The Great Transformation of the Energy Storage Market in 2025: How Next-Generation Battery Technology is Reshaping the Global Power Ecosystem
Editor
A New Chapter in the Energy Storage Revolution
The energy storage market in 2025 is amidst an unprecedented whirlwind of change. The global energy storage system (ESS) market has surpassed $120 billion this year, marking a 28% growth compared to the previous year. This rapid growth is driven by the surge in renewable energy generation and the increasing demand for grid stability. In particular, the construction of large-scale storage facilities to address the intermittency issues of solar and wind power is accelerating worldwide.
According to data released by China’s Contemporary Amperex Technology (CATL) in the third quarter of this year, global battery shipments for ESS increased by 35% compared to 2024, reaching 180 GWh. This is equivalent to the amount of electricity that approximately 18 million households can use in a day. South Korea’s Samsung SDI and LG Energy Solution also strengthened their presence in the global market by shipping 25 GWh and 22 GWh of ESS batteries, respectively. Notably, Samsung SDI successfully completed a large-scale 6 GWh ESS project in Texas, USA, solidifying its position in the North American market.
From a technological perspective, 2025 is seen as the year when lithium iron phosphate (LFP) batteries have fully established themselves as mainstream in the ESS market. LFP batteries are optimized for large-scale storage facilities due to their higher safety and longer lifespan compared to traditional nickel-cobalt-manganese (NCM) batteries. The LFP system, utilizing BYD’s blade battery technology, has seen its price drop to around $100 per kWh, a 60% decrease from 2020. This price competitiveness significantly improves the economic feasibility of ESS projects, accelerating market expansion.
The First Year of Commercializing Next-Generation Battery Technology
2025 is expected to be recorded as the first year of full-scale commercialization of sodium-ion batteries. The sodium-ion battery launched by CATL earlier this year achieved an energy density of 160 Wh/kg, reaching a competitive level with existing LFP batteries. More importantly, the abundant reserves of sodium ensure raw material price stability. While lithium prices fluctuate around $15,000 per ton, sodium-related raw materials maintain relatively stable prices.
Korean companies are also actively developing next-generation battery technologies. SK Innovation announced the development of the ‘NCM-LFP hybrid’ battery, a next-generation LFP technology, improving energy density by 20% compared to existing LFP. This technology, combining the safety of LFP with the high energy density of NCM, is expected to play a crucial role in securing competitiveness in the ESS market. LG Energy Solution is conducting research to apply solid-state battery technology to ESS, aiming for commercialization by 2027.
Among American companies, Tesla is leading the ESS market with its Megapack system utilizing 4680 battery cells. Tesla’s Megapack, with a current capacity of 3 MWh, has a high energy density relative to installation area, making it advantageous for urban ESS deployment. The 400 MWh Megapack facility installed in Monterey County, California, this year has significantly improved power supply stability during peak hours. Tesla announced that its Megapack shipments in 2025 increased by 85% year-over-year, reaching 40 GWh.
Fluence Energy, an independent ESS system integrator, provides customized solutions using products from various battery manufacturers. Based in Virginia, USA, Fluence completed ESS projects totaling 15 GWh globally this year, a 67% increase from the previous year. The company has expanded its presence in the global market by securing numerous grid-scale ESS projects in Australia and the UK.
With technological advancements, the operational efficiency of ESS systems has also greatly improved. The introduction of AI-based energy management systems (EMS) makes it possible to optimize battery charge-discharge patterns and extend lifespan. CATL’s TENER system uses AI algorithms to monitor and adjust imbalances between battery cells in real-time, maintaining system efficiency above 95%. These technological advancements have reduced the operating cost of ESS to around 5 cents per kWh, making it competitive with the operating costs of traditional gas peaker plants.
In the European market, the growth is accelerating with the spread of mandatory ESS installation policies alongside renewable energy obligations. Germany mandated the installation of storage facilities in new solar power plants starting in 2025, resulting in a 120% growth in the German ESS market, reaching $4.5 billion. Similar policies in the Netherlands and Belgium are driving rapid growth in the overall European ESS market.
In the Asia-Pacific region, China remains the largest market. China’s new ESS installation capacity reached 75 GWh this year, accounting for 60% of the global new installations. The Chinese government’s ‘Carbon Neutral 2060’ policy and plans to increase the share of renewable energy generation to 50% by 2030 are driving the increase in ESS demand. Large-scale solar and wind power plants linked to ESS projects in Xinjiang and Inner Mongolia have started operations this year.
Japan, with heightened interest in energy security following the Fukushima nuclear disaster, is focusing on building decentralized ESS. The Ministry of Economy, Trade and Industry of Japan expanded subsidies for home ESS this year, covering up to 70% of installation costs, resulting in a 180% growth in the home ESS market compared to the previous year. Japanese companies like Panasonic and Toshiba are benefiting from the expansion of the home ESS market.
Restructuring the Global Supply Chain and Future Prospects
With the rapid growth of the ESS market, diversifying the battery supply chain has emerged as a crucial issue. Efforts to reduce dependence on China are accelerating due to the U.S. Inflation Reduction Act (IRA) and the European Union’s battery regulations. Consequently, the role of Korean companies is becoming increasingly important. Samsung SDI completed a 21 GWh ESS battery production line in Göd, Hungary, this year, and LG Energy Solution has begun constructing a 35 GWh production facility in Michigan, USA.
Raw material price volatility also significantly impacts the ESS market. Although lithium prices plummeted from $80,000 per ton in early 2024 to around $15,000, they still exhibit high volatility. In response, battery manufacturers are focusing on developing low-cobalt, low-nickel battery technologies with reduced lithium content. CATL’s M3P (Manganese, Phosphorus, Phosphate) battery, which reduces lithium usage by 30% while maintaining energy density, is gaining attention.
From a financial perspective, investment in ESS projects is surging. Global investment in ESS projects reached $85 billion this year, a 45% increase from the previous year. With growing interest from institutional investors, financing for ESS projects is becoming more accessible. Large asset management firms like Macquarie Group and BlackRock are forming ESS infrastructure funds for long-term investments.
From a technological perspective, next-generation technologies such as solid-state batteries and metal-air batteries are expected to enter the ESS market in earnest after 2026. The solid-state battery, jointly developed by Toyota and Samsung SDI, is projected to achieve twice the energy density of current NCM batteries. These technological advancements are expected to significantly reduce ESS installation space and facilitate urban installations.
In terms of market outlook, the global ESS market is predicted to grow at an average annual rate of 25% to reach $450 billion by 2030. This growth will be driven by the expansion of renewable energy generation, the increasing need for grid modernization, and the development of V2G (Vehicle-to-Grid) technology due to the proliferation of electric vehicles. The accelerated adoption of ESS in emerging markets such as Africa and Southeast Asia is expected to become a new growth driver.
Regulatory changes are also supporting market growth. The U.S. offers a 30% investment tax credit (ITC) for ESS installations starting in 2024, and China classifies ESS installations as essential infrastructure for ensuring grid stability, providing various incentives. South Korea will implement a policy in 2025 to grant additional Renewable Energy Certificate (REC) weights when linked with ESS.
The growth of the ESS market signifies a paradigm shift in the entire power system beyond mere advancements in battery technology. The transition from centralized to decentralized generation, the activation of real-time power trading markets, and the advent of the prosumer era, where consumers also become producers, are accelerating alongside ESS technological advancements. These changes are creating new business models and investment opportunities across the energy industry, marking a critical turning point at the early stage of these transformations by the end of 2025.
