The Upheaval in the Global Energy Storage Market: Innovations in Battery Technology and a New Paradigm for Grid Stability
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Explosive Growth and Technological Innovation in the Energy Storage Market
The global energy storage system (ESS) market in 2025 is reaching a historical turning point. According to the latest report from Bloomberg NEF, this year the energy storage market size increased by 35% year-on-year, reaching $120 billion, with installed capacity hitting 74GWh, a 34% growth from 55GWh in 2024. This rapid growth is driven by the increase in renewable energy generation, heightened demand for grid stability, and above all, the innovative advancements in battery technology.
A particularly noteworthy change is the expanding market share of lithium iron phosphate (LFP) batteries. China’s CATL (Contemporary Amperex Technology, Ningde Times) unveiled its next-generation LFP battery ‘Qilin 3.0’ this year, achieving an energy density of 230Wh/kg, a 40% improvement over existing LFP batteries. This aligns with market trends prioritizing safety and cost-effectiveness in ESS batteries, elevating LFP’s global market share from 45% in 2024 to 58% this year. Conversely, despite their high energy density, NCM batteries are seeing a decline in market share due to fire risks and high costs.
Korea’s three major battery companies are actively responding to these market changes. LG Energy Solution (Ochang, Gyeonggi Province) began full-scale operation of its ESS LFP battery production line in the third quarter of this year, diversifying its previously NCM-focused portfolio. The company announced plans to expand its ESS battery production capacity to 40GWh by the end of 2025, a 60% increase from the previous year. Samsung SDI (Yongin, Gyeonggi Province) also started mass production of ESS-specific LFP batteries at its Göd plant in Hungary, strengthening collaborations with German energy companies to penetrate the European market.
Market analysts predict that 2025 will be a ‘technological watershed’ for the ESS market. According to Wood Mackenzie’s energy storage analysis report, battery prices have fallen to an average of $89 per kWh, a 23% decrease from 2024. This significantly improves the economics of ESS projects, reducing the investment recovery period (IRR) for utility-scale projects from 7-8 years to 5-6 years. In particular, the demand is surging in the US and Europe as ESS installation mandates spread in line with carbon neutrality policies.
The Grid Revolution Driven by AI and Digital Technologies
Another key trend in the 2025 energy storage market is the full-scale adoption of artificial intelligence (AI) and digital technologies. Fluence Energy, headquartered in Texas, USA, launched an upgraded version of its AI-based energy management platform ‘Mosaic’ this year. This system optimizes ESS charging and discharging by analyzing weather data, power demand forecasts, and electricity price fluctuations in real-time, improving profitability by an average of 18% compared to existing systems. According to Fluence Energy’s third-quarter earnings announcement, contracts for ESS projects equipped with AI optimization features accounted for 73% of the total, a 156% increase from the same period last year.
In Korea, the development of AI-based ESS operation technology is also active. Korea Electric Power Corporation completed a 300MWh AI-based ESS demonstration complex in Jeju this year, solving the intermittency problem of wind power generation using a predictive model based on deep learning algorithms. The demonstration results showed that after the introduction of the AI system, grid stability improved from 94% to 98.5%, and renewable energy utilization increased from 87% to 94%. Based on these achievements, KEPCO plans to build a total of 2GWh of AI-based ESS in major regions nationwide by 2026.
Globally, Tesla’s (Palo Alto, California) Megapack system is leading the market. Tesla launched the Megapack 2XL this year, expanding the storage capacity per unit to 4MWh. Additionally, through its AI software ‘Autobidder’, it provides automatic bidding functions in the electricity trading market. In the Victorian Big Battery project in Victoria, Australia, with a capacity of 300MW/450MWh, Autobidder generated an average annual revenue of $12 million, shortening the investment recovery period by two years compared to the initial plan.
China’s BYD (Shenzhen) is also actively integrating AI technology. Through its ‘BYD Energy Cloud’ platform, the company is monitoring and optimizing over 1,500 ESS projects worldwide in real-time. In particular, BYD’s ESS market share in Southeast Asia reaches 34%, achieving an average 22% reduction in operating costs with its AI-based predictive maintenance system. Based on this technological prowess, BYD recorded $7.8 billion in revenue from its ESS business segment this year, an 89% increase from the previous year.
Industry experts analyze that the introduction of AI technology is transforming the ESS business model itself beyond simple operational optimization. The shift from a hardware-centric business to a model of continuous revenue generation through software and services is having a decisive impact on the profitability and competitiveness of ESS manufacturers. According to McKinsey’s latest analysis, ESS companies offering AI-based services have an EBITDA margin 8-12% higher on average than traditional hardware companies.
Next-Generation Battery Technology and Future Prospects
The most notable technological innovation in the 2025 energy storage market is the potential commercialization of solid-state batteries. QuantumScape, headquartered in San Jose, California, announced this year that its lithium metal solid-state battery retains over 95% capacity after 1,000 charge-discharge cycles. This is an innovative achievement compared to the 80% capacity retention of existing lithium-ion batteries. More importantly, the energy density of solid-state batteries reaches 400Wh/kg, 74% higher than existing LFP batteries. QuantumScape aims for commercial production by 2027 and has already signed a long-term supply agreement with Volkswagen.
Japan’s Toyota (Toyota City, Aichi Prefecture) is also accelerating the development of solid-state batteries. The company announced this year that its battery using sulfide-based solid electrolytes reduced fire risk by over 90% compared to conventional liquid electrolyte batteries in safety tests. Toyota’s solid-state batteries operate stably over a wide temperature range of -30°C to 60°C, making them particularly advantageous for large-scale ESS projects operating in extreme environments. The company plans to start pilot production of ESS solid-state batteries by the end of 2026.
Korea’s battery industry is also focusing all efforts on developing next-generation technologies. LG Energy Solution is jointly developing next-generation silicon nanowire anode technology with the University of Michigan, USA, and batteries using this technology are expected to increase capacity by 40% and improve charging speed by 60% compared to existing ones. Samsung SDI announced this year that it has developed a new coating technology to solve the dendrite formation problem of lithium metal batteries as part of its ‘Dream Battery’ project. This technology is expected to extend battery life by more than three times compared to existing ones.
According to analysis by market research firm IDTechEx, the annual growth rate (CAGR) of the ESS market is expected to reach 28% during the 2027-2030 period when next-generation battery technologies are fully commercialized. Especially with the commercialization of solid-state batteries, the safety and lifespan of ESS will be greatly improved, making large-scale ESS installations in urban areas feasible. As the installation of ESS in underground or building interiors, which was previously limited due to fire risks, expands, the urban energy storage market is expected to open anew.
From a financial perspective, investment in next-generation battery technology is surging. In 2025, global battery technology R&D investment increased by 45% year-on-year, reaching $34 billion, with solid-state battery-related investments accounting for the largest share at $8.9 billion. Interest from venture capital and strategic investors is also rising, with total investment in battery technology startups reaching $12.7 billion this year, a 67% increase from 2024, indicating that investors highly value the commercial potential of next-generation battery technology.
Industry experts evaluate 2025 as a ‘technological turning point’ for the energy storage industry. As existing lithium-ion battery technology matures and the visibility of next-generation technologies’ commercialization increases, the competitive landscape of the ESS market is expected to fundamentally change. Particularly, as next-generation batteries with improved safety, lifespan, and energy density are introduced to the market, the scope of ESS utilization is expected to expand from existing utility-scale to distributed microgrids and urban energy systems. This change has the potential to expand the size of the energy storage market to 3-4 times its current level, serving as a medium- to long-term growth driver for related companies.
*This analysis is based on publicly available market data and industry reports, and additional due diligence and expert consultation are recommended for investment decisions.*
