Battery storage is the fastest growing energy technology today, with a rapidly evolving field of innovation. Energy storage (and specifically battery storage) can offer promising solutions to enhance the efficiency and reliability of intermittent renewable energy sources (solar and wind), where energy supply is dependent on unstable weather conditions. This development is not just a technical evolution but a fundamental shift in how energy systems operate, enabling a more resilient, flexible, less expensive and sustainable energy infrastructure.
Moreover, by offering portable energy storage, in the transport sector batteries can support the needed expansion of Electric Vehicle (EV) penetration, as well as additional applications such as shipping and aviation. As industries seek to decarbonize, the importance of reliable, high-density energy storage systems becomes paramount, offering a clear pathway to reducing the carbon footprint of these traditionally high-emission sectors. Figure 1 presents a snapshot of the varying potential applications that battery storage can support to accelerate the transition to net zero.
Figure 1 – The Applications of Battery Energy Storage
Source: Integra Source.
Over the past five years, the volume capacity of lithium-ion batteries (the dominant technology in the market) increased by more than 2,000 GWh. While EV usage accounts for the biggest share, utility-scale electricity storage is the fastest growing application in the energy sector. This growth is indicative of the broader energy transition underway, where energy storage technologies are expected to bridge the gap between renewable energy generation and consumption, ensuring a stable and continuous energy supply.
Moving forward, batteries will play a critical role in achieving a successful green energy transition. As renewable energy deployment needs to triple by 2030 to remain on the path to net zero emissions by 2050, battery usage needs to expand more rapidly than its current pace. This will necessitate enabling policies as well as more investments and technological innovations to increase batteries’ cost effectiveness, extend their lifecycle, and enhance their energy density. While this will create opportunities for new markets and business investments, supply chain and cost challenges continue to present obstacles. Furthermore, the environmental and social implications of battery production and disposal must be carefully managed to ensure that the shift to a green energy system does not create new forms of ecological or humanitarian crises.
The objective of this research is to discuss the central role that batteries can play in renewable energy storage and efficiency, while investigating the market opportunities and challenges. This research will serve as a fifth in a series of articles that study the top “green” energy sources and their emerging markets.
Executive Summary:
1. Battery storage is the fastest growing energy technology and critical to enhancing renewable energy efficiency and reliability in the green energy transition.
2. Lithium-ion batteries dominate the market due to their superior energy density and declining costs, driven by electric vehicle penetration and utility-scale applications.
3. Global demand for battery materials like lithium, graphite, and nickel is expected to rise exponentially by 2040, posing significant supply chain challenges.
4. Technological advancements in battery density and cost reductions are anticipated to drive broader applications across industries, including aviation and maritime transport with solid state batteries solving key issues.
5. Policy support and private sector innovation are essential to overcoming supply chain challenges and scaling battery storage to meet net zero emissions targets by 2050.
What is Energy Storage and Why is it So Important?
Energy storage is the process of capturing energy when produced and saving it for later use. With the rapid deployment of renewables and their required scale-up for the green energy transition, storage has become a pivotal building block in ensuring the reliability and efficiency of such energy sources. The role of energy storage extends beyond mere backup; it is a strategic asset in optimizing energy systems, reducing reliance on fossil fuels, and enabling more efficient grid management. Solar and wind energy are known for their intermittent nature, with high efficiency losses during periods of low wind speeds or poor sunlight intensity. As a result, for such energy sources to be economically viable, it is important that we be able to save excess energy during peak generation periods, to reduce variability and ensure a stable energy supply to the grid. This capability not only improves the financial viability of renewable projects but also enhances energy security by providing a buffer against fluctuations in energy supply.
Several categories of energy storage technologies exist that offer various solutions and characteristics. Pumped hydropower systems, by which energy is released through pumping water (both as the source and store of energy) between an upper and lower reservoir to generate energy, are the most commonly used utility-scale storage technology in the world. Despite its power, pumped hydropower storage is limited to a country’s endowment of abundant water resources, making it hard to scale. Moreover, the environmental impact of large-scale hydropower projects, including ecosystem disruption and displacement of communities, poses significant challenges to their expansion. Electric Batteries, on the other hand, offer the greatest potential as the most scalable type of grid-scale storage. Their modularity, geographic flexibility, and rapid deployment make them a cornerstone of modern energy storage strategies, capable of being integrated into both new and existing energy infrastructure with relative ease. Other types of energy storage include mechanical techniques (e.g., compressed air, flywheels, and gravity storage), thermal storage, and hydrogen storage (See our research on hydrogen here).
Given the potential and critical role that batteries can play in the scale-up of green energy and transport, it will be the focus of this article. Batteries represent not just a technical solution but a critical enabler of broader societal shifts towards sustainable energy consumption and production. And potentially vastly reduced energy costs.
How Do Batteries Work?
A battery energy storage system (BESS) comprises several parts, including the battery cell, the battery and energy storage management systems, the power conversion system, in addition to other safety components. Understanding how these components work in detail is essential for optimizing their performance and extending their lifespan, both of which are crucial for maximizing the return on investment in battery technologies.
The battery cell is the core of the BESS, which is an electrochemical technology that captures and stores energy in a reversible chemical reaction (charging). This energy can then be released on demand (discharging) to power an external circuit, such as the grid network or residential and commercial buildings. Different types of battery cells exist, the most common of which are the lithium-ion batteries. Lithium-ion technology has become the industry standard due to its superior energy density, longer lifespan, and declining cost curve, driven by economies of scale and continuous innovation.
A lithium-ion battery relies on raw materials such as graphite, cobalt, copper, lithium, magnesium, and nickel, and is composed of three main parts:
- The Electrodes: consisting of the anode – the negative electrode (typically made of graphite) – and the cathode – the positive electrode (typically made of a lithium compound)
- The Electrolyte: a chemical solution that transports lithium-ions between the anode and cathode
- The Separator: a plastic material which prevents the anode and cathode from shorting together electrically and forces the movement of electrons to generate power.
During the charging process, the positively charged lithium ions move from the cathode, through the separator, to the anode. This movement creates free electrons in the anode and causes an electrical potential difference (voltage). During discharging, the flow of lithium ions and electrons is reversed (Figure 2). This electrochemical process, while seemingly simple, involves complex interactions at the molecular level, which researchers continue to study in order to develop next-generation batteries with higher efficiencies and lower costs.
Figure 2 – The Charging and Discharging Process of a Lithium-Ion Battery
Source: Dragonfly Energy.
The Rapid Growth of Battery Storage
Battery storage is among the fastest growing energy technologies worldwide, with close to 80 GW of battery storage capacity added over the past half decade. Lithium-ion battery volume has particularly expanded, with over 2,000 GWh added since 2019. This surge in capacity reflects both the increasing demand for energy storage solutions and the rapid advancements in battery technology, which have made these systems more affordable and accessible. The strong uptake of electric vehicle penetration has been the powerhouse of such expansion. In 2023, global battery volume usage reached over 2,400 GWh, four times its usage in 2020, with utility-scale representing the fastest growing use of battery storage, while behind-the-meter battery storage accounted for almost 35% of annual growth (Figure 3). This trend highlights the dual role of batteries in both the consumer and utility sectors, where they are transforming energy consumption patterns and enabling the integration of higher levels of renewable energy into the grid.
Figure 3 – Global Lithium-Ion Battery Volumes in Use by Application
Source: International Energy Agency (IEA), Batteries and Secure Energy Transitions.
When it comes to lithium-ion battery manufacturing capacity, China is the dominant player, as it contributed a 76% share in 2022. Together, the U.S. and Europe, accounted for a share of 15% (less than 10% each). Although, by 2030, the share of the U.S. and Europe in global production capacity is expected to rise to 27%, China will continue to dominate the market at 68% (Figure 4). This market dominance has strategic implications, as control over battery production is increasingly seen as a key factor in determining global leadership in the green energy transition.
Figure 4 – Global Lithium-Ion Battery Manufacturing Capacity by Country
Battery Storage is Critical for the Energy Transition, But Investments Need to Pickup
Rapid growth in the battery sector is essential to ensure a successful transition to net zero emissions (NZE) by 2050. By providing a more stable clean energy supply to the grid, batteries hold immense potential to increase the efficiency and reliability of renewables, supporting the transition away from fossil fuel energy sources. Under a successful NZE scenario by 2050, batteries will account for an estimated 60% of the total CO2 emission reduction: a direct 20% through batteries in EVs and battery-enabled solar PV, in addition to 40% indirect reductions through facilitating electrification through renewables that are indirectly facilitated by batteries (Figure 5). By 2030, the larger penetration of EVs alone will create additional demand for 8 million oil barrels per day, which needs to be abated. This surpasses the current total road oil consumption in Europe. However, this growth trajectory is not guaranteed. The road to achieving such ambitious targets is fraught with challenges, not least of which are the economic and geopolitical factors that could disrupt supply chains. Furthermore, the technological and infrastructural advancements required to integrate such large-scale battery storage into national grids demand concerted efforts from both the private and public sectors.
Figure 5 – Avoided CO2 Emissions Due to Batteries and Other Technologies by 2050
Source: International Energy Agency (IEA), Batteries and Secure Energy Transitions.
Under the NZE scenario, the global installed battery storage capacity needs to increase by 13 times to reach over 1,200 GW by 2030, up from the current 87 GW (Figure 6). This will support a tripling in global renewable energy capacity over the same period. Nevertheless, under the Stated Policies Scenario (STEPS), if the current policy setting continues as is, battery storage capacity is estimated to reach only 760 GW by 2030, almost half of what’s needed. On the path to the NZE scenario, the global market value of batteries is projected to quadruple, from a current battery pack value of $120 billion, to around $500 billion by 2030. Even with maintaining today’s policies (STEPS scenario), market growth is expected to almost triple to $330 billion by 2030.
Figure 6 – Battery Storage Capacity (GW)
Source: International Energy Agency (IEA).
This growth will indeed create a striving market for greater innovations and will attract new financing and investments. In 2023, battery startups attracted $6 billion from venture capital alone. Moreover, over the last two decades, battery patents have grown tremendously to reach more than 700 thousand patents worldwide, from less than 9 thousand in 2000 (Figure 7). Yet, more is needed.
Figure 7 – Cumulative Number of Global Battery Patents
Source: International Renewable Energy Agency (IRENA).
Investments will be needed across the battery supply chain, to improve quality and affordability. In a battery cell, anodes are typically made of graphite, while materials for cathodes vary, including lithium iron phosphate, lithium cobalt oxide, lithium iron phosphate, lithium manganese oxide, and nickel manganese cobalt oxide. Today, lithium-ion batteries dominate the market. Lithium iron phosphate cathodes have taken over those made of nickel manganese cobalt cathodes (which used to be the primary technology), given they’re cheaper, despite the latter’s higher energy density. Nevertheless, the major culprit with lithium is its scarcity. This scarcity not only drives up costs but also exacerbates geopolitical tensions, as countries vie for control over lithium-rich regions.
The demand for more diversified supply chains has spurred the development of new technologies, including promising battery types like sodium-ion, sodium-sulfur, metal-air, and flow batteries. Given their much heavier weight, sodium-ion still lag behind lithium-ion batteries when it comes to energy density (120-160 Wh/kg compared to 170-190 Wh/kg). In addition, their material supply chains are still under-established, and technology is still in its early stages. However, sodium-ion batteries present significant potential, particularly in the following areas:
- Cost Efficiency: Sodium-ion batteries can reduce costs by up to 30% compared to lithium-ion batteries.
- Durability and Speed: They offer longer life cycles and faster charging capabilities.
- Safety: These batteries are less prone to thermal runaways, making them safer.
- Sustainability: Sodium is 500 times more abundant than lithium and is widely available across many countries. This abundance makes sodium-ion batteries a more sustainable option, as they reduce the environmental impact associated with lithium mining.
While the future envisions increasingly shifting towards sodium-ion batteries (IEA estimates a share of around 10% of EV batteries by 2030), further investments in research in development and policy support are needed to fully harness the benefits of the sodium-ion battery, by enhancing its value chain, quality, and energy density.
Figure 8 – The Advantages of Sodium-Ion Over Lithium-Ion Batteries
Source: CIC EnergiGUNE.
Certainly! Below is a section on solid-state batteries that can be added to the research on battery technology and the green energy transition:
The Emergence of Solid-State Batteries: A Game-Changer in Energy Storage
Solid-state batteries represent the next frontier in energy storage technology, promising significant advancements over conventional lithium-ion batteries. Unlike traditional batteries that use liquid or gel electrolytes to conduct ions between the cathode and anode, solid-state batteries employ a solid electrolyte. This fundamental shift in design provides numerous advantages, including higher energy density, enhanced safety, and improved longevity.
One of the most critical benefits of solid-state batteries is their higher energy density compared to lithium-ion batteries. Solid electrolytes enable the use of metallic lithium as the anode, which offers a much higher energy capacity than the graphite typically used in lithium-ion batteries. This allows solid-state batteries to store more energy in a smaller, lighter package—ideal for applications such as electric vehicles (EVs) and renewable energy storage. Researchers estimate that solid-state batteries could potentially achieve energy densities that are 50-100% higher than current lithium-ion batteries.
Safety is a significant concern with traditional lithium-ion batteries due to the risk of thermal runaway—an uncontrollable and dangerous increase in temperature that can lead to fires or explosions. Solid-state batteries eliminate the flammable liquid electrolyte, significantly reducing this risk. The solid electrolyte also offers better thermal and mechanical stability, making solid-state batteries much safer for high-demand applications like EVs, aviation, and grid storage.
Solid-state batteries have the potential to last longer than their lithium-ion counterparts due to reduced degradation over time. The solid electrolyte is less prone to forming dendrites—tiny metal filaments that can short-circuit the battery—allowing for more charging cycles without loss of performance. Furthermore, solid-state batteries can support faster charging times, a critical factor in accelerating EV adoption and improving the overall user experience in portable electronics.
Despite their potential, solid-state batteries face significant technical and manufacturing challenges that have so far limited their commercial deployment. Producing a solid electrolyte that is both stable and efficient at conducting ions remains a difficult task. Additionally, the manufacturing process for solid-state batteries is more complex and expensive than that of traditional lithium-ion batteries, which has slowed down large-scale production.
However, progress is being made, and several companies, including Toyota, QuantumScape, and Solid Power, have announced breakthroughs in solid-state battery technology. Industry analysts predict that solid-state batteries could begin to enter the market as early as 2025, with broader commercial adoption likely by the end of the decade. Once these challenges are overcome, solid-state batteries could revolutionize the energy storage landscape, particularly in high-demand sectors like transportation and grid storage.
The superior performance characteristics of solid-state batteries make them a key enabler of future technological advancements. In the EV market, for example, the higher energy density and faster charging times could lead to longer driving ranges and shorter refueling times—further driving the transition away from fossil fuels. In grid storage, solid-state batteries offer the potential for more efficient and reliable backup power, critical for integrating more intermittent renewable energy sources like solar and wind.
Technology Advances Have Enhanced Batteries’ Quality and Cost Effectiveness
It is estimated that every doubling in deployment results in cost efficiencies of 19% and density gains of 7%, making batteries the fastest improving clean energy technology. Thanks to rapid technology advancements, the quality of batteries, as measured by energy density, has increased while their costs dramatically decreased over the last three decades. Between 1991 and 2023, costs have dropped by almost 100%, parallel by a fivefold rise in the energy density of top-tier batteries (Figure 9).
Figure 9 – The Cost and Quality Enhancements of Battery Technology
Source: Enerypost.eu
According to a recent study by the Rocky Mountain Institute (RMI), the combination of falling costs and quality improvements is expected to create a battery “domino effect” that would turbocharge battery usage, fueling more technological improvements, cost reductions, quality improvements, and even greater deployment. This is expected to rapidly expand the applications of battery technologies, which started from mere usage in consumer appliances to electric vehicles, with even more potential for shipping, aviation, and electrification (Figure 10). The concept of the battery “domino effect” is particularly intriguing as it suggests that advancements in battery technology could have a compounding impact on the broader energy sector. As costs continue to fall and performance improves, batteries could become the preferred energy storage solution across a wider range of applications, from residential solar systems to large-scale grid storage. This could, in turn, accelerate the decline of fossil fuels as the primary energy source, leading to a cleaner, more sustainable global energy system. The advent of AI will drive significant improvements in battery technology along with improvements in efficiency for solar cells.
Figure 10 – The Battery Domino Effect and Increasing Applications
Source: Rocky Mountain Institute (RMI).
According to the IEA, further technological advancements are projected to produce up to 40% additional reductions in the global average of lithium-ion batteries by 2030, by reducing the upfront investment costs, improving their energy densities, and lengthening their lifetime. These advancements will not only lower the overall cost of energy storage but will also enhance the performance and safety of batteries, making them more suitable for a wider range of applications, from electric vehicles (EVs) to grid storage solutions. As a result, we can expect a significant expansion in the use of lithium-ion batteries across various industries, driven by the continuous improvements in material science and manufacturing processes.
Falling battery costs are expected to increase the cost competitiveness of EVs, including through the increasing use of sodium-ion batteries, which depend less on expensive materials such as lithium. Sodium-ion batteries offer a promising alternative as they utilize more abundant and less expensive materials, which could make them a game-changer in the battery industry, especially for large-scale energy storage applications.
Moreover, the competitiveness of Solar PV plus batteries is expected to rise, surpassing that of new coal-fired power in China and natural gas in the U.S. The research RMI expects that, by 2030, top-tier battery density will reach 600-800 Wh/kg (from around 500 currently) and costs are forecasted to drop to $32–$54/kWh (from around a current $100 currently), resulting in a rapid rise of battery sales (Figure 11). Such a dramatic improvement in battery density and cost will likely lead to a proliferation of new applications for batteries, including in areas like aviation and maritime transport, where weight and energy density are critical factors.
Figure 11 – The Battery Domino Effect: Improvements and Expanding Demand
Source: Rocky Mountain Institute (RMI).
Yet, Supply Chain Challenges Remain the Major Culprit
As the global demand for batteries expands, so will the need for metals and other raw materials. By 2040, the global demand for graphite, lithium, and nickel is estimated to increase by 14-20 times over its 2020 levels. This exponential rise in demand highlights the urgent need for the mining industry to scale up production capacities and for new sources of these materials to be identified and developed. The geopolitical implications of this growing demand are also significant, as countries vie for control over these critical resources.
Sadly, the supply of such materials remains concentrated in China. Critical minerals are mostly mined and processed in China (holding around 90% of the supply chain), while the EU and Korea each account for less than 10%, and the U.S. contributes a negligible share (around 3% of global lithium production and less than 1% of the rest). The heavy reliance on China for these materials raises concerns about the security and resilience of global supply chains, especially in light of recent geopolitical tensions and trade restrictions. Yet, it will also drive innovation as no country wants to be dependent on one supplier.
Despite the steady reduction in battery costs, low supply chain diversification, China’s export restrictions, and the pandemic-induced disruptions, in addition to the exploding demand and increasing competition from EVs have all resulted in unpredictable and volatile prices of battery components (most notably lithium).
Up to 2030, the demand for materials such as nickel and lithium is projected to exceed their supply (Figure 12), creating challenges for the needed market growth. If these supply constraints are not resolved, they could hinder the global transition to renewable energy and delay the achievement of climate goals. (Again, this need will likely drive AI-led innovation into new materials and battery types.)
Figure 12 – The Rising Global Supply-Demand Shortage of Lithium
Source: European Commission.
On that front, massive expansion of synthetic graphite is happening in China, while new lithium mines are being developed in Europe. Nevertheless, the timely transition to net zero emissions calls for additional and rapid investments to expand the needed supply of raw materials and components and diversify their geographical distribution. This includes not only expanding mining activities but also investing in advanced processing and refining technologies to increase the efficiency and yield of raw material extraction. Figure 12 below provides the estimated production capacity of battery raw materials across countries by 2030.
Many countries will have to depend on imports of various materials and components for batteries. While China will continue to dominate all of the markets, Australia, Canada, Argentina, and Chile have great potential to reduce the supply risks of lithium chemicals, and graphite production can be scaled up in Mozambique and Tanzania (natural graphite) and the U.S. (refined graphite). These countries could play a pivotal role in diversifying the global supply chain and reducing dependency on any single nation, thereby enhancing the resilience of the battery industry.
Figure 13 – Production Capacity of Battery Raw Materials by 2030
Source: European Commission.
Although the availability and natural endowments of metals and other raw materials largely affect their availability and costs across countries, enhancing the circularity of the value chain can reduce the dependence on primary materials. Strategies can include, for example, extending batteries lifespans, through reuse and remanufacturing, or recycling/reusing secondary materials. The adoption of circular economy principles in the battery industry could significantly reduce the environmental impact of battery production and decrease the reliance on newly mined materials. This approach also presents an opportunity to create new business models and revenue streams through the development of a robust secondary market for used batteries and materials.
Conclusion and Policy Implications
Battery storage is the fastest growing energy technology that is commercially available and will play a pivotal role in accelerating the NZE transition by 2050. However, as renewable energy sources need to triple by 2030 to ensure a successful transition, batteries will need to expand even faster. Although this will create tremendous business and investment opportunities, value chain and cost challenges persist. Addressing these challenges will necessitate a comprehensive approach that includes both immediate policy interventions and long-term strategic planning.
Looking ahead, solid-state batteries could also enable new applications in areas like aerospace and advanced electronics, where size, weight, and safety are paramount. These batteries may also play a pivotal role in advancing technologies such as wearable devices and medical implants by providing a compact, reliable, and long-lasting power source.
Most importantly, the private sector will likely drive the innovation needed as the growth opportunities and profit potentials are vast. Here’s a quick list of start-ups just since 2021 in the energy storage space.
Figure 14 – Start-Ups in Energy Storage
As well, government policies play a key role and need to enable faster deployment to support the tremendous scale up of renewables that is needed for the transition. In particular, policy makers should: (1) facilitate and support the development of resilient and sustainable supply chains, through better international cooperation, building strategic partnerships, multi-sourcing, establishing better environmental, social, and governance standards for mining, promoting battery and material recycling, and shifting toward more sustainable and abundant materials; and (2) develop the supportive regulatory systems and enabling environments to harness the full potential of batteries, through enabling market access, creating fair competition, incentivizing investments in research and development to enhance battery quality and cost effectiveness, providing the required financing, building the necessary grid infrastructure to support large-scale storage, and allowing for variable electricity tariffs to align with consumer needs and encourage behind-the-meter battery use.
Several promising advancements have been achieved on the policy front in several countries. For example, in the U.S., the Inflation Reduction Act directs $369 billion in subsidies to turbocharge the green energy transition, including for both standalone energy storage investments and those that are connected to solar energy projects. Investment tax credits reach up to 50% for energy storage facilities, in addition to 10% bonus credits for the use of locally produced equipment and 10% for assets located at decommissioned fossil fuel facilities in front-line communities. This enabled the country to add a record 7.9 GW of energy storage in 2023, with battery storage expected to nearly double in 2024.
In addition, the European Union has a target to deploy close to 45 GW of storage by 2030, which is enabled through the National Energy and Climate Plans, providing incentives and support for battery storage, and enacting policies to boost raw material import diversification and increase lithium mining. The EU’s proactive approach to energy storage is a testament to the region’s commitment to achieving its climate goals and reducing its dependence on fossil fuels. These efforts are expected to position Europe as a global leader in the battery storage market, driving innovation and competitiveness in the sector.
To sum up, the market for battery storage is a thriving market with promising investment opportunities and great potential to scale up renewables, however, we still need to see greater policy support, bigger investment flows, and international cooperation on all fronts.
