As the world electrifies, there will be increased need for energy storage to mitigate discrepancies between energy supply and energy demand.
The energy storage sector continues to see strong investment, with global spending on battery storage reaching $54 billion in 2024, a 36% increase from the previous year. This surge highlights the critical role of energy storage in enabling the transition to renewable energy and stabilizing power grids. However, despite overall growth, some signals indicate a potential slowdown in specific areas, driven by supply chain constraints, geopolitical shifts, and market imbalances.
Europe Continues to Expand its Battery Storage
Europe is experiencing a significant expansion in battery storage, primarily due to the increasing integration of wind and solar energy. The region added 3.7 GW of battery storage capacity in 2024 alone, bringing the total to 10.8 GW. Projections suggest that by 2030, Europe’s battery storage capacity could exceed 50 GW, with estimated investments surpassing €80 billion. However, supply chain issues, particularly delays in obtaining essential components like transformers, could slow progress and threaten decarbonization goals.
Supply Chain Challenges and Investment Risks
Delays in obtaining essential equipment, particularly in the UK, are already impacting the rollout of new energy storage projects. These bottlenecks could hinder Europe’s ability to meet its ambitious climate goals by 2030.
Beyond logistics and manufacturing delays, geopolitical factors also pose risks. China, which processes 70-80% of the world’s lithium, is considering tighter restrictions on lithium refining technology and materials. If enacted, these measures could disrupt global supply chains and slow battery production.
Tesla Responds to Global Bottlenecks in Supply of Raw Materials
Recognizing these supply chain risks, Tesla has shifted its silicon anode sourcing from China to Korea to align with U.S. Inflation Reduction Act (IRA) requirements. Additionally, Tesla’s Texas lithium refinery has commenced operations, aiming to produce enough refined lithium to support 50 GWh of battery production per year—sufficient for 500,000 EVs. However, the facility’s high water demand (up to 800,000 gallons per day) raises sustainability concerns.
Market Overcapacity impacts Prices across Batteries
Interestingly, at present battery market overcapacity is an issue. Overcapacity has driven cell prices down to $40/kWh, which is unsustainably low and has led to investment pullbacks. Despite this, Battery Energy Storage Systems (BEES) have grown significantly, now accounting for 15% of total battery deployments, up from just 7% in 2020.
AI & Data Centres will increase Battery Demand
A new demand driver for battery storage is emerging: AI-driven data centres. As artificial intelligence adoption accelerates, data centres require massive energy storage solutions to manage power demand and ensure grid stability. This shift could further drive investments in battery technology beyond traditional renewable energy integration.
Looking Ahead
Despite challenges, the global energy storage market remains on a trajectory of rapid expansion. However, to sustain growth and meet future energy demands, the industry must address supply chain bottlenecks, geopolitical risks, and market imbalances. Companies that proactively adapt, through localized production, diversified sourcing, and strategic investments, will be best positioned to thrive in the evolving energy landscape.