Five trends for energy storage as global market passes 100 GW

The global energy storage market reached a major milestone in 2025, with annual installations passing 100 GW for the first time. The growth comes despite major policy shifts in the world’s two largest markets, China and the United States.

China has removed its mandate to pair storage with new renewable energy projects. The country is moving toward market-based mechanisms. This creates uncertainty for future revenue.

In the United States, tax incentives remain in place. However, new supply chain constraints are making it difficult to use Chinese battery modules.

Wood Mackenzie’s latest report, “What to look for in 2026: Global Storage,” outlines five trends that it expects will shape the coming year.

1. Supply chain restructuring

China maintains its dominant position in energy storage supply chains across raw-material processing, component manufacturing, battery manufacturing and system integration. However, domestic overcapacity and escalating local content requirements are driving manufacturers to diversify investments beyond China’s borders to circumvent tariffs.

Wood Mackenzie said with significant challenges looming in the near term, particularly in the United States market, Chinese suppliers are strategically positioning themselves to serve global demand, with expansion efforts focused on South and Southeast Asia, Europe, and the Middle East. The goal is to gain market share, even if it means lower profits in the short term, said the report.

Supply remains tight, said Wood Mackenzie. Shortages that began in late 2025 will likely continue through mid-2026. The shortage is acute for certified batteries from top-tier suppliers, said the report. Wood Mackenzie expects system prices to stabilise in the second half of 2026.

2. Grid-forming technology

Grid-forming storage is moving from a voluntary option to a requirement in many markets, said the report. Grid-forming systems can stabilise voltage and frequency on the grid. This is critical as more coal and gas plants retire, including in Australia where 75% of coal-fired power capacity is predicted to exit the market by 2035.

Wood Mackenzie said technological advances are further facilitating integrating grid-forming capabilities as the premium for the systems declines. Previously, these systems cost 10% to 15% more than standard storage, but that price gap is disappearing, said the report. Manufacturers are now building these features into their standard products at little to no extra cost.

3. Non-lithium batteries scale up

Lithium-ion is the dominant technology, but alternatives are gaining ground. Sodium-ion, flow batteries, and iron-air systems are scaling up. These technologies are becoming cost-competitive for specific uses.

Wood Mackenzie said there is increased investment in and investigations of alternative storage technologies, particularly for non-lithium storage, emerging across major markets including China and Australia.

In Europe, new policy support is helping long-duration storage. The United Kingdom and Italy are using “cap and floor” mechanisms. These help make non-lithium projects more bankable for investors.

4. Data centres drive demand

Large data centres are turning to batteries to bypass grid bottlenecks. The grid often cannot keep up with the power needs of generative AI. Data centre developers are co-locating storage to secure faster utility connections.

Data centre batteries handle “training loads.” These loads can jump from 10% to 90% capacity in milliseconds. Storage provides the necessary flexibility. While gas turbines remain the top choice for onsite power, storage is now the second most common choice in the data center pipeline.

5. The rise of hybrid projects

Developers are increasingly pairing storage with solar and wind. Hybrid systems help manage curtailment when renewable energy is wasted because the grid cannot receive the generation.

In Australia and India, more than half of the storage projects announced in 2025 were paired with solar, wind, or a combination of both.

Wood Mackenzie said hybrid and co-located projects accounted for 30% of storage capacity additions in Australia last year. For new solar-plus-storage projects, average battery capacity is now larger than the solar generation capacity, with oversizing enabling asset owners to open additional revenue streams beyond shifting energy from their paired asset to include grid arbitrage and ancillary services.

In Europe, the trend is also growing. Some regions now see more than 500 hours of negative power prices per year, said the report. These market conditions make standalone solar less profitable. Developers are using hybrid power purchase agreements (PPAs) to protect their revenue.

Regional outlook

Continuing downward pressure on storage pricing long-term, technology advancement, and new applications are expected to drive growth in the coming decade, the report says.

China is expected to retain a leading position globally in terms of capacity growth while the United States market is projected to dip in in 2026 and 2027 due to the impact of tariff changes and future supply chain restructuring.

Europe was highlighted as a bright spot. Installations in Europe grew by 160% in 2025. Germany leads the market for small-scale, distributed storage, while the United Kingdom is the leader for large, utility-scale projects.

In Latin America, 2026 will be a year of new auctions. Brazil is planning a national storage tender for early 2026. Chile is also updating its rules to better pay storage for providing grid services.

The global transition is moving forward. Energy storage is no longer just a backup, and it is becoming the primary tool for grid reliability.

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