Energy Outlook 2025: the role of energy storage in the global transition

Energy storage is becoming a key element of the global energy landscape. The growing integration of renewable energy sources and the need to ensure the stability of power grids are driving the active development of storage technologies. Innovative solutions make it possible to use renewable resources more efficiently and increase the resilience of power systems.

Energy storage technologies and market

Today, the energy storage sector encompasses a variety of technologies, including batteries, pumped hydro and thermal storage. Due to growing investments in this sector, the energy storage market is expected to expand significantly by 2025, changing the way the world generates, stores and consumes electricity.
Driven by factors such as declining technology costs, increased renewable energy production and government support, the global energy storage market is expected to grow significantly.

Impact of COP29: will 2025 be a turning point?

The energy storage market is forecast to continue to grow in 2025, driven by increased renewable energy integration and government incentives.
In November 2024, the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29) was held in Baku, Azerbaijan. The conference resulted in the adoption of a new collective quantified climate finance target, which envisages mobilising $300 billion annually by 2035 to support developing countries in their efforts to adapt to and mitigate climate change.
In addition, at COP29, rules were finalised to implement Article 6 of the Paris Agreement, which provides for the creation of an international carbon credit market. This decision is aimed at stimulating investment in green technologies and reducing global greenhouse gas emissions.

In particular, the decisions taken at the COP29 climate summit envisage a six-fold increase in global storage capacity compared to 2022 levels – up to 1,500 GW in 2030. At the same time, one of the main challenges remains the upgrade of power grids and the implementation of efficient storage solutions. The Summit participants also committed to investing in the modernisation of more than 80 million kilometres of power grids by 2040.
The global energy storage market is projected to grow by an average of 21% per year by 2030, with the total annual capacity of storage systems reaching 137 GW (442 GWh).

China, the US and Europe: regional leaders in energy storage

China maintains its global leadership in the energy storage sector by actively investing in large-scale battery systems. By the end of 2025, the country plans to install at least 40 GW of new battery storage facilities. The cost of lithium-ion batteries is also expected to continue to decline, which will contribute to the profitability of this segment.

In the US, the energy storage sector has received a significant boost from the Inflation Reduction Act (IRA) of 2022, which provides tax incentives for off-grid energy storage. However, the election of Donald Trump as US president threatens the continuation of this programme, as he has promised to cancel unspent funding.

The European Union is also actively developing the energy storage sector, in particular through the Horizon Europe fund, which finances innovative projects. Particular attention is paid to Germany and Spain, where there is a high demand for storage due to ambitious renewable energy development plans.

Battery prices: will the decline continue?

Recent studies have shown a significant decline in the cost of lithium-ion batteries. According to BloombergNEF, in 2023, the weighted average price of lithium-ion batteries decreased by 14%, reaching $139 per kWh.
In 2024, there was a further decline in prices. Global prices for lithium-ion batteries fell by 20%, falling below $100 per kWh for electric vehicles and energy storage systems. This decline was driven by overcapacity, lower raw material prices, and increased competition in the market.

Overall, from 2008 to 2021, the cost of lithium-ion batteries decreased by 87%, which contributes to the growing availability of electric vehicles and energy storage systems.

Battery prices are expected to continue to decline in 2025, despite rising raw material costs, due to overcapacity. China and Europe are increasing battery production, which is putting pressure on pricing. Technological improvements and economies of scale are also contributing to cheaper technologies.

At the same time, the limited supply of lithium, cobalt and nickel is driving up their costs. The answer to this challenge is the transition to new battery technologies that require less scarce materials. The European Union, for example, is expanding its battery recycling programme and reducing its dependence on imported raw materials through the European Battery Alliance initiatives.

Alternative storage technologies: a new trend in 2025?

Alternatives to lithium-ion batteries, such as sodium-ion, solid-state and flow batteries, are gaining popularity due to their lower cost and improved performance. China is already home to the world’s largest sodium-ion battery storage system (BESS), indicating a trend towards market diversification.

In September 2024, the US Department of Energy announced $100 million in funding to support long-term energy storage projects based on non-lithium technologies. Europe also has a strategic plan to develop innovative storage technologies.

Regulation and incentives: how do governments support the sector?

Government support for energy storage will continue to grow in 2025. The EU has adopted new financial programmes aimed at accelerating the deployment of battery systems, including the update of Spain’s National Integrated Energy Plan, which envisages the installation of 22.5 GW of storage by 2030.

The UK has an updated Energy Act that simplifies regulatory procedures for the deployment of energy storage systems. The National Grid has also launched a new initiative to accelerate grid connection.

Japan will require new residential buildings to be equipped with solar installations starting in 2025, which will increase demand for storage.
In the United States, the key factor remains the preservation of the Inflation Reduction Act, which provides significant tax incentives for investors in the energy storage sector.

In 2025, the energy storage market will continue to grow rapidly, supporting the global transition to clean energy. Government support, technological breakthroughs and investment will drive the sector, making it an integral part of the future energy infrastructure.