Global Energy Storage Market at Crossroads - 5% Growth Amid Challenges

At the CLNB 2025 (10th) New Energy Industry Chain Expo - New Energy PV ESS Forum hosted by SMM Information & Technology Co., Ltd., Mingyuan Ye, a senior ESS consultant at Shanghai Metals Market, shared insights on the topic of "Opportunities and Challenges in the Global ESS Market."

He stated that global ESS demand has slowed due to policy adjustments in China and the US, with an expected growth rate of around 5% in 2025. After 2025, global ESS planning will be gradually completed. The successful transformation of the Chinese and US markets may lead to a rebound in growth, driving the global ESS market to grow at a compound annual growth rate (CAGR) of 10%. SMM predicts that the Chinese ESS market will achieve a CAGR of around 9.5% from 2025 to 2030, while the North American ESS market will see a CAGR of around 7.4% during the same period. The European ESS market is expected to achieve a CAGR of around 23.4% from 2025 to 2030.

Global Energy Transition Drives ESS Market Growth

Global renewable energy power generation continues to rise year by year, and under the backdrop of energy transition, ESS development has ushered in new growth opportunities.

With the continuous advancement of global carbon reduction and carbon neutrality actions, the transition from a fossil fuel-dominated energy structure to a clean and low-carbon energy structure has become a clear trend. Renewable energy (PV & wind power) is entering a period of development opportunities.

Countries around the world are implementing carbon reduction and carbon neutrality actions. As of now, over 190 countries have signed the Paris Agreement. By 2030, China, the US, and the EU are expected to reduce emissions by over 50%, and as economically strong nations, China, the US, and the EU will become long-term core carbon reduction regions.

Energy Structure Adjustment under the "Carbon Neutrality" Background Becomes a Clear Trend

Currently, renewable energy (PV & wind power, etc.) accounts for 31% of the energy mix. To achieve the "carbon neutrality" goal, the proportion of renewable energy is expected to increase to 42% by 2030 and exceed 53% by 2050. However, factors such as the instability of new energy power generation have stimulated the development of ESS.

Global ESS Market Presents Different Development Trends Due to Energy Transition and Policy Shifts

Global ESS demand has slowed due to policy adjustments in China and the US, with an expected growth rate of around 5% in 2025. After 2025, as global ESS planning is gradually completed, the successful transformation of the Chinese and US markets may lead to a rebound in growth, driving the global ESS market to grow at a CAGR of 10%.

Global Annual ESS System Shipments Forecast from 2024 to 2030

From 2024 to 2025, the demand in the major ESS markets of China and the US is expected to decline due to policy adjustments, while other markets will maintain relatively high growth rates.

►The cancellation of mandatory energy storage allocation in China has led the Chinese ESS market into a transition period, with short-term demand declining;

►Repeated tariff hikes in the US have impacted the economics of local ESS projects, potentially leading to the cancellation or delay of many ESS projects;

►Other regions, in order to absorb new energy power generation and support the power grid, will continue to maintain relatively high growth rates;

From 2025 to 2030, as global ESS planning is completed, the ESS market demand will see an expected growth rate of around 10%. Global ESS demand is expected to reach 480 GWh by 2030.

►From 2025 to 2030, ESS planning in most regions will be completed. Although policy subsidies are expected to phase out, the establishment of ESS economics after PV ESS parity will continue to drive market growth;

►The success of China's power market reform in driving ESS transformation will maintain high demand growth. The US ESS market will also maintain high growth rates under stable policies.

Impact of Policy Fluctuations on the Chinese ESS Market

Review and Outlook of the Chinese ESS Market

SMM predicts that the Chinese ESS market will achieve a CAGR of around 9.5% from 2025 to 2030.

Power Generation-Side ESS in China May Experience Fluctuations Due to Changes in Energy Storage Allocation Policies

The cancellation of mandatory energy storage allocation, with no clear policies issued by provinces, may lead to a decline in demand.

Document No. 136 cancels the mandatory energy storage allocation requirement.

In 2025, provinces will formulate policies based on Document No. 136 that align with their actual conditions. Some provinces will continue mandatory energy storage allocation, while others will begin to phase it out. Most provinces are still in the process of formulating policies, posing uncertainty to future demand.

Industrial and Commercial ESS Will Become An Important Driver of Growth for the Chinese ESS Market

With the further improvement of time-of-use electricity prices and the further increase in electricity prices for energy-intensive enterprises, the economics of industrial and commercial ESS have significantly improved.

•As the peak-valley electricity price spread continues to widen, the economic benefits of industrial and commercial ESS have become more apparent. According to electricity price adjustment data released in 2024, the peak-valley electricity price spread in many provinces and cities continues to widen, with 16 provinces and cities having a peak-valley electricity price spread of over 0.7 yuan per kWh.

For user-side industrial and commercial demand, SMM predicts that by 2030, user-side industrial and commercial demand is expected to reach around 30 GWh.

US ESS Market Under Multiple Factors

Review and Outlook of the North American ESS Market

SMM predicts that the North American ESS market will achieve a CAGR of around 7.4% from 2025 to 2030.

Utility ESS: Excessive tariffs will increase investment costs for US companies, reduce profits for Chinese suppliers, and lead to a decline in US ESS demand.

2025 Tariff:

►In February 2025, an additional 10% tariff was imposed on Chinese products for the first time, affecting the delivery of ESS cells and BESS, as well as impacting signed orders. US buyers and Chinese suppliers need to consider how to share the 10% tariff;

►In March 2025, an additional 10% tariff was imposed on Chinese products for the second time, bringing the cumulative tariff increase to 20%. This further affected the delivery of ESS cells and BESS, as well as future orders, slowing the overall shipment pace. It is expected that US buyers and Chinese suppliers will each bear half of the additional tariff, which will become the mainstream solution;

►In April 2025, the Reciprocal Tariff was signed, in addition to raising the baseline tariff to 10%, a 34% reciprocal tariff was added. This tariff increase has created a high trade barrier for US ESS imports, severely compressing US ESS demand.

2026 Tariff:

►The 301 Act is expected to be implemented as scheduled in early 2026, imposing additional 25% tariff on lithium battery products.

User-Side: The ITC subsidy policy includes household ESS in the subsidy scope, driving the development of user-side ESS in the US.

According to SMM analysis, the ITC subsidy for user-side ESS will continue until 2034, enhancing the economics of household ESS. With policy support, user-side ESS will continue to develop rapidly.

Residential Electricity Prices: In recent years, US residential electricity prices have remained high, rising from 12.55¢/kWh in 2016 to 15.96¢/kWh in 2024, an increase of 27.2%. High electricity prices have increased the necessity of "PV + ESS" for residents.

ITC Subsidy: The ITC subsidy policy increased the subsidy ratio for user-side ESS in 2023 and extended it to 2034. Stimulated by the policy, the economics of user-side ESS have improved.

Power Outage Risks: The aging power grid equipment in the US is vulnerable to extreme weather, making power outages highly likely during peak electricity usage. This summer, as temperatures soared, two-thirds of North America faced the risk of energy shortages. Therefore, as the penetration rate of new energy increases, ESS as a rigid demand will also rise.

European ESS Market at a Turning Point

Review and Outlook of the European ESS Market

SMM predicts that the European ESS market will achieve a CAGR of around 23.4% from 2025 to 2030.

Utility ESS in Europe Has Begun to Take Shape, with Multiple Countries' Plans Driving Future Growth

In 2024, renewable energy accounted for over 27% of Europe's energy supply structure.

According to SMM analysis, driven by Europe's energy transition, high electricity price volatility, and policy stimulus, power generation-side ESS growth has entered a fast track.

•Energy Structure: Over the past five years, the share of renewable energy in Europe has grown from 20% to 47%. Front-of-meter new energy power generation has brought more power generation, but also increased the load on the power grid, further strengthening the demand for power generation-side ESS to ensure stable power generation and transmission;

•Impact of the Russia-Ukraine Conflict: After the outbreak of the Russia-Ukraine conflict, energy trade between Russia and Europe has been subject to multiple restrictions. Benefiting from Europe's new energy policies, new energy power generation and ESS have grown rapidly, reducing Europe's dependence on energy imports. In 2024, energy imports decreased by 9.2% compared to 2021;

•Policy Stimulus: Led by the UK, Germany, Spain, and Poland, Europe has introduced stimulus policies for the development of the ESS industry, including government subsidies, electricity trading, peak shaving, and frequency regulation compensation.

Recent Market Developments in the ESS Industry

Monthly Installations in Major Overseas ESS Markets

US ESS Monthly Installations:

US ESS installed capacity has decreased MoM due to seasonal factors, but the YoY growth rate in February exceeded 1,400%. This installation rush was mainly driven by grid demand and political struggles, characterized by non-replicability and occasionality, and has overdrawn future demand. US installations may slow down in the future.

In January 2025, heavy snow in many areas led to a sudden increase in grid load, revealing demand for utility ESS. Monthly installations increased compared to the previous year. At the beginning of 2025, constantly changing tariff policies put pressure on project costs, prompting owners to rush installations to avoid additional tariffs affecting project returns.

German ESS Monthly Installations:

German ESS, driven by policies and renewable energy installations, may have a profound impact on future ESS installation structures;

With sufficient natural gas supply and a downward price trend, stable electricity prices, and the phase-out of household ESS subsidies in Germany, household ESS installations are showing a weakening trend;

As new energy installations continue to increase, the grid's absorption capacity is limited. To support the grid and accommodate more new energy installations, power generation and grid-side ESS are needed to support the grid.

Since entering 2024, ESS system costs have continued to decline, but the trend has slowed.

The price of ESS cells is closely related to the price trend of lithium carbonate, the main raw material for batteries. Since entering 2024, the overall price of lithium carbonate has shown a downward trend, driving ESS system costs to continue to decline. The winning bid price for 0.5C systems has also declined significantly since 2024. However, the downward trend in costs has slowed.

SMM predicts that the prices of 314Ah battery cells may fluctuate downward overall, keeping the cost of energy storage systems at a low level.

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