Global BESS Macro and Technology Iteration at the SMM Indonesia Li-ion Battery & Energy Storage Seminar

At the SMM Indonesia Seminar: Li-ion Battery & Energy Storage hosted by SMM, Katherina Dong, New Energy Business Director at SMM, shared insights on the topic of "Global Battery Energy Storage System Macro and Technology Iteration."

Battery Energy Storage System (BESS) Market Dynamics: A Global Perspective

SMM anticipates that from Q3 2025 to the first two quarters of 2026, the global energy storage market will enter a phase of significant growth, primarily driven by regional policy incentives and challenges related to renewable energy grid integration. The growth rate in Q2 2026 is expected to be the highest among these four quarters. In China and the EU, the growth of the energy storage market is mainly policy-driven, while in the US, tariffs and cost issues are impacting the market.

Specifically, in China, benefiting from strong support under various policies, the energy storage market is experiencing rapid growth, bringing short-term revenue increases and demand growth for operators. SMM forecasts that China's energy storage installations in Q3 2025 may reach around 50 GWh, with Q4 expected to reach approximately 47 GWh.

In the US, energy storage demand faces constraints from both economic and tariff aspects. Economically, demand is suppressed due to declining economic benefits and rising costs. Regarding tariffs, the current tariff remains at 40.9%, and under Section 301, it may increase to 57.4% in 2026. The "Big and Beautiful" act maintains current tariff levels in the short term, but tariff adjustments in 2026 and new energy total cost requirements may encourage investment in advance, slightly offsetting the impact of demand decline.

The strong growth in the EU energy storage market stems from high levels of renewable energy generation, grid instability driving demand for energy storage solutions, and policy subsidies in multiple countries accelerating new energy deployment. Energy storage installations in Q3 2025 are projected to be around 12 GWh, with Q4 2025 expected to be approximately 10 GWh.

As for the Asia-Pacific region and other areas, ESS demand in these regions, though still in its early stages, is expected to continue rising. In Q2 2026, with increasing renewable energy penetration and early policy support, it is projected to be the period of strongest growth.

Overall, China dominates global ESS deployment with strong policy backing; the EU maintains steady growth momentum driven by power grid balancing needs and renewable energy expansion; the US ESS market still faces short-term challenges, with tariff policies playing a key role in curbing demand, but accelerated growth is likely before 2026; ESS demand in the Asia-Pacific and other regions is entering a growth phase. Q2 2026 is expected to be the peak period for global ESS market growth.

Tenders for renewable energy projects are becoming increasingly complex,

with the main focus areas as follows:

1. Future Bid Price Forecast:

EPC contractors and investors need to predict cost structures 18 to 24 months ahead when submitting bids.

Due to significant price fluctuations in raw materials (such as lithium) and key components (e.g., battery cells, inverters), accurately locking in bid prices is highly challenging, thereby increasing financial risks.

2. Long Construction and Commissioning Cycle:

It typically takes 24 to 36 months from project signing to official grid connection.

During this period, technological advancements may render soon-to-be-installed equipment obsolete; meanwhile, supply chain disruptions or rising logistics costs also pose additional risk factors.

3. Battery Life Cycle and Technological Innovation:

Battery technology is advancing rapidly, with emerging technologies capable of significantly reducing the Levelized Cost of Energy (LCOE), but they may also pressure existing facilities into early retirement.

To address this uncertainty, investors should consider developing mid-term replacement strategies and ensure system designs are flexible enough to support future upgrades and technology integration.

SMM helps EPC contractors and investors manage risks during long-term procurement and construction by providing the following services:

Tracking industry trends: Continuously monitoring developments in DC-side energy storage integration systems, battery technology trends, and the timetable for new product launches;

Cost analysis and forecasting: Conducting accurate price predictions based on research into upstream material cost fluctuations, policy adjustments, and supplier strategic plans.

When selecting the optimal energy storage product, both economic and technical performance must be considered comprehensively. Future battery technology is expected to develop towards higher capacity, enhanced safety, and extended cycle life, which will help further reduce the Levelized Cost of Energy (LCOE) and create more competitive and scalable ESS projects.

What Changes Are Occurring in the Solar + Energy Storage Sector?

Solar power plants equipped with different energy storage durations have achieved varying degrees of improvement in their average capacity factors. Specifically, solar plants with a two-hour energy storage system can see a slight increase in average capacity factor to 25%-35%; a four-hour system can raise this figure to 30%-45%; for a six-hour system, the capacity factor can reach 35%-50%; and with an eight-hour (i.e., long-duration) storage solution, this metric can even increase further to 40%-55%, indicating that solar power generation is gradually approaching semi-stable or even stable power supply levels.

With advancements in lithium-ion battery energy storage technology and the extension of continuous discharge times, solar energy is becoming a more efficient and economical power generation solution. This not only enhances the utilization efficiency of solar resources but also reduces overall operating costs, making solar power a more viable option in a wider range of scenarios.

As of now, the China offshore export price for a 5MWh energy storage system is approximately $87.5/kWh. To analyze cost composition factors in greater depth, SMM breaks down the industry bill of materials (BOM) structure from a theoretical perspective:

Battery cell: As the largest cost component in the energy storage system, accounting for about 50% of the total cost. The cost of this part is highly sensitive to fluctuations in raw material market prices, directly impacting manufacturers' cost control capabilities and profit margins.

Other components (approximately 20%): These include, but are not limited to, battery pack assembly parts, battery management systems, temperature control systems, and container integration. It should be noted that the energy management system is typically custom-developed according to specific project requirements and is therefore not included in the standard cost calculation; similarly, the power conversion system (PCS) only considers the cost on the DC side and is also excluded.

The remaining approximately 30%: This portion primarily reflects the gross profit level of the enterprise, which varies depending on the capabilities and efficiency of different suppliers, demonstrating the company's comprehensive strength in overall supply chain management, technology integration, and operational optimization.

Technological Iteration in Battery Energy Storage Systems

Development Process of Energy Storage Battery Technology:

In 2022, driven by mandatory energy storage policies and rapid advancements in lithium battery technology, the mainstream battery cell in the global market was the 280Ah LFP cell, with an energy density of approximately 168Wh/kg. As independent power producers increasingly focused on reducing the Levelized Cost of Energy (LCOE), market demand gradually shifted toward higher energy density, large-capacity cells.

Consequently, from 2023 to 2024, the industry successfully achieved large-scale production and widespread application of 300Ah cells, establishing them as the new market mainstream. Compared to the 280Ah cells, the 300Ah cells achieved an energy density increase of 10-15Wh/kg and a cycle life extension of up to 4,000 cycles. These improvements not only extended the service life of energy storage systems but also enhanced overall cost-effectiveness.

Technological Iteration in Energy Storage Integration—Capacity

Initially, DC integration capacity was low; by 2024, integration capacity increased to 5MWh; future integration capacity is expected to continue growing and exceed 10MWh.

As the market continues to mature, technological innovation is no longer limited to improving cell energy density but has expanded to increasing the capacity of entire energy storage containers. The following is an optimized description of the technological development of energy storage containers for different years:

2023: The market mainstream was the 280Ah system (capacity range from 3.44 to 3.72 MWh).

Starting from 2024:

4+ MWh energy storage containers began to emerge, serving as a bridge product transitioning from older systems to a new generation of high-capacity solutions, primarily targeting European and overseas markets.

5+ MWh energy storage containers achieved mass production, utilizing 314 ampere-hour battery cells, significantly enhancing energy storage capacity. With their excellent performance and economic advantages, they quickly became the preferred choice in the global market.

6+ MWh energy storage containers feature higher integration and energy density and are expected to gradually replace existing 5 MWh products, potentially becoming one of the mainstream choices in the future.

Within the 7 to 10+ MWh capacity range, some products are already deliverable, marking the direction of large-scale energy storage technology development. With continuous improvements in integration technology, these high-capacity energy storage containers have the potential to become key mainstream products in the future.

Iteration of Energy Storage Integration Technology—Dimensions

2022-2023, with the advancement of integration technology, standard 20-foot containers gradually became the industry mainstream. However, to better adapt to the needs of different application scenarios, flexible and non-standard container designs are increasingly becoming a new development trend.

Reducing Costs by Increasing Cabinet Capacity

One effective method to reduce system costs is to increase land utilization by enhancing cabinet capacity. For example, a standard 20-foot liquid-cooled energy storage system with 5 MWh capacity can save 43% in footprint compared to a traditional 3.72 MWh system, while also reducing costs by 26%.

Modular and Non-Standard Designs for the Future

To address changing customer demands and growing market needs, it is anticipated that more modular non-standard 20-foot containers will be applied in energy storage systems of 6+ MWh and above in the future. For application scenarios with larger capacities (e.g., 7-10+ MWh), a 30-foot container may be adopted as the solution to further enhance the system's scalability and energy density per unit area. This flexible and versatile design approach not only meets diverse needs but also provides strong support for the continuous development of the entire energy storage industry.

ESS Integration Technology Iteration—Optimization of Battery Charge Rate

Early energy storage systems were primarily limited by the battery cell technology of the time, typically operating at a charge and discharge rate of 0.5C. At a 0.5C rate, the battery can be fully discharged within 2 hours. Future energy storage systems will evolve toward a 0.125C (i.e., one-eighth C) rate to better meet the needs of regional long-duration power peak shaving. The discharge time corresponding to a 0.125C rate is approximately 8 hours, making it more suitable for long-duration and stable power regulation.

Batteries operating at a 0.125C rate can provide longer discharge times, making them more suitable for applications such as long-duration peak shaving, baseload power supply, or energy shifting, rather than rapid discharge requirements. Adopting lower charge and discharge rates helps extend battery lifespan and reduces performance degradation over time, thereby better aligning with the characteristics of renewable energy generation and power grid dispatch requirements.

In addition to charge/discharge rates, TCS technology is also continuously advancing to adapt to the trend of increasing battery energy density. These improvements collectively contribute to the overall performance enhancement of energy storage systems.

ESS Integration Technology Iteration—TCS

In the early stages of energy storage system development, air cooling technology was sufficient to meet DC cooling needs. However, starting from 2024, with increasing system integration levels, liquid cooling systems will become the more ideal choice to ensure operational safety and efficiency.

Liquid cooling solutions offer more efficient heat dissipation paths, as liquid cooling can directly remove heat, significantly reducing hot spots and temperature gradients. In addition, it also boasts excellent thermal conductivity, as the thermal conductivity and specific heat capacity of liquids are significantly higher than those of air, making faster and more controllable cooling possible under high loads.