Battery Energy Storage Systems Market is up for a Surge

With renewables poised to overtake coal as the leading source of electricity globally by 2025, the significance of Battery Energy Storage Systems (BESS) in the energy transition cannot be overstated. BESS is key to leveraging renewable energy more effectively, enabling the storage of excess power during peak solar and wind periods for use during demand surges or production dips.  

Government policies are major drivers behind this shift. The US Inflation Reduction Act is set to significantly increase renewable energy projects, with expectations to add over 20 GW of battery capacity, which will elevate the US's total battery capacity to over 130 GW by 2030. Europe's Green Deal Industrial Plan and the UK's GBP 32 million energy storage funding are accelerating the move towards a more sustainable industrial sector, including support for BESS development. Similarly, China's goal to peak emissions by 2030 is driving its renewable energy strategy, with battery development playing a critical role. 

The importance of BESS extends beyond just storing and releasing energy; it is crucial for integrating renewable energy into the power grid efficiently and reliably. By providing essential services like frequency regulation and load shifting, BESS enhances grid stability and supports the broader adoption of renewable energy sources. This transition to a renewable-based power system is fundamental to achieving a more sustainable and environmentally friendly energy future, underscoring the global momentum towards renewable energy and the indispensable role of BESS. 

The Global Market Value of Battery Energy Storage System 

The global battery energy storage system (BESS) market is on a rapid growth trajectory, with its value dramatically increasing from USD 2.8 billion in 2022 to an anticipated USD 49.2 billion by 2032. This growth represents a CAGR of 33.10% over the decade, according to Apollo Research Reports. This surge is in line with the global electricity demand, which is expected to grow by over 20% in the next decade, whereas the need for flexibility in the power system—to quickly adapt to changes in supply and demand—is projected to increase by about 80%. BESS, particularly with advancements in lithium-ion technology, which currently accounts for over 80% of all battery capacity, plays a crucial role in providing this much-needed flexibility by offering both short-term storage solutions and supporting grid stability through frequency regulation and load shifting. 

Source: Statzon/ Apollo Research Reports

Technological advancements and decreasing costs are further fueling the expansion of the BESS market. Lithium-ion batteries, especially lithium iron phosphate (LFP) variants, are gaining popularity due to their cost-effectiveness and safety features compared to nickel manganese cobalt (NMC) chemistries. This shift is evident in the continuous launch of BESS expansion projects by utility companies, aiming to revolutionize grid infrastructure and integrate storage devices across solar power technologies. 

 
2023 marked a significant milestone with an estimated addition of 74 GWh to the BESS capacity, showcasing a 72% increase from the prior year as per data from Rystad Energy. The firm’s further forecasts reveal a significant trend for the sector, predicting that by 2030, annual battery storage installations will eclipse 400 GWh. This forecast suggests a dramatic increase, more than tenfold, in the annual rate of installations relying on anticipated cost reductions and the reinforcing impact of global policy support. 

Electric Vehicles: A Catalyst for BESS Expansion 

The BESS sector's growth is closely aligned with significant strides in the automotive industry, especially in the surging demand for lithium-ion batteries, fueled by the EV boom. This segment, a major contributor to the battery energy storage market, saw a valuation of USD 1.7 billion in 2022. It's projected to skyrocket to USD 28.5 billion by 2032, demonstrating a CAGR of 32.69%. This uptrend reflects the deepening link between EV adoption and lithium battery innovation, indicating a thriving future for energy storage solutions. 

Battery market growth has been characterized by an exponential increase in battery sales, following the classic S-curves typical of disruptive technologies, with sales doubling every two to three years at an average growth rate of 33%, accelerating to around 40% in the last decade due to the popularity of electric vehicles. IEA data shows that demand for lithium batteries alone jumped by 65% in 2022.  
 
RMI predicts that by 2030, batteries will likely be taking market share in shipping and aviation too. 

BESS Market Segmented by Type of Battery 

Other than lithium, which is the dominant type in the battery energy storage system (BESS) market, other battery technologies are also marking their presence with significant growth prospects. Lead-acid batteries, recognized for their reliability, cost-effectiveness, and lower upfront costs compared to other battery types, are projected to expand from USD 585.3 million in 2022 to USD 10.3 billion by 2032, achieving a CAGR of 33.33%. This affordability makes them a preferred choice for automotive, UPS, and backup power systems.  

Meanwhile, flow batteries are gaining traction for their unique capabilities in long-duration energy storage, expected to grow from USD 395.2 million to USD 7.2 billion in the same period, at the highest growth rate of 33.71% among the battery types. Flow batteries are emerging as a significant technology for stationary storage, offering scalability and performance stability over decades. This is demonstrated by the commissioning of the world's largest vanadium redox flow battery in China, with a capacity of 100 MW and 400 MWh.  

Source: Statzon/ Apollo Research Reports

Evolution of Battery Technology 

Battery technology has significantly evolved, moving from simple designs like the Voltaic Pile and Daniell Cell to modern lithium-ion and nickel-metal hydride batteries. Innovations have focused on increasing energy density, efficiency, and reducing costs. Tesla's 4680 battery cell and CATL's 500 Wh/kg battery highlight recent advancements aiming for higher capacity and efficiency. 

Tesla's innovation in battery technology, particularly with the 4680 battery cell, underscores a significant shift towards higher energy densities and efficiencies in battery storage. This cell design is aimed at reducing battery costs by over 50% and is critical for future electric vehicles. 

CATL, the world's largest battery manufacturer, has announced a breakthrough "condensed" battery with 500 Wh/kg energy density, promising to nearly double the energy intensity of current high-end batteries. This leap forward will significantly impact the BESS market, especially in enabling the electrification of transportation, including sea, land, and potentially air travel. The condensed battery incorporates innovative cathode and anode materials, separators, and manufacturing processes, heralding a new era of electrification centered on high-safety and lightweight solutions. This development is particularly relevant for the segments catering to capacities greater than 100 MWh but less than 500 MWh, as it opens up new possibilities for large-scale utility projects and renewable energy integration. 

BESS Market Segmented by Capacity 

Integrating advancements in battery technology into BESS market projections, Apollo Research Reports observes growth across segments. The <500 MWh category, valued at USD 2.2 billion in 2022, is forecast to rise to USD 37.2 billion by 2032, reflecting a 32.63% CAGR. The >100 to <500 MWh segment is expected to grow from USD 538.6 million to USD 10.03 billion, with a 34.06% CAGR. Similarly, capacities <100 MWh are projected to expand from USD 106.4 million to nearly USD 2.0 billion, at a 34.02% CAGR. 

iMcKinsey has a more interesting approach in segmenting the market suggesting that understanding market opportunities requires looking at both the application of the systems and the scale at which they operate. The firm identifies three distinct segments: 

The front-of-the-meter (FTM) segment, which deals with the large-scale energy needs of utilities, often exceeds 10 MWh. Here, BESS plays a pivotal role in activities like price arbitrage and maintaining the stability of the power grid. 

The behind-the-meter (BTM) segment is then divided into two subsections. Commercial operations typically require systems that range from 30 kWh to 10 MWh, focusing on integrating renewable energy and optimizing energy costs. Residential setups, on the other hand, usually below 30 kWh, cater to household energy management and the growing need for electric vehicle charging infrastructure. 

McKinsey anticipates that the utility-scale BESS segment will experience the most rapid growth, estimated at 29% annually through the end of this decade. This segment is set to dominate the market by 2030, potentially accounting for up to 90% of the total market share, with annual installations projected to be between 450 and 620 GWh. 

Source: Statzon, Apollo Research Report's report on BESS market, mining.com, Renewable Energy Magazine, IEA, IEA (2), RMI, McKinsey, Rystad Energy, electreck.co, CATL