LONDON/HOUSTON/SINGAPORE: After a record-breaking year in 2025, the global energy storage market will see challenges in larger markets, while growth continues to accelerate globally, according to Wood Mackenzie.
Wood Mackenzie’s Five trends to look for in global energy storage report looks at key trends shaping the market this year, including: the restructuring of the global supply chain, the regulation of grid forming, non-lithium technologies emerging at scale, the support of large loads and the expansion of hybrid systems beyond the US.
Restructuring of the global supply chain
2025 was a record-breaking year for the energy storage market globally. Installations passed 106 GW for the first time – a milestone achieved even as some of the largest energy markets grappled with significant policy shifts. Europe’s energy storage market surged 160% in 2025, while growth continues to accelerate in the Middle East and other emerging markets.
China maintains its dominant position in energy storage supply chains. However, domestic overcapacity and escalating local content requirements are driving manufacturers to diversify investments beyond China’s borders. Chinese manufacturers are expected to announce new ownership structures in 2026 to regain US market access, reducing ownership below 25% to meet FEoC requirements.
Global energy storage markets remain strained as supply shortages that emerged in late 2025 are expected to persist through mid-2026.
“Developers face compressed margins and significant execution risks,” said Jiayue Zheng, energy storage senior supply chain analyst for Wood Mackenzie. “Margin pressure is particularly acute in China’s domestic market, while international markets offer a more favourable outlook characterised by stronger demand, better pricing discipline, and improved profitability. This market dynamic will drive Chinese manufacturers to aggressively expand overseas operations in 2026, prioritising market share gains over near-term profitability.”
From voluntary to mandatory: 2026 is the year grid forming gets regulated
The rapid renewable energy transition is creating unprecedented grid stability challenges globally, with 2026 marking a pivotal year as grid-forming energy storage evolves from a technical curiosity to a commercial necessity. The global variable renewable energy (VRE) penetration of electricity capacity sits at around 36% as of 2025, and is expected to hit 56% by 2035, with many countries already experiencing VREs of 50% or higher today. This decline of traditional synchronous generation is weakening the grid stability that power systems have relied upon for decades.
Grid-forming inverters can independently establish voltage and frequency stability without relying on the traditional grid, unlike conventional grid-following inverters. The European Network of Transmission System Operators for Electricity (ENTSO-E) recently published a technical requirements report that establishes Europe’s first harmonised framework for grid-forming capability, with the European Commission expected to formalise these requirements in 2026.
Non-lithium technologies emerging at scale
Alternative storage technologies—including sodium-ion, flow batteries, and iron-air systems—are gaining traction as cost-competitive complements to lithium-based solutions for meeting the demand for flexible capacity.
Sodium-ion batteries benefit from compatibility with existing lithium-ion manufacturing lines and are beginning to scale outside China, which already hosts a 100 MWh operational sodium-ion project. In the United States, Peak Energy has entered into a multi-year agreement with Jupiter Power to supply up to 4.75 GWh of sodium-ion battery systems—representing the largest planned sodium-ion battery project to date.
Storage will be deployed across a breadth of applications to support large loads
Storage has become critical for building the flexible capacity to support large loads from data centers as gas turbine delivery timelines have stretched to five years, with costs rising dramatically. Data centers and other large loads continue to expand rapidly, with over 230 GW of projects announced in the United States alone. Europe has seen 35 GW announced, while China’s total data center demand could reach 78 GW by 2030.
Storage will be deployed across a range of applications in 2026 to support data center growth, including interconnection support, load ramp management, resilience backup, and clean power integration.
While only 10% of all announced data centers currently tracked have associated onsite generation of any kind, that ratio is growing as load interconnection queues become increasingly jammed. While gas turbines currently lead, storage is now the second most common onsite generator behind gas turbines in our data center pipeline.
Hybrid system popularity expands beyond the US market
Hybrid and co-located battery storage projects paired with renewables will accelerate globally in 2026. Falling solar capture prices and the need to shift generation outside midday peaks are driving developers to deploy storage with solar.
In the APAC region, Australia and India lead this trend, with over half of newly announced storage projects in 2025 in both countries paired with solar, wind, or a combination of both. In Australia, hybrid and co-located projects accounted for 30% of storage capacity additions (GWh) in 2025. For new solar-plus-storage projects, average battery capacity (in MW) is now larger than the solar generation capacity.
In Europe, storage co-location is emerging from niche to mainstream. In 2025, while 80% of installed capacity remained in standalone systems, market dynamics are driving rapid change toward co-located projects as negative prices now occur over 500 hours annually in some regions.
“The energy storage market is undergoing a fundamental transformation,” said Allison Weis, global head of energy storage for Wood Mackenzie. “While supply chain challenges and policy shifts create near-term headwinds in some markets, the underlying drivers—falling costs, grid stability needs, and explosive data center growth—ensure that storage will play an increasingly critical role in the global energy transition.”
