Battery energy storage is moving from a supporting role in the energy transition to one of its central pillars. IDTechEx puts figures on that shift in its newly updated report Batteries for Stationary Energy Storage 2027–2037, forecasting that the global lithium-ion battery energy storage system (BESS) market will reach $135 billion by 2037, with cumulative installations exceeding 10.5 TWh worldwide. It traces this growth to the rising share of renewables in electricity grids, new demand from data centre build-out and a shift in policy from headline storage targets towards bankable revenue frameworks and more sophisticated routes to market.
A rapid shift in battery demand
Lithium-ion remains the dominant chemistry for stationary storage, supported by broad availability, falling costs and steady performance gains. Total lithium-ion battery demand continues to climb, but the application mix is changing quickly. Electric vehicles still account for the largest share of global demand, although their portion fell from 84 percent in 2023 to 78 percent in 2025, while the BESS share rose from 10 to 19 percent over the same period. Policy shifts in the EV market have contributed to this change, but the main driver is the faster growth of stationary storage as grids integrate more variable renewable generation and require greater flexibility.
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Within lithium-ion, lithium iron phosphate (LFP) continues to extend its lead over nickel manganese cobalt (NMC), reflecting lower cost, longer cycle life and better thermal stability. Sodium-ion is also gaining ground as developers improve performance and cut production costs, but LFP is expected to remain the chemistry of choice for most BESS applications over the forecast period.
Deployments triple in two years
IDTechEx estimates that annual global Li-ion BESS deployments across grid-scale, commercial and industrial, and residential segments rose from 92 GWh in 2023 to 318 GWh in 2025, an increase of more than threefold. China accounted for 58 percent of 2025 deployments at 183 GWh, with the United States contributing 57 GWh, or 18 percent. China is likely to retain its lead over the coming decade, supported by intense domestic competition, growing grid flexibility requirements and expanding LFP cell and BESS manufacturing capacity.
The US market, by contrast, is being reshaped by industrial policy aimed at reducing reliance on Chinese cells and systems. That policy is accelerating the localisation of the domestic supply chain, with several players expanding LFP cell and BESS manufacturing capacity in the country, while most Chinese suppliers have scaled back or exited the market.
Beyond the two leaders, countries previously absent from the global top tier are now entering it at scale. Saudi Arabia emerged as the third-largest market in 2025, boosted by several gigawatt-hour-scale projects, and Chile also broke into the top ten. IDTechEx expects more countries to follow, with leading suppliers already securing projects of several hundred megawatt-hours up to gigawatt-hour scale in markets where deployment had previously been limited.
Europe scales up through policy and procurement
Europe is emerging as one of the most dynamic regions in the global BESS market, with the report covering Germany, Italy, the United Kingdom, Bulgaria, Spain and Poland in detail. Two policy schemes stand out. The UK’s cap-and-floor framework for long-duration energy storage is designed to unlock projects that struggle to secure financing on merchant revenues alone, while Italy’s MACSE auction establishes a central procurement route for large-scale storage.
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Beyond these schemes, Germany continues to anchor Europe’s residential and commercial storage segments, and markets such as Bulgaria, Spain and Poland are moving quickly from early projects to structured pipelines. Together, these developments are shaping Europe into a region where storage deployment is increasingly underpinned by predictable revenue mechanisms rather than merchant exposure alone.
Procurement, revenue models and bankability
The same shift is under way well beyond Europe. Governments and system operators are moving beyond headline targets towards mechanisms that can carry large waves of BESS projects through tendering and commissioning. Examples include Australia’s Capacity Investment Scheme and the New South Wales Long-Term Energy Service Agreements, as well as state-backed tenders in the Middle East.
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Project financing is also becoming more sophisticated. Revenue floors, capacity contracts, tolling agreements and stacked revenue models combining arbitrage, ancillary services and capacity payments are improving bankability and enabling a broader pipeline of projects to secure investment. In the residential segment, subsidies continue to play a decisive role, as shown by the strong uptake under Australia’s Cheaper Home Batteries Program. When such schemes are phased out, however, activity can drop quickly.
Technology trends: larger cells, denser systems
At the technology level, developers are increasingly launching containerised grid-scale systems built around higher-capacity cells, with a growing number of units rated at 6.5 MWh or more. Larger cells can improve system-level energy density by reducing the number of cells, interconnections and casings per megawatt-hour, allowing a greater share of the container to be occupied by active battery material. The approach also simplifies manufacturing and can lower project-level costs, as fewer units are needed for a given site capacity.
Although energy density has traditionally mattered less for stationary storage than for EVs, it is becoming a point of differentiation. Higher density comes with trade-offs, however, including more demanding thermal management and heavier containers that in some regions are approaching transport limits. These pressures are prompting new design approaches. Concepts such as CATL’s 6.25 MWh TENER system, marketed as “zero-degradation,” illustrate how developers are seeking to combine higher capacity with improved performance stability.
Emerging challenges and uncertainty
As project pipelines grow, grid connection is emerging as a critical bottleneck in several markets, including parts of Europe. Reforms to connection queues are likely to cause delays and force some projects to drop out. At the same time, intensifying supplier competition and expanding manufacturing capacity will put pressure on margins. In this tougher market, developers with proven utility-scale experience, strong local execution and demonstrable bankability are increasingly winning the largest projects, raising the barrier to entry.
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Upstream, raw material prices and policy shifts add further uncertainty. China is cutting its battery export VAT rebate and plans to scrap the rebate entirely, a move that could affect future cell and system pricing. The change has already encouraged some front-loading of production and exports and, alongside other factors, contributed to higher lithium carbonate prices in early 2026. If prices stay high, they could weigh on project economics across the containerised Li-ion BESS supply chain.
Outlook
Despite these headwinds, the trajectory remains firmly upward. IDTechEx expects annual global Li-ion BESS deployments, measured in GWh, to grow at a compound annual rate of 10 percent between 2027 and 2037. As Europe builds credible procurement frameworks alongside the established and emerging markets elsewhere, stationary storage is on course to become one of the key infrastructure segments of the next decade. (hcn)
