Battery for Energy Storage Systems Market to Grow by USD 22.18 Billion (2025-2029), Transition from Fossil Fuels to Renewable Energy Drives Growth, Report on AI-Driven Market Evolution - Technavio

NEW YORK, Jan. 24, 2025 /PRNewswire/ -- Report on how AI is driving market transformation - The global battery for energy storage systems (ESS) market size is estimated to grow by USD 22.18 billion from 2025-2029, according to Technavio. The market is estimated to grow at a CAGR of 23.8% during the forecast period. Changing energy mix from fossil fuels to sustainable and renewable energy resources is driving market growth, with a trend towards increased adoption of microgrids. However, widening demand-supply disparity with regard to lithium poses a challenge. Key market players include ABB Ltd., AEG Power Solutions BV, Corvus Energy, dSPACE GmbH, East Penn Manufacturing Co. Inc., Exergonix Inc., General Electric Co., Hitachi Ltd., LG Corp., Mitsubishi Heavy Industries Ltd., NEC Corp., Panasonic Holdings Corp., Philadelphia Scientific LLC, Samsung SDI Co. Ltd., Siemens Energy AG, SolarEdge Technologies Inc., TDK Corp., Tesla Inc., The AES Corp., and Toshiba Corp..

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Market Driver

The Battery for Energy Storage Systems (ESS) market is experiencing significant growth due to trends in renewable energy sources and grid modernization initiatives. Lithium-ion batteries are currently leading the market with their high energy density and affordability. Grid operators seek reliable power sources to manage the increasing integration of renewable energy into the grid. Flow batteries and lead-acid batteries also have a role in the market, each offering unique advantages. Power conversion systems, control systems, thermal management systems, and safety measures are crucial components of ESS. Economies of scale and manufacturing efficiency are key drivers for cost-effective solutions. Grid power, renewable energy infrastructure, and utility-scale applications above 500 MWh capacity are major sectors for ESS. Input energy sources include renewable energy, and raw materials like lithium, cobalt, and copper are essential. Energy demand, incentive programs, and peak shaving are factors influencing investments. In the residential sector, affordable and accessible ESS solutions are gaining popularity for self-consumption optimization and backup power. Distributed energy resources and renewable power sources like solar energy are driving the market. France Territoire Solaire, Pillswood project, Autobidder, and O-Uchi Kyuden System are notable projects. Battery prices, reliability, energy management systems, and revenue models are essential considerations for utilities and battery producers. Ancillary services, arbitrage, capacity auctions, and telecommunication towers are revenue streams. Harsh environmental conditions and regulations impact performance and lifespan. Mining, construction, events, and self-sufficiency are emerging markets for ESS. Balance of system components, including battery cells, packs, inverters, and housing, are essential for optimal performance. Regulations, demand charges, and peak power consumption are challenges to be addressed. 

Microgrids are self-contained electricity systems that integrate local generation and energy storage resources. They can function independently or collaborate with other small power grids, referred to as hybrid microgrids. These grids can switch between grid-connected and island modes, operating autonomously when the main power grid fails or during intentional disconnection. Renewable energy sources, such as solar and wind power, are increasingly being adopted in microgrids to reduce reliance on fossil fuels. This shift towards cleaner energy sources enhances the microgrid's efficiency and sustainability. 

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Market Challenges

• The Battery for Energy Storage Systems (ESS) market is experiencing significant growth due to grid modernization initiatives and the increasing integration of renewable energy sources. Grid operators seek reliable power sources to manage the variability of renewable energy and ensure power quality. Lithium-ion batteries have the highest energy density, making them popular for utility-scale applications above 500 MWh capacity. However, challenges such as safety measures, thermal management systems, and economies of scale persist. Flow batteries and lead-acid batteries offer alternatives, with long cycle life and lower costs. Power conversion systems and control systems are crucial for optimizing performance and lifespan in harsh environmental conditions. Grid power outages and the shift to renewable energy infrastructure drive demand for cost-effective solutions. The utility sector invests in utility-scale ESS for peak shaving, self-consumption optimization, and backup power. Residential sector installations, such as BTM and FTM, are growing due to increasing electricity consumption, disposable incomes, and the work-from-home trend. Renewable energy sources, including solar energy, are the primary input energy sources, with solar parks and wind farms driving demand. Battery prices are a significant challenge, with raw materials like lithium, cobalt, and copper driving costs. Regulations and incentive programs influence the market, with distributed energy resources and renewable power sources gaining popularity. Telecommunication towers, data centers, and uninterruptible power supply systems also rely on ESS for reliability. Mining, construction, events, and harsh environments present unique challenges for ESS, requiring specialized designs and maintenance activities. Utilities, battery producers, and system integrators collaborate to ensure reliability and energy management systems provide firm frequency response and ancillary services. Arbitrage, capacity auctions, and revenue models offer opportunities for profit pools in the global BESS market.
• Lithium-ion batteries have emerged as the dominant technology in the energy storage systems (ESS) market, accounting for over 75% of the global electrochemical energy storage capacity in 2023. Initially, these batteries were primarily used in consumer electronics. However, their usage has expanded significantly in recent years, particularly in the transportation sector for electric vehicles (EVs), due to the growing demand for larger batteries and stationary storage. The advantages of lithium-ion batteries, including improved energy and power density, safety, cost reduction, and longer battery cycle life, make them the preferred choice for both EVs and consumer electronics such as laptops and smartphones. This trend is expected to continue, further increasing the demand for lithium-based batteries in the ESS market.

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Segment Overview

This battery for energy storage systems (ess) market report extensively covers market segmentation by

1. Technology 
• 1.1 Lithium-ion batteries
• 1.2 Flow batteries
• 1.3 Others
2. Connectivity 
• 2.1 On-grid
• 2.2 Off-grid
3. Geography 
• 3.1 APAC
• 3.2 North America
• 3.3 Europe
• 3.4 Middle East and Africa
• 3.5 South America
4. Battery
5. Ownership

1.1 Lithium-ion batteries- The lithium-ion batteries segment holds a substantial market share in the global battery for energy storage systems (ESS) market in 2024, with Li-ion batteries being the preferred choice due to their high energy density, improved energy-to-density ratio, and lower self-discharge rate. These batteries are highly efficient in storing large amounts of power, making them ideal for ESS applications. The increasing demand for renewable energy and the need for grid energy storage have led to significant growth in the ESS market. China is a major contributor to this trend, with numerous Li-ion-based ESS projects underway due to the country's high renewable energy potential. In regions with increasing power demand and frequent power outages, such as Eastern Europe and the Middle East and Africa, there is a growing focus on enhancing power reliability through ESS projects. Although Li-ion batteries are currently not considered cost-effective for large-scale grid storage, their suitability is expected to increase with the implementation of smart grids. The lightweight and compact nature of Li-ion batteries, along with their higher operating voltage, further strengthens their position in the battery energy storage market.

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Research Analysis

The Battery for Energy Storage Systems (ESS) market is experiencing significant growth due to the increasing integration of renewable energy sources into the power grid. Grid modernization initiatives are driving the demand for energy storage solutions, enabling the efficient management of variable renewable energy generation. Lithium-ion batteries are currently leading the market, but flow batteries are gaining popularity due to their longer cycle life and ability to use a wider range of raw materials, including cobalt, lithium, and copper. Energy demand, electricity consumption, and clean-energy investments are key factors fueling the growth of the global BESS market. In the residential sector, BTM (behind-the-meter) installations are becoming more common for peak shaving, self-consumption optimization, and backup power. Utility-scale BESS and FTM (front-of-the-meter) installations are also increasing to support grid stability and optimize renewable energy infrastructure. Battery prices are decreasing, making energy storage more accessible and cost-effective for various applications.

Market Research Overview

The Battery for Energy Storage Systems (ESS) market is witnessing significant growth due to the increasing integration of renewable energy sources and grid modernization initiatives. Lithium-ion batteries are currently leading the market, offering high energy density, power conversion systems, control systems, and thermal management systems. However, flow batteries and lead-acid batteries also play essential roles due to their reliability and affordability. Grid operators seek ESS as a reliable power source for peak shaving, self-consumption optimization, backup power, and ancillary services. The utility sector is investing heavily in utility-scale applications above 500 MWh capacity, while the residential sector is focusing on smaller-scale installations. Input energy sources include renewable energy, with solar energy being a significant contributor. Raw materials like lithium, cobalt, and copper are crucial for battery production, and economies of scale and manufacturing efficiency are essential for cost-effective solutions. Grid power and alternative energy sources, such as wind and hydro, require ESS for firm frequency response and revenue models like arbitrage, capacity auctions, and ancillary services. Harsh environmental conditions, maintenance activities, and safety measures are also critical considerations. Geographically, the largest share is in North America and Europe, with China and Asia Pacific rapidly growing. Performance and lifespan, power quality, and cycle life are essential factors, along with the geographic footprint and cost-effectiveness of ESS. Incentive programs, distributed energy resources, and renewable power sources are driving the market, with key applications including solar parks, wind farms, telecommunication towers, data centers, uninterruptible power supply, and diesel generators. Lithium-ion BESS products are popular, but other technologies like flow batteries and lead-acid batteries have their strengths. The market is evolving rapidly, with new players entering and existing ones expanding their offerings, including battery producers, system integrators, and utility companies. Reliability, energy management systems, and firm frequency response are essential for grid operators, while self-sufficiency, optimized self-consumption, and peak power consumption are key considerations for residential and commercial customers. Battery cells, packs, inverters, and housing form the balance of system, while regulations and demand charges impact the profit pool. The market is expected to continue growing, driven by increasing energy demand, clean-energy investments, and the transition to renewable energy.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• Technology
• Lithium-ion Batteries
• Flow Batteries
• Others
• Connectivity
• On-grid
• Off-grid
• Geography
• APAC
• North America
• Europe
• Middle East And Africa
• South America
• Battery
• Ownership

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

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