10 Insights from the Energy Storage Market that Shocked Me

As we begin 2025, I'm excited to share insights from my recent comprehensive market analysis of the energy storage industry. Drawing from 8+ years of leadership experience across the ecosystem - from product manufacturing to software solutions and project development - and my recent strategic consulting work, I've identified 10 trends that showcase our industry's evolution from niche technology to a cornerstone of the energy transition. I am shocked at how fast these have emerged. These trends highlight both unprecedented opportunities and complex challenges that will define our sector's future. I would love my network to engage with these insights and share their perspectives.

1. Global ESS Deployments Tripled: The global energy storage system (ESS) market tripled in 2023 with 45GW/97GWh of deployments. 2024 is looking strong. This was largely driven by China, where energy storage has become mandatory with solar installations. [reference]

2. EV Slowdown Boosts Stationary Storage: EV sales grew slower than expected the last years, which created a glut in the supply of battery cells. The increased availability of batteries for stationary storage provides the added bonus of driving down battery prices.

3. China's Battery Production Already Oversupplying the Market: China's battery production capacity is greater than world demand…and they are still building LOTS more gigafactories. China had capacity to make 2.6 TWh of cells in 2023 and plan to add another 5TWh of factory capacity, which will lead to oversupply conditions for years. This massive oversupply is driving down prices and creating opportunities for market expansion, but may also lead to the early signs of dumping in US markets. This will likely create challenges for all the domestic production being incentivized by the IRA as profitability will be difficult with global oversupply. [reference] [reference]

4. Turnkey ESS Costs Plummeting In China, But Still High In Many US Segments: Turnkey energy storage system costs in China are incredibly low, at $115/kwh for 2-hour ESS – down 43% from a year ago. This rapid decline is making ESS much more affordable, but in the US, residential and commercial segments are still seeing prices of $700-1,000+/kwh installed. There should be lots of room for lower cost solutions and more efficient deployment models in the US that are still viable business models. Even so, residential adoption is booming, though also with adoption that favors of few specific markets (CA, HI, Puerto Rico, MA, NY) thanks to favorable policies and/or expensive, unreliable grids. 

5. US Market Doubling in 2024: As the dust settles on 2024, we can verify the numbers, but the US energy storage market was on track to double its existing installation base to a cumulative 30GW in 2024. This staggering growth rate is driven largely by utility scale energy storage deployments. And the deployment distribution is very concentrated - 80+% is in just three states (CA, TX, AZ). 2025 will be the year Texas passes California in terms of installed capacity. Energy storage is expected to be economically viable in all states by 2029. [reference]

6. Utility-Scale Projects are Getting Huge: Just as utility-scale solar projects have gone from 50-100MW to 250-500+ MW in size, utility-scale energy storage projects are also getting bigger. It is now common to see 400-600MW (2-4 hr) in size. There is increasing investment interest in energy storage, making such large projects possible, as energy storage is now becoming mainstream.

7. LFP is King: When I started in batteries in 2017, it was offering an Lithium Iron Phosphate (LFP) solution. At the time, most energy storage was using different chemistries that were coming out of EV batteries at the time (with Nickle and Cobalt). But thanks to massive Chinese manufacturing scaling in the last couple years, LFP batteries are now the dominant chemistry in the US market. The shift towards LFP reflects the importance of cost-effectiveness in the energy storage sector (and it’s a good thing since they are made with more common, less toxic ingredients). 

8. Tesla's Market Dominance Is Formidable: Tesla has a ~55% market share in the residential battery market in the US. Their all-in cheapest pricing model is what most companies benchmark against (and there are a LOT of competitors and new market entrants targeting this segment). Their Megapack has enabled huge volume growth and their vertical integration has turned out to be a key factor to success for scaling as the industry faces a talent shortage. In 2024, Tesla deployed over 31 GWh of energy storage - up over 10X from just 4 years ago. 

9. US Manufacturing Growth, But Uncertain: While the US is seeing a surge in battery manufacturing capacity, with an additional ~200GWh of production capacity announced to be online by 2030, several of these plants could be changed or canceled given global market conditions and the change in administration. And there are still various steps in the supply chain that China controls most of the world’s capacity. Building a competitive manufacturing industry will need decades of consistent industrial policy and support to ensure the US can catch up to all of the capital investment, knowledge, and experience China has built in batteries. 

10. Policy is Key, but massively uncertain: US policy is a key driver of the market, and initiatives like the Inflation Reduction Act (IRA) and Infrastructure Bill are driving demand for domestic production. However, it is impossible to pivot to domestic supply in energy storage quickly, so we will continue to rely heavily on imports for years to come, making tariffs a massive unknown as we head into an administration change. Tariffs can be changed by the president at the stroke of a pen, and while the industry had been preparing for tariffs expected to go into effect Jan 2026, we can now be fairly certain those won’t be the tariffs we see. And batteries imported from China are now seeing risks with the UFLPA legislation preventing forced labor (note: why do US legislators only seem to care about forced labor in clean energy manufacturing and not the rest of what China makes?). 

The energy storage landscape continues to evolve at a breathtaking pace, and geopolitics are about to add a whole new wave of change to the ecosystem. I see both unprecedented opportunities and complex challenges ahead. The convergence of plummeting costs, massive scale-up in manufacturing, and growing market demand along with the influx of project capital suggests energy storage has gone mainstream as a key grid asset and cornerstone of the energy transition. For those interested in a deeper dive into specific aspects or strategic implications, please feel free to connect.