(Bloomberg) — Around the world, a wave of mega-installations of batteries are lining up to be connected to the grid this year — from a solar hub in Texas to the grasslands of Inner Mongolia and the site of a former coal plant north of Sydney.
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Falling costs and increasing energy demand from data centers had set the stage for rapid growth. Wars in the Middle East have helped accelerate the trend by increasing demand for alternatives to expensive fossil fuels, setting 2026 as the year batteries will dominate the global energy system. BloombergNEF analysts had expected installations to rise by about a third this year, led by expansion in Europe, the Middle East, Africa and Latin America. That pace could increase further if fuel disruptions continue.
There are already signs of a ramp up. A Chinese battery maker has forecast a sharp rise in first-quarter profits as global demand picks up. In Vietnam, a developer is seeking approval to replace a planned LNG-to-power project with renewable energy linked to storage, citing increases in fuel costs linked to the war.
“We’ve now entered a point where anyone looking to invest in a power system, batteries are one of the most attractive options,” said Brent Wanner, head of the International Energy Agency’s Power Sector Unit. “Battery storage systems will continue to grow for the foreseeable future.”
In markets saturated with solar and wind — technologies that have developed significantly since the last energy crisis in 2022 — battery operators can buy power when it’s cheap and sell it when demand is peaking. Where grids once relied on coal and gas as renewable generation declines, storage technology is now becoming cheaper and faster to make a difference in how the grid works. According to BNEF, average costs have fallen by about 75% from 2018 to 2025, and are expected to drop another 25% by 2035.
Battery projects are also being built in large enough fleets to make a real difference to how the grid operates. In Inner Mongolia, three large sites were recently switched on with a combined capacity of 7.4 gigawatt-hours, enough to outcompete many large power plants for short periods. In Scotland, two giant neighboring battery farms on the site of a former coal mine will start this year.
Australia – the world’s largest battery market on a per capita basis – offers a glimpse of how the boom is reshaping the energy system. Shortly after a large project known as the Waratah Super Battery in New South Wales was partially switched on last year, the batteries discharged more power into the main grid during the evening peak than gas-fired plants. The site is expected to be fully operational in 2026. The storage is helping to delay an expected gas crisis as domestic sectors dwindle, emphasizing its role in the country’s energy security.
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For investors, one of the major reasons why projects have become more attractive is the sharp decline in costs. The Waratah, for example, will cost about 20% less to build now than it did four years ago, according to Nick Carter, chief executive officer of Waratah owner Akasha Energy Pvt.
Battery glut
China’s role in hardware manufacturing is at the center of the world’s energy storage boom. Years of investment in its electric vehicle supply chain have created massive volumes of batteries, driven down prices and flooded the global market with cheap devices. Exports of lithium-ion batteries rose in March as global demand for alternative energy sources increased as oil and gas supplies were affected by the Iran war.
The country now accounts for the vast majority of global generation capacity, as well as nearly half of existing grid-scale battery installations. That’s because of a 2021 mandate requiring renewable projects to include energy storage, which has since been retired.
The pattern reflects the solar industry’s post-2021 cycle, when rising demand spurred a wave of investment that led to oversupply, falling prices and ultimately mass adoption, according to consultancy Trivium China. What’s notable is that the drop in battery prices is happening even as the costs of many other clean energy technologies are rising.
This means that the calculus for projects is changing rapidly. In mid-2024, Australia’s AGL Energy Ltd began building large batteries in New South Wales. Six months later, it approved another project in the same state at about half the cost per megawatt-hour, according to CEO Damien Nix.
Increasing demand
With power systems under strain in much of the world, the wave of cheap batteries is coming at a pivotal moment.
The pace of construction in America is an important factor. Data centers from Texas to Tennessee are turning to battery-connected solar power because traditional power plants can’t be built quickly enough, with a lack of turbines and grid constraints as a slow timeline. Near Memphis, Tennessee, Elon Musk’s artificial intelligence business xAI has installed rows of Tesla Inc. Megapack batteries at its Colossus supercomputing facility.
According to the Energy Information Administration, batteries are expected to account for more than a quarter of the record production capacity the U.S. will add in 2026.
“A lot of people still see the battery story as a clean energy technology,” said Jeff Monday, chief growth officer at storage provider Fluence Energy Inc. “We’ve seen an evolution – battery technology is now seen as building grid resilience.”
Dynamic is also expanding a new class of technology beyond lithium-ion, designed to extend storage from hours to days. Form Energy Inc. Companies like that are pitching batteries that can power data centers during long periods of outages, effectively replacing supply from the grid. Unlike lithium-ion cells, Form’s technology relies on iron oxide to store and release energy for up to 100 hours, 25 times longer than most grid-connected batteries.
In Europe, the challenge is different. The rapid expansion of wind and solar is stressing grids not designed for large variations in supply, driving up price increases and increasing demand for generation, forcing operators to shut down. Germany alone is expected to lose €3.7 billion ($4.4 billion) to cuts in renewable generation this year. According to a report by think tank Aurora Energy Research earlier this year, storage is now set to increase across the continent, with capacity expected to increase fivefold by the end of the decade.
According to BNEF, the increase in energy prices caused by the Iran war increases arbitrage revenues and strengthens the case for reducing dependence on imported fossil fuels. In Europe, it sees batteries already online or nearing completion likely to benefit the most, with capacity seen growing from around 50 gigawatts in 2025 to 75 gigawatts by the end of the year.
“In the face of rising gas prices with the war in Iran and general market volatility, storage can act as a hedge against power price volatility that is becoming more frequent,” said Alison Feeney, energy storage analyst at research firm Wood Mackenzie. “This will revolutionize the way we operate our grid, once we reach a higher penetration level.”
Technology is also gaining momentum elsewhere. India has supercharged its auctions for energy storage projects as it races to balance the grid with more variable renewables. Brazil is preparing its first tender for grid-scale batteries. In Egypt, Africa’s largest hybrid solar and battery installation was partially switched on earlier this year and is expected to be fully operational this summer. The takeoff, however, is not without obstacles.
Much of the industry still depends on China’s supply chain, which creates vulnerabilities as geopolitical tensions rise and US trade tariffs are implemented. According to a March report by the American Energy Storage Alliance, while the US now has the manufacturing capacity to supply 100% of its energy storage systems domestically, Chinese equipment is still cheaper than US-made components.
Deploying batteries at scale also requires navigating the same hurdles faced by the broader power sector. Grid connection delays, permitting constraints and developing market regulations can also delay projects as demand increases.
“For installers in Europe, hardware is only 50% of the cost, but there are also grid connection and installation costs,” said Eva Zimmerman, senior research associate at Aurora. High interest rates as a result of war-related price constraints can also complicate the economics of capital-intensive projects.
Yet even with those obstacles, few expect the battery boom to slow. In the US, demand for storage is outstripping policy headwinds driven by growing electricity demand, the growth of data centers and the need to stabilize renewable energy.
As developers continue to push into new markets from Europe to Texas, the same forces reshaping Australia will be at play elsewhere. Akshay’s Carter, who cut his teeth in the energy and automotive industries before jumping into renewables, sees the current momentum extending beyond this decade.
“Electricity demand is increasing, data centers are coming online, more renewables are being built, coal is being phased out,” he said. “So when you combine all those things, the need for storage continues to grow.”
–Ocean Howe, with help from Eva Brendel, Will Mathis, Rachel Morrison and Stephen Stepzinski.
(Updates with China export data in ninth paragraph.)
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