New global battery energy storage systems capacity doubles in 2023, IEA says

Global battery energy storage systems, or BESS, rose 40 GW in 2023, nearly doubling the total increase in capacity observed in the previous year, according to a special report published by the International Energy Agency on April 25.

According to the IEA's Batteries and Secure Energy Transitions published on April 25, the global market for BESS doubled in 2023, reaching over 90 GWh and increasing the volume of battery storage in use to more than 190 GWh. The report said that 65% of this growth in capacity came from utility-scale systems, while behind-the-meter battery storage accounted for 35%.

The increase was driven almost entirely by China, the EU and US, which collectively accounted for nearly 90% of the added capacity.

"Incentives to boost the uptake of [electric vehicles] or encourage the rollout of battery storage are increasingly being paired with domestic manufacturing incentives aimed at establishing or boosting domestic production of batteries and other elements of the EV value chain," the IEA said.

In China, BESS capacity additions tripled in 2023 to 23 GW. Around two-thirds of the additional capacity was utility scale, supported primarily by provincial level mandates pairing new solar PV or wind power projects with energy storage.

US additions doubled year-on-year to more than 8 GW in 2023, with utility-scale projects accounting for nearly 90% of the new capacity.

"Improving economics have been boosted by market reforms, falling equipment costs and an investment tax credit introduced as part of the Inflation Reduction Act," the IEA said.

In the EU, BESS capacity was estimated at 6 GW, up 70% from the previous year. The IEA said that almost 90% of the capacity growth was associated with behind-the-meter storage, mostly in Germany and Italy, where high retail electricity prices and incentives encouraged the pairing of rooftop solar PV with storage.

"The electricity and transport sectors are two key pillars for bringing down emissions quickly enough to meet the targets agreed at COP28 and keep open the possibility of limiting global warming to 1.5 C," IEA executive director Fatih Birol said. "Batteries will provide the foundations in both areas, playing an invaluable role in scaling up renewables and electrifying transport while delivering secure and sustainable energy for businesses and households."

Analysts at S&P Global Commodity Insights forecast global battery capacity in the power sector to rise above 600 GW in 2030, according to the Clean Energy Technology database. Longer duration of those batteries would further boost the storage capacity of batteries.

Falling battery costs

The IEA attributed the strong growth in BESS capacity to declining prices for lithium-ion batteries, noting that prices -- including cell and pack costs -- have declined to less than $140/kWh in 2023 from around $800/kWh, supported by advances in battery chemistry and manufacturing.

The battery industry continues to invest in low-cost cathode chemistry known as lithium iron phosphate. According to the IEA, LFP had the lowest global weighted average prices of all lithium-ion batteries in 2023, with prices falling below $100/kWh.

Battery deployment to increase rapidly

The IEA forecasts a rapid increase in the global deployment of battery storage, supported by falling costs and increasing government support. Under a Stated Policies Scenario, total global installed BESS is forecast to increase from 86 GW in 2023 to over 760 GW in 2030. Meanwhile, a Net Zero by 2030 Scenario forecasts a 14-fold increase over the same period, with BESS increasing to 1,200 GW by 2030.

The IEA said that battery deployment will need to scale up significantly between now and the end of the decade to enable the world to meet its energy and climate goals.

In order to triple renewable energy capacity by 2030 as required under COP28, the IEA said that around 1,500 GW of energy storage, of which 1 200 GW from batteries, will be required.

"A shortfall in deploying enough batteries would risk stalling clean energy transitions in the power sector," it said.

Rising demand for critical minerals

The IEA said that battery manufacturing capacity is set to increase nearly fourfold from now to 2030 if all announced plants are built in full and on time, with production capacity to reach around 9.4 TWh.

The rapid rise in battery manufacturing implies a correspondingly significant increase in demand for the critical minerals used in the process. In order to meet this demand, the IEA said that critical minerals supply must be scaled-up supported by action to address policy and regulatory barriers. In the NZE Scenario, demand for critical minerals for batteries expands rapidly by 2030, with manganese, lithium, graphite and nickel increasing at least sixfold and cobalt more than tripling.

"Meeting these demands requires a significant ramp up in mining, refining and recycling activities," the IEA said. "While some positive signs in terms of investment in new supply, limited progress so far has been made in diversifying supply sources."

Platts, part of S&P Global Commodity Insights, last assessed seaborne lithium carbonate and lithium hydroxide both at $14,300/mt CIF North Asia on April 25, down 4.6% and 5.9%, respectively, since the start of the year.