SMM: Development Opportunities and Challenges in the Global ESS Market, Expected Growth Rate of Around 5% in 2025 [New Energy Summit]

At the 2025 (10th) New Energy Industry Expo - New Energy PV ESS Forum hosted by SMM Information & Technology Co., Ltd. (SMM), Ye Mingyuan, a senior ESS consultant at SMM, shared insights on the topic of "Global ESS Market Development Opportunities and Challenges." The global energy transition is driving the growth of the ESS market. With the continuous rise in global renewable energy power generation, the ESS sector is experiencing new growth opportunities amid the energy transition. As global carbon reduction and carbon neutrality efforts progress, the shift from a fossil fuel-dominated energy structure to a clean and low-carbon energy system has become a clear trend, presenting development opportunities for renewable energy (PV & wind power). Countries worldwide are implementing carbon reduction and carbon neutrality actions. To date, over 190 countries have signed the Paris Agreement. By 2030, China, the US, and the EU are expected to achieve carbon reduction targets exceeding 50%, and as major economic powers, these regions will remain core areas for long-term carbon reduction. Against the backdrop of "carbon neutrality," energy structure adjustment has become a clear trend. Currently, renewable energy (PV & wind power) accounts for 31% of the energy mix. To achieve the "carbon neutrality" goal, the proportion of renewable energy is expected to increase to 42% by 2030 and exceed 53% by 2050. However, the instability of new energy power generation has stimulated the development of ESS. The global ESS market is showing different development trends due to energy transition and policy shifts. The growth rate of global ESS demand has slowed due to policy adjustments in China and the US, with an expected growth rate of around 5% in 2025. After 2025, as global ESS planning is gradually completed, the market will transition to a stock market. The successful transformation of the Chinese and US markets may lead to a rebound in growth, driving the global ESS market to grow at a compound annual growth rate (CAGR) of 10%. Global annual ESS system shipments are forecasted from 2024 to 2030. From 2024 to 2025, the demand in major ESS markets such as China and the US is expected to decline due to policy adjustments, while other markets will maintain a relatively high growth rate. ► The cancellation of mandatory energy storage allocation in China has led the Chinese ESS market into a transition period, with short-term demand declining. ► The US has imposed multiple tariff hikes, impacting the economics of local ESS projects, potentially leading to the cancellation or delay of many ESS projects. ► Other regions, in order to absorb new energy power generation and support the power grid, will maintain a relatively high growth rate. From 2025 to 2030, as global ESS planning is completed, the ESS market will transition from an incremental market to a stock market, with an expected growth rate of around 10%. By 2030, global ESS demand is expected to reach 480 GWh. ► From 2025 to 2030, the global ESS market will enter a stock phase, with most regions having a high completion rate of ESS planning. Although policy subsidies are expected to phase out, the establishment of ESS economics after PV ESS parity will continue to drive market growth. ► The success of China's power market reform in promoting ESS transformation will sustain high demand growth. The US market will still have ESS demand, and under stable policies, ESS is expected to maintain a high growth rate. The impact of policy fluctuations on the Chinese ESS market. Review and outlook of the Chinese ESS market. SMM expects the Chinese ESS market to achieve a CAGR of around 9.5% from 2025 to 2030. Power generation-side ESS in China may experience fluctuations due to changes in energy storage allocation policies. The cancellation of mandatory energy storage allocation, with no clear policies issued by provinces, may lead to a decline in demand. Document No. 136 cancels the mandatory energy storage allocation restrictions. In 2025, provinces will formulate policies based on Document No. 136 that align with their actual conditions. Some provinces and cities will continue mandatory energy storage allocation, while others will begin to phase it out. Most provinces and cities are still formulating policies, and demand is not yet fully clear. Industrial and commercial ESS will become an important incremental source for the Chinese ESS market. With the further improvement of time-of-use electricity prices and the further increase in electricity prices for high-energy-consuming enterprises, the economics of industrial and commercial ESS have significantly improved. • As the peak-valley electricity price spread continues to widen, the economic benefits of industrial and commercial ESS become more apparent. According to electricity price adjustment data released in 2024, the peak-valley electricity price spread in many provinces and cities continues to widen, with 16 provinces and cities having a peak-valley electricity price spread of over 0.7 yuan/kWh. SMM predicts that by 2030, the demand for industrial and commercial ESS on the user side is expected to reach around 30 GWh. The US ESS market under multiple influencing factors. Review and outlook of the North American ESS market. SMM expects the North American ESS market to achieve a CAGR of around 7.4% from 2025 to 2030. Large-scale ESS: Excessive tariffs will increase investment costs for US owners, reduce profits for Chinese suppliers, and lead to a decline in US ESS demand. 2025 Tariff: • In February 2025, an additional 10% tariff was imposed on Chinese products for the first time, affecting the delivery of ESS battery cells and BESS, as well as signed orders. US owners and Chinese suppliers need to consider how to share the 10% tariff. • In March 2025, an additional 10% tariff was imposed on Chinese products for the second time, bringing the total additional tariff to 20%. This further affects the delivery of ESS battery cells and BESS, as well as future orders, slowing the overall shipment pace. It is expected that US owners and Chinese suppliers will each bear half of the additional tariff, which will become the mainstream solution. • In April 2025, the Reciprocal Tariff was signed, in addition to raising the baseline tariff to 10%, a 34% reciprocal tariff was added. This tariff increase has created a high trade barrier for US ESS imports, severely compressing US ESS demand. 2026 Tariff: • The 301 Act is expected to be implemented in early 2026, imposing a 25% tariff on lithium battery products. User-side ESS: The ITC subsidy policy includes household ESS in the subsidy scope, promoting the development of user-side ESS in the US. According to SMM analysis, the ITC subsidy for user-side ESS will continue until 2034, enhancing the economics of household ESS. With policy support, user-side ESS will continue to develop rapidly. Residential electricity prices: In recent years, US residential electricity prices have remained high, rising from 12.55¢/kWh in 2016 to 15.96¢/kWh in 2024, an increase of 27.2%. High electricity prices have increased the necessity of "PV + ESS" for residents. ITC subsidy: The ITC subsidy policy increased the subsidy ratio for user-side ESS in 2023 and extended it to 2034. Stimulated by the policy, the economics of user-side ESS have improved. Power outage risk: The aging power grid equipment in the US is vulnerable to extreme weather, making power outages likely during peak electricity usage. This summer, as temperatures soared, two-thirds of North America faced the risk of energy shortages. Therefore, as the penetration rate of new energy increases, ESS as a rigid demand will also rise. The European ESS market at a turning point. Review and outlook of the European ESS market. SMM expects the European ESS market to achieve a CAGR of around 23.4% from 2025 to 2030. Large-scale ESS in Europe has begun to take shape, with multiple countries' plans driving future growth. In 2024, renewable energy accounted for over 27% of Europe's energy supply structure. According to SMM analysis, driven by Europe's energy transition, high electricity price volatility, and policy stimulus, power generation-side ESS is entering a fast track of growth. • Energy structure: Over the past five years, renewable energy in Europe has increased from 20% to 47%. The increase in front-of-the-meter new energy power generation has brought more power generation but also increased the load on the power grid, further strengthening the demand for power generation-side ESS to ensure stable power generation and transmission. • Impact of the Russia-Ukraine conflict: After the outbreak of the Russia-Ukraine conflict, energy trade between Russia and Europe was subject to multiple restrictions. Benefiting from Europe's new energy policies, new energy power generation and ESS have grown rapidly, reducing Europe's dependence on energy imports. In 2024, energy imports decreased by 9.2% YoY from 2021. • Policy stimulus: Led by the UK, Germany, Spain, and Poland, Europe has introduced stimulus policies for the development of the ESS industry, including government subsidies, electricity trading, peak shaving, and frequency regulation compensation. Recent market developments in the ESS industry. Monthly installations in major overseas ESS markets. US ESS monthly installations: Due to seasonal reasons, US ESS installations decreased MoM, but in February, the YoY growth rate exceeded 1,400%. This installation rush was mainly driven by grid demand and political struggles, characterized by non-replicability and occasionality, and it has overdrawn future demand. US installations may slow down subsequently. In January 2025, heavy snow in many areas led to a sudden increase in grid load, revealing the demand for large-scale ESS. Monthly installations increased compared to the previous year. At the beginning of 2025, constantly changing tariff policies put project costs under pressure, prompting owners to rush installations to avoid the impact of additional tariffs on project returns. German ESS monthly installations: Driven by policies and renewable energy installations, German ESS may have a profound impact on future ESS installation structures. With sufficient natural gas supply and a downward price trend, stable electricity prices, and the phase-out of household ESS subsidies, household ESS installations are showing a weakening trend. As new energy installations continue to increase, the grid's absorption capacity is limited. To support the grid and accommodate more new energy installations, power generation and grid-side ESS are needed to support the grid. Since entering 2024, ESS system costs have continued to decline, but the trend has slowed. The price of ESS battery cells is closely related to the price trend of lithium carbonate, the main raw material for batteries. Since entering 2024, the overall price of lithium carbonate has shown a downward trend, driving the cost of ESS systems to continue to decline. The winning bid price for 0.5C systems has also decreased significantly since 2024. However, the downward trend in costs has slowed. Click to view SMM's new energy product spot prices. SMM expects that the price of 314Ah battery cells may fluctuate downward overall, keeping ESS system costs at a low level. Click to view the special report on the 2025 (10th) New Energy Industry Expo.

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SMM: Development Opportunities and Challenges in the Global ESS Market, Expected Growth Rate of Around 5% in 2025 [New Energy Summit]

The weekly awarded capacity was 952.27 MW, with an average winning bid price of 0.73 yuan per watt [SMM statistics].

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