In 2025, the global energy storage market accomplished an event that went down in history: the annual new installations exceeded 106 gigawatts. This figure was unimaginable just five years ago, but now it has become an actual occurrence.
But just as people were still marveling at this milestone, a report from the energy research institute Wood Mackenzie painted a more complex picture – in 2026, the energy storage industry is undergoing a less conspicuous but more profound structural transformation.
The power grid has changed, so energy storage must keep up.
By 2025, the installed capacity of variable renewable energy sources (wind and solar) globally has accounted for 36% of the total installed power capacity. By 2035, this proportion will rise to 56%. The reality behind these figures is that an increasingly grid driven by solar and wind energy has fundamentally changed from what it was twenty years ago.
The stability of traditional power grids relies on rotating generators – coal-fired power plants, gas turbines, and hydroelectric generators. These provide “momentum” physically, like a gyroscope, to maintain the frequency and voltage stability of the grid. However, when these synchronous units gradually withdraw and a large number of inverters are connected to the grid, the task of maintaining stability requires new mechanisms to take over.
One of the answers is “grid-forming energy storage system” (Grid-forming BESS).
Unlike traditional “grid-following” inverters (which respond passively to grid signals), the grid-connected energy storage system can actively establish and maintain voltage and frequency, effectively serving as an independent framework supporting the grid in the absence of a synchronous machine. The 370-megawatt-hour Koorangie energy storage project in Australia has become a landmark case of this technical approach.
In 2026, this route will shift from the period of technological exploration to the period of policy enforcement. The European Grid Operators’ Association (ENTSO-E) has released a draft of technical requirements, and the formal regulations are expected to be implemented within this year. The window for congealing storage systems from being an “optional” choice to a “mandatory” one is opening up.
Lithium is no longer the only solution.
Over the past decade, the energy storage industry has been dominated by lithium iron phosphate (LFP) batteries. The price decline curve has been steep, and the supply chain has become mature. This advantage seemed unassailable.
However, in 2026, a group of alternative chemical systems are quietly moving from laboratories to construction sites. Sodium-ion batteries are one of the most highly regarded among them. They have a lower theoretical cost, do not rely on lithium mines, and have a high degree of compatibility with existing lithium battery manufacturing lines – this means that the barrier for capacity switching is much lower than other routes. American Peak Energy and Jupiter Power have signed the largest sodium-ion energy storage deployment agreement to date, with an initial scale of 725 megawatt-hours, plus a 4-gigawatt-hour long-term option.
Fluid batteries and iron-air batteries have also found their place in specific scenarios. The advantages of these technologies lie in their ability to store energy for long periods – when it is necessary to store energy for 8 hours or even longer, the competitive landscape between them and lithium batteries begins to undergo subtle changes.
As Allison Weis, the global head of energy storage at Wood Mackenzie, pointed out, this industry is undergoing a “fundamental transformation” – not by replacing one chemical system with another, but by forming an energy storage ecosystem where multiple technologies coexist and each has its own specific role.
The data center has changed the game rules.
If the grid-connected energy storage and new chemical systems represent the internal evolution within the industry, then the rise of data centers represents a force from outside the industry that is reshaping the entire logic of the energy storage market.
The explosive growth in global demand for artificial intelligence computing power is giving rise to an unprecedented wave of data center construction. In the United States alone, the total installed capacity of announced data center projects exceeds 230 gigawatts; Europe contributes 35 gigawatts, and China has an impressive 78 gigawatts.
These facilities have several unique characteristics regarding their power demands: extremely large in scale, consistently stable, intolerant of power outages, and increasingly requiring “green power” to fulfill ESG commitments.
Data centers have become the second-largest on-site self-generated power usage scenario after natural gas units. The role of energy storage systems here is far more than just backup power – they are used for grid connection support, load ramp management, integration of clean energy, and as a substitute for high-carbon diesel or gas generators.
The significance of this scenario lies in that it shifts energy storage from a passive device that is dependent on the scheduling needs of the power grid, to a core infrastructure that actively serves specific industrial energy usage scenarios.
Renewable energy + Energy Storage
Another trend is that the “co-location” deployment of energy storage and renewable energy is spreading from the single market of the United States to the global scale.
The logic is quite simple: Solar power generation peaks at noon, but electricity demand peaks in the evening. The more photovoltaic installations there are, the more likely the “afternoon electricity price” becomes negative – in some parts of Europe, the number of negative electricity hours throughout the year has exceeded 500 hours by 2025. The involvement of energy storage is no longer just an added benefit; it is a necessary condition for making renewable energy assets truly have market value.
In the Asia-Pacific region, Australia and India are leading the way. By 2025, more than half of the new energy storage projects announced by these two countries will adopt a configuration that combines with solar energy, wind energy, or both. In Australia’s market, there has even been a large-scale deployment of DC-coupled hybrid systems, which can further reduce system costs and improve efficiency.
Neha Sinha, the product manager of Wärtsilä’s energy storage system, spoke directly: “As more and more solar power stations come into operation, as the problem of solar power waste becomes increasingly prominent, and as the wave of coal power retirement arrives, you must locate the energy storage system alongside the power generation facilities in order to maximize the system’s value and respond to market demands.”
“Made in China” is moving towards the global market.
The last trend is closely intertwined with geopolitics.
China’s position in the global energy storage supply chain remains dominant. However, this “dominance” is generating an internal tension: the overcapacity in the domestic market has led to price competition and extremely thin profits; while the international market has better price discipline and a more generous profit margin.
Zheng Jiayue, a supply chain analyst at Wood Mackenzie, pointed out that this market pattern will drive Chinese manufacturers to undertake significant overseas expansion in 2026. The strategic logic is to “exchange market share for long-term profit space”, rather than seeking short-term financial returns.
Meanwhile, the “Foreign Entity of Concern” (FEOC) restrictions in the US Inflation Reduction Act (IRA) are forcing some project developers who hope to obtain investment tax credits to re-examine their supply chain structures and shift their sourcing from Chinese manufacturers to other sources. This policy variable will continue to shape the landscape of the global energy storage supply chain.
106 gigawatts is a figure. But the significance behind this number is that the energy storage industry has completed its transformation from a “experimental technology” to a “grid infrastructure”.
Grid-forming requirements, diversified energy storage systems, data center demands, co-location of renewable energy sources, and supply chain reconfiguration – these are the five major trends in 2026, all essentially describing the same thing: Energy storage is no longer an accessory of the grid; instead, it is becoming the backbone that supports the operation of the future energy system.
Adulthood often comes with complexity. The energy storage industry in 2026 is much more difficult to simply describe with the phrase “rapid growth” than it was five years ago – it has supply chain pressures, policy uncertainties, and diverse technological competition. But this is precisely the appearance that an industry should have when it truly matures.