Nearly $1.2 trillion must be invested globally in battery energy storage systems (BESS) to support the installation of over 5,900 GW of new wind and solar capacity through 2034, according to Wood Mackenzie.

The deployment of grid-forming technology needs to accelerate over the next decade to facilitate the projected $5 trillion global expansion of renewable energy.

Unlike conventional grid-following systems that only react to existing grid conditions, grid-forming BESS can actively generate and sustain grid stability. This function is becoming increasingly vital as renewable energy becomes the primary source of power generation worldwide.

Grid-forming battery energy storage represents a significant advancement in integrating renewable energy. With global electricity demand expected to rise by 55% by 2034 and variable renewables making up over 80% of new capacity, this technology offers a key solution for balancing renewable energy supply with grid reliability.

The global power sector is facing a shortfall of 1,400 GW in battery energy storage capacity equipped with grid-forming technology, which is essential for maintaining grid stability between 2024 and 2034.

In several Asia-Pacific countries, wind and solar power already contribute between 46% and 90% of electricity during peak demand, highlighting a significant market opportunity as grid-forming solutions become increasingly important in regions with high renewable energy penetration.

Wood Mackenzie said that although the pace of renewable energy integration is gaining momentum worldwide, recent incidents of grid instability underscore the need to advance both storage and grid technologies simultaneously. The 2025 blackout in Spain serves as a clear example of the risks associated with high levels of renewable power without the necessary grid-forming capabilities or advanced storage systems to maintain system reliability.

Grid-forming battery energy storage systems offer several key stability functions. These include acting as independent voltage sources, providing strong current support during disturbances, delivering inertia-like response comparable to traditional power plants, and enabling black start capabilities for full system recovery after outages.

While grid-forming capabilities add an estimated 15% to overall system costs, largely due to upgraded inverters, controls, and software, these cost hurdles are becoming more manageable as average battery energy storage prices have declined across global markets in the past year.

In 2024, battery prices dropped 40%, reaching a record low of $165/kWh for a fully integrated system (excluding engineering, construction, procurement, and grid connection costs). Driven by the rising demand and falling costs, global energy storage capacity additions are expected to grow by 35% in 2025 to 94 GW or 247 GWh.

The economic case for advanced battery storage systems is growing stronger in markets worldwide. Hybrid utility-scale solar projects paired with battery energy storage are already matching or beating the cost of onshore wind, and forecasts suggest that large-scale battery systems will become more affordable than coal and gas power generation by 2040 in many regions outside the U.S.

The U.S. added more than 2 GW of energy storage systems across all segments in the first quarter (Q1) of 2025, marking the highest Q1 on record. Utility-scale energy storage added 1,558 MW, while residential energy storage accounted for 458 MW.

Regulatory momentum is also building in support of grid-forming battery technology. Countries such as China, the U.S., and Australia have begun rolling out detailed technical guidelines to enable their deployment. These efforts reflect a growing understanding of the role grid-forming batteries can play in maintaining stability as solar, wind, and storage account for a larger share of electricity generation. Although international standards are still evolving, early regulatory developments show a clear shift toward favoring advanced grid-forming capabilities.

In the Asia-Pacific region, markets such as China, India, Japan, and Vietnam are already meeting a significant portion of their peak demand through renewable energy, with supply levels ranging from 46% to 92%. This variability is contributing to increased curtailment, emphasizing the need for technologies that can ensure grid stability while maximizing the use of renewable energy.

With global electricity demand expected to rise at an average annual rate of 3% through 2040, according to Wood Mackenzie, grid-forming batteries are emerging as a viable alternative to traditional synchronous generators. Their ability to maintain voltage and frequency is making them a critical component of future power systems dominated by renewable energy.