Energy storage infrastructure needs to expand by at least six times the current capacity if the world wants to triple renewables capacity by 2030 while maintaining electricity security, a new report from the International Energy Agency (IEA) said, adding that falling costs of batteries have accelerated energy storage deployment globally.

The IEA’s first comprehensive analysis of the battery ecosystem found that deployment of batteries soared in 2023, especially in the power sector, where capacity more than doubled. Most of this growth came from utility-scale systems, while behind-the-meter battery storage accounted for 35% of annual growth in 2023.

However, electric vehicles (EVs) dominated the use of lithium-ion batteries, representing over 90% of the increase in demand from 2015 to 2023. EV sales surged to nearly 14 million in 2023 as battery costs plunged over 90% in less than 15 years.

Lithium-ion battery prices have fallen from $1,400 per kWh in 2010 to less than $140 per kWh in 2023 – one of the fastest cost declines of any energy technology ever. The decline was aided by economies of scale in manufacturing.

The report projects that further innovation in battery chemistry and manufacturing will reduce global average lithium-ion battery costs by an additional 40% from 2023 to 2030.

“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,” said IEA Executive Director Fatih Birol. “Batteries will provide the foundations in both areas, playing an invaluable role in scaling renewables and electrifying transport while delivering secure and sustainable energy for businesses and households.”

Global installed battery storage capacity in the power sector has risen exponentially from just 1 GW in 2013 to over 85 GW in 2023. This rapid growth was driven almost entirely by developments in China, the European Union, and the U.S.

China accounted for 55% of new energy storage installations, with its capacity tripling to 23 GW; meanwhile, the U.S. was the second largest market, with additions roughly doubling year-over-year to over 8 GW in 2023. The European Union saw 6 GW of new battery capacity in 2023, with most coming from behind-the-meter residential and commercial installations in countries like Germany and Italy.

The report added that meeting the target of tripling renewables by 2030 will require installing 1,500 GW of energy storage by 2030, with 1,200 GW coming from batteries. To deliver this, battery storage deployment must accelerate by an average of 25% annually by 2030.

China Dominates Battery Supply Chains

However, the Paris-based agency cautioned that battery supply chains remain concentrated, with China dominating production at every step of the value chain. Europe, the U.S., and Korea each hold 10% or less of the supply chain for some battery metals and cells today.

Europe, which is responsible for almost 20% of EV production, holds very little of the global supply chain apart from 7% of battery cell manufacturing capacity. The U.S. is responsible for 10% of EV production and 6% of battery cell manufacturing capacity.

Going forward, the IEA sees China’s share of battery manufacturing capacity declining to 67% by 2030 from the current 83%, driven by investment from Korea-based companies.

Lack of Battery Storage Could Hinder Green Transition

While EVs powered with lithium-ion batteries and utility-scale energy storage could reduce reliance on fossil fuels, the report warns that failing to rapidly scale up battery storage could undermine global efforts to transition to a clean energy future.

The analysis explores a “Low Battery Case” where solar energy’s share of generation tops at 20% due to inadequate storage to ensure grid reliability. In this scenario, nearly half of the 6,000 GW of solar projected for 2050 under the IEA’s Net Zero Emissions pathway would be at risk long-term.

This could result in many countries turning to unabated fossil fuels, causing global power sector emissions to plateau in the 2030s rather than dropping steeply as required. The additional pollution could wipe out six years’ worth of emissions reductions for the sector.

Energy importers like the EU, Korea, and India could see fossil fuel import bills increase by an annual average of $12.5 billion from 2030-2050 compared to the Net Zero pathway.

Regulatory barriers such as restrictions on market participation, double taxation, lack of locational pricing signals, and inadequate compensation for grid services are the biggest challenges facing energy storage deployment, according to IEA.

The report also predicted that India will become the world’s third-largest market for utility-scale batteries by 2030, with capacity additions expected to rise to 9 GW by 2030.

The global energy storage sector witnessed a 432% increase year-over-year in corporate funding, totaling $11.7 billion across 29 transactions, from $2.2 billion in 27 deals, according to a recently released Mercom report.