Global Energy Transition Needs US$1.2 Trillion Battery Storage Investment by 2034 to Support 5,900 GW of Renewable Energy Projects, Says Wood Mackenzie

Global investments of around US$1.2 trillion in battery energy storage systems (BESS) will be required by 2034 to support the addition of more than 5,900 gigawatts (GW) of new wind and solar capacity, according to new research from Wood Mackenzie. The report stresses that the adoption of grid-forming technology (GFM) will need to accelerate significantly over the next decade in order to support what is projected to be a US$5 trillion expansion of renewable energy worldwide.

Unlike conventional grid-following systems that respond to existing grid conditions, grid-forming BESS can actively create and maintain grid stability, a feature that becomes increasingly vital as renewable energy grows to dominate global power generation. Robert Liew, research director at Wood Mackenzie, described the technology as a “critical breakthrough for renewable energy integration,” noting that with global power demand expected to increase by 55% by 2034, and renewable sources comprising more than 80% of new capacity additions, GFM batteries are essential to bridging the gap between renewable expansion and system reliability.

The report estimates that the global power sector faces a capacity shortfall of about 1,400 GW in battery energy storage using grid-forming technology between 2024 and 2034. Several Asia-Pacific countries already rely heavily on variable renewable power, with wind and solar contributing between 46% and 90% of peak load conditions. This creates an enormous opportunity for advanced storage technologies as grid-forming systems become the preferred solution for markets with high renewable penetration.

The urgency of deploying grid-forming BESS is underscored by recent instability events, such as the blackout in Spain in 2025, which highlighted the risks of high renewable energy dependence without sufficient grid stability measures. Grid-forming batteries are designed to address these challenges by providing functions traditionally offered by conventional power plants, such as independent voltage sourcing, inertia response, high-current support during disturbances, and black start capabilities to restore systems following outages.

One example cited in the report is Saudi Arabia’s Red Sea Project, which has demonstrated the viability of grid-forming technology on a large scale. It is currently the world’s largest off-grid renewable energy project and has been operating on 100% renewable power for nearly two years. Although grid-forming capabilities add an estimated 15% to project costs, largely due to advanced inverters, controls, and software, these costs are becoming more manageable as battery prices continue to fall.

Wood Mackenzie notes that global storage prices declined by 10% to 40% across markets in the past year. At the same time, the economic case for advanced storage is strengthening, with hybrid solar-plus-storage projects already competitive with onshore wind, and projections suggesting that large-scale battery systems could outcompete coal and gas power generation costs by 2040 in markets outside the United States.

Regulatory support for grid-forming BESS is also growing, with countries such as China, the United States, and Australia introducing technical guidelines to promote deployment. While international standards are still under development, early regulatory moves reflect a preference for advanced stability solutions. In Asia-Pacific, markets including China, India, Japan, and Vietnam are already grappling with high renewable penetration—ranging from 46% to 92% of peak demand—leading to growing curtailment issues that grid-forming batteries could help address.

With global electricity demand expected to grow at a compound annual rate of 3% through 2040, Wood Mackenzie forecasts that grid-forming batteries are emerging as a practical alternative to conventional synchronous generators. Their ability to maintain voltage and frequency stability positions them as a core technology for future high-renewable energy systems.

According to Liew, the convergence of declining battery costs, stronger clean energy targets, supportive regulatory frameworks, and successful pilot projects is rapidly accelerating the adoption of grid-forming systems. With global battery capacity set to triple by 2035, he noted that grid-forming functionality is likely to become a standard requirement for new storage projects, ensuring both system reliability and the full utilisation of renewable energy at scale.