The global energy sector crossed a major turning point in 2025 as battery energy storage systems became the largest source of operational energy storage in the world, overtaking pumped hydropower. With more than 250 GW of battery storage now online, the technology has moved far beyond its earlier role of simply supporting renewable power. It is now a core part of modern electricity systems, helping grids manage the fast growth of solar and wind energy.
The rise of battery storage has been extremely rapid. Annual installations nearly tripled between 2023 and 2025 as countries rushed to add flexible capacity to their power networks. This growth reflects a clear shift in priorities. As more solar and wind power is added, grids need technologies that can respond quickly to changes in supply and demand. Batteries are increasingly filling this gap, offering fast response times and the ability to store excess electricity for later use.
The pace of expansion is expected to increase further in 2026, with new battery installations projected to cross 130 GW in a single year. China and the United States remain the largest markets, driven by strong policy support and large renewable pipelines. At the same time, new regions are emerging as important growth centers. Countries in the Middle East, along with markets such as Italy and parts of Eastern Europe, are moving quickly as their grid needs grow and regulations become more supportive of storage.
One of the most notable changes is the way battery storage is replacing fossil fuel generation. In Victoria, Australia, batteries have already produced more electricity than gas-fired plants for the first time. A similar trend is visible in California, where batteries now provide more than 20% of evening power generation. Just five years ago, gas plants dominated this time of day almost completely. These examples show how batteries are beginning to take over roles that were once seen as exclusive to conventional power plants.
Falling costs have played a key role in this transition. In 2025, turnkey battery system prices in China fell by about 15%, reaching around $150 per kilowatt-hour. However, cost reductions are expected to slow in 2026. Changes to Chinese export tax rebates and a recovery in lithium prices could raise system costs by 8% to 11%. Even so, battery storage remains attractive in most regions.
Technology improvements have extended battery system lifetimes to more than 20 years, improving project economics. Investors are increasingly focused on energy shifting and merchant revenues. By charging batteries when solar power is abundant and prices are low, and discharging during peak demand, storage operators can benefit from price differences while also stabilizing power markets.
In Europe, this value is becoming especially clear. The growing “duck curve” is pushing midday power prices down while raising evening prices. In some countries, solar projects without storage now earn less than 40% of the average market price. Adding batteries can sharply improve these returns, turning price swings into an advantage.
As 2026 progresses, battery storage is no longer optional. It has become essential for further renewable growth, taking over the flexibility and reliability once provided by gas plants and strengthening its role in the global energy transition.
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