Wood Mackenzie At ESIE 2026 Highlights Major Shift In Energy Storage Industry Toward Larger Cells, Modular Design And System-Level Innovation

Analysts were in Beijing this April attending the Energy Storage International Conference and Expo (ESIE) 2026, engaging with battery manufacturers, system integrators, and developers at what has become one of the most important annual events for the global energy storage industry. The discussions this year reflected a clear shift in focus: away from basic technical comparisons and toward deeper questions about the future direction of the market, emerging supply chain constraints, next-generation product design, and how rapidly evolving grid requirements are reshaping competitive dynamics.

While the event featured numerous product launches and capacity expansion announcements, the underlying message was that the energy storage sector is entering a more complex phase of transformation. Instead of focusing solely on incremental improvements in battery cells, the industry is now moving toward multi-dimensional innovation that includes system-level design, integration strategies, and new commercial use cases.

This shift is expected to create a clearer divide between companies that can adapt quickly and those that may struggle to keep pace in the next growth cycle.One of the key technical trends highlighted at ESIE 2026 is the move toward higher-capacity battery cells. New 700+ Ah batteries introduced by companies such as EVE and Envision drew significant attention, representing some of the highest-capacity winding cells currently available.

At the same time, 648 Ah and 684 Ah products from manufacturers like CRRC and Sungrow are already on the market. However, the broader industry appears to be converging around 587 Ah and 588 Ah cells as the next mainstream standard. These cells offer important cost advantages by reducing wiring and electrical component requirements on a per-unit basis.

They also lower system-level costs by reducing the number of required power conversion systems and transformers, while simplifying engineering, procurement, and construction processes.For manufacturers, these larger cells also improve profitability by lowering production costs while maintaining pricing power. However, experts noted that adoption of these higher-capacity cells may take longer than previous transitions, such as the shift from 280 Ah to 314 Ah, mainly due to increased safety considerations associated with larger energy densities.

Another important theme at the conference was the growing role of modular design in battery storage systems. As direct current (DC) block capacities increase from around 5 MWh to more than 6 MWh, individual modules are becoming larger and heavier, with some exceeding 36 tonnes. This is driving interest in more transportable 10-foot container designs, particularly for international deployment where logistics constraints are more complex.

System configuration trends are also evolving. While vertical stacking of containers can improve energy density within a limited footprint, it creates challenges in installation, commissioning, and earthquake safety compliance. As a result, side-by-side system layouts are becoming more widely preferred by manufacturers, offering a more balanced approach between efficiency, safety, and ease of deployment.Power conversion technology is another area seeing rapid advancement.

The latest power control systems (PCS) now incorporate several key improvements. These include enhanced safety performance through liquid-cooled silicon carbide (SiC) systems, which provide better thermal management and efficiency compared to traditional air-cooled insulated-gate bipolar transistor (IGBT) designs. Another major development is grid-forming capability, which allows battery systems to actively support voltage and frequency stability, effectively mimicking traditional power generation assets and strengthening grid reliability.

Additionally, high-voltage cascading technologies enable direct connection to medium-voltage busbars without transformers, improving system efficiency to as high as 92 percent.Grid-forming functionality in particular is gaining strong momentum, as it is increasingly expected to become a regulatory requirement in both the European Union and the United States.

This is driving its rapid adoption as a standard feature in next-generation storage systems and is also opening up new revenue opportunities for operators.A major emerging application discussed at ESIE 2026 is the use of battery energy storage systems in artificial intelligence data centres. These facilities have highly specific energy demands, including rapid load fluctuations, strict thermal control requirements, and the need for extremely high power reliability.

They also require near-instant frequency response and very high power quality standards to ensure uninterrupted operations. As a result, data centres are driving demand for fully integrated power solutions that combine generation, storage, and intelligent control systems into a single framework. This new demand segment is pushing leading battery manufacturers to evolve from component suppliers into full system solution providers.

The conference also highlighted a broader structural shift in the industry, with battery manufacturers increasingly moving downstream into system integration and engineering, procurement, and construction (EPC) activities. Companies such as BYD and CATL are expanding their role across the value chain, which is putting pressure on traditional system integrators by compressing margins and increasing competition.

While battery manufacturers hold strong advantages in cell technology, including energy density and lifecycle optimisation, system integrators are responding by focusing on competitive differentiation in areas such as power conversion systems, availability, and round-trip efficiency.

Overall, the discussions at ESIE 2026 pointed to a rapidly evolving energy storage sector where competition is no longer defined solely by battery chemistry or capacity. Instead, the future market will be shaped by system-level innovation, integration capabilities, regulatory alignment, and the ability to serve emerging high-demand applications such as AI-driven data infrastructure.