(Bloomberg) — From solar hubs in Texas to grasslands in Inner Mongolia to the site of a former coal power plant north of Sydney, a number of mega-battery plants around the world are lining up to connect to the grid this year.
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Falling costs and energy demand from data centers had already paved the way for rapid growth. The war in the Middle East has helped accelerate this trend by increasing demand for alternatives to expensive fossil fuels, setting 2026 as the year batteries will take effect in the global energy system. BloombergNEF analysts had expected installations to rise by about a third this year, led by expansion in Europe, the Middle East, Africa and Latin America. This momentum could increase further if fuel shortages continue.
Signs of the rise are already emerging. A Chinese battery maker is forecasting a sharp rise in first-quarter profits as global demand picks up. A developer in Vietnam is seeking approval to replace its planned LNG-to-power project with renewables paired with storage, citing war-related increases in fuel costs.
“We’ve gotten to the point now where batteries are one of the most attractive options when everyone is looking to invest in their energy system,” said Brent Wanner, head of the International Energy Agency’s energy sector unit. “Battery storage systems will continue to grow for the foreseeable future.”
In markets flooded with solar and wind technologies that have improved significantly since the last energy crisis in 2022, battery operators can buy electricity when it’s cheap and sell when demand peaks. While grids once relied on coal and gas as renewable generation dwindled, storage technology is now becoming cheap and fast enough to make a difference in the functioning of the grid. Average costs fell nearly 75 percent from 2018 to 2025 and are expected to fall another 25 percent by 2035, according to BNEF.
Battery projects are increasingly being built in fleets large enough to make a real difference to the functioning of the grid. Three large facilities with a total capacity of 7.4 gigawatt-hours have recently been commissioned in Inner Mongolia, rivaling many large power plants for a short time. In Scotland, two large neighboring battery farms on a former coal mining site are set to become operational this year.
Australia, the world’s largest battery market on a per capita basis, offers a glimpse into how the boom is reshaping energy systems. Shortly after the partial commissioning of a massive project known as the Waratah Super Battery in New South Wales last year, batteries dumped more power into the mains grid in the evening than gas-fired power plants. The facility is expected to be fully operational in 2026. Storage also helps delay expected gas shortages as domestic fields are depleted, underscoring its role in the country’s energy security.
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One of the biggest reasons why projects have become more attractive for investors is the rapid decrease in costs. For example, Waratah will cost around 20% less to build than when it started construction four years ago, according to Nick Carter, chief executive of Waratah’s owner, Akaysha Energy Pty Ltd. “If you had the same project today, the economy would be better off materially,” he said, although Waratah’s strong returns had left him “without regrets”.
abundance of batteries
At the center of the world’s energy storage boom is China’s role in hardware production. Years of investment in the electric vehicle supply chain have created a glut of batteries, driving down prices and flooding global markets with cheaper equipment. Lithium-ion battery exports increased in March as global demand for alternative energy sources increased due to the negative impact on oil and gas supplies due to the Iran war.
The country currently accounts for the vast majority of global manufacturing capacity, as well as about half of current grid-scale battery installations. This is partly due to a 2021 mandate requiring renewable projects to include energy storage, which has since been discontinued.
This pattern reflects the solar industry’s post-2021 cycle, where rising demand triggers a wave of investment that leads to oversupply, falling prices and ultimately mass adoption, according to consultancy Trivium China. What is striking is that the decline in battery prices is occurring even as the costs of most other clean energy technologies are rising.
This means that calculations for projects are changing rapidly. In mid-2024, Australia’s AGL Energy Ltd. began construction of a large battery in New South Wales. Six months later, it approved another project in the same state at about half the cost per megawatt-hour, according to CEO Damien Nicks.
increasing demand
The wave of cheaper batteries comes at a crucial moment, with power systems under pressure in much of the world.
In the US, the speed of construction is an important factor. From Texas to Tennessee, data centers are turning to solar power paired with batteries because traditional power plants can’t be built fast enough as turbine shortages and grid bottlenecks slow timelines. Elon Musk’s artificial intelligence company xAI is building Tesla Inc.’s Colossus supercomputing facility near Memphis, Tennessee, to manage outages and growing electricity needs. Megapack installed its batteries.
Batteries are expected to account for more than a quarter of the record manufacturing capacity the U.S. plans to add in 2026, according to the Energy Information Administration.
“A lot of people still see the battery story as clean energy technology,” said Jeff Monday, chief growth officer at storage provider Fluence Energy Inc. “We have seen an evolution; battery technology is now seen as a tool to build grid resilience.”
This dynamic is also giving rise to a new class of technologies beyond lithium-ion designed to extend storage from hours to days. Form Energy Inc. Companies like are using batteries that can keep data centers running during long outages, effectively replacing supply from the grid. Unlike lithium-ion cells, Form’s technology relies on the rusting of iron to store and release energy for up to 100 hours, 25 times longer than most grid-connected batteries.
In Europe, the challenge is different. The rapid expansion of wind and solar energy is straining grids not designed for large changes in supply, increasing price volatility and forcing operators to shut down when production exceeds demand. Germany alone is expected to lose 3.7 billion euros ($4.4 billion) this year due to curtailing renewable production. Storage is now set to increase across the continent, with capacity predicted to increase nearly fivefold by the end of the decade, according to a report by think tank Aurora Energy Research earlier this year.
According to BNEF, fluctuations in energy prices caused by the Iran war increase arbitrage revenues and strengthen the case for reducing dependence on imported fossil fuels. In Europe, batteries already online or nearing completion appear to benefit the most, with capacity set to rise from around 50 gigawatts in 2025 to 75 gigawatts by the end of the year.
“In the face of rising gas prices and general market volatility driven by the war in Iran, storage can serve as a hedge against increasingly frequent energy price swings,” said Allison Feeney, energy storage analyst at research firm Wood Mackenzie. “It will revolutionize the way our grid works once we reach high levels of penetration.”
The technology is gaining momentum elsewhere, too. India has stepped up its auctions of energy storage projects as it races to balance a grid that receives more variable renewable energy. Brazil is preparing for its first tender for grid-scale batteries. In Egypt, Africa’s largest hybrid solar and battery installation was partially commissioned earlier this year and is expected to be fully operational this summer. However, take-off is not unrestricted.
Much of the industry still depends on China’s supply chain; This creates vulnerabilities as geopolitical tensions rise and US trade tariffs come into effect. Although the United States now has the manufacturing capacity to source 100% of energy storage systems domestically, Chinese equipment is still cheaper than American-made components, according to a March report from the U.S. Energy Storage Coalition.
Deploying batteries at scale also requires overcoming the same bottlenecks faced by the broader energy sector. Grid connection delays, permitted barriers, and evolving market rules can slow projects even as demand increases.
“For installers in Europe, hardware accounts for only 50% of the cost, but there are also grid connection and installation costs,” said Eva Zimmermann, senior research associate at Aurora. Higher interest rates as a result of war-related price disruptions can also complicate the economics of capital-intensive projects.
But despite these restrictions, few people think the battery boom will slow down. In the US, demand for storage outweighs policy downsides due to rising electricity needs, the growth of data centers, and the need to stabilize renewable energy.
Developers continue to enter new markets from Europe to Texas, believing the same forces reshaping Australia will be at play elsewhere. Akaysha’s Carter, who cut his teeth in the energy and automotive industries before shifting to renewables, thinks the current momentum will extend well beyond this decade.
“Energy demand is increasing, data centers are coming online, more renewable energy is being produced, coal is running out,” he said. “So when you combine all of that, the need for storage increases.”
—With assistance from Ocean Hou, Eva Brendel, Will Mathis, Rachel Morison, and Stephen Stapczynski.
(Updated with Chinese export data in the ninth paragraph.)
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