What does energy storage growth mean for multiple metals demand?

The global energy storage industry is growing steadily, fuelled by the world's transition to clean energy. This is expected to drive up long-term demand for metals that are essential for energy storage technologies.

The essential role of energy storage is to mitigate the intermittency and variability of renewable sources such as wind and solar power, ensuring reliable supply of clean electricity.

China is on target to add 100GW of new energy storage capacity over 2025-27, more than doubling total capacity to 180GW by the end of 2027 compared with 2024, according to a government action plan issued in September.

The US and Europe are also advancing energy storage initiatives. The US added more battery storage [in April-June](US battery storage growth sets single-quarter record | Latest Market News) than in any previous quarter, driven chiefly by new, larger installations. The country will add about 19GWand 52.5GWh in 2025 at the current pace, equating to a year-on-year growth of 53pc and 45pc, respectively.

Energy storage can address the variability of wind and solar power by rapidly absorbing or releasing electricity to balance possible sudden fluctuations caused by weather conditions. China's installed capacity for solar power generation reached 1.13TW, in January-September, increasing by 45.7pc from a year earlier, according to data from the country's National Energy Administration. Installed wind power capacity rose by 21.3pc on the year to 580GW.

Lithium-ion batteries, a prominent storage technology, have become more efficient and cost-effective, making large-scale storage projects increasingly economically viable. Argus-assessed costs for cathode active material LFP have fallen to $11.12/kWh, down by 83pc from November 2022, when lithium feedstock costs reached all-time highs.

The expansion of energy storage is directly bolstering demand for metals, especially lithium. Energy storage has become the second-largest source of lithium demand with a 12-13pc market share. Argus Consulting forecasts that lithium demand from energy storage systems will grow to 340,000t lithium carbonate equivalent (LCE) by 2035.

Construction of storage systems and infrastructure is also expected to drive up demand for metals such as copper, which is essential for power transmission, and aluminium, which is used in structures and thermal management. Argus expects China’s copper demand from electric vehicles and energy transition to increase by 18pc from 2024 to 3mn t in 2025.

The rapid growth of energy storage is reshaping demand for metals as the industry is also moving towards diversification. The development and commercialisation of alternative technologies, such as vanadium redox flow batteries (VRFB) and sodium-ion batteries, are also progressing.

Around 5GWh of VRFB installations will be completed in 2025, which will consume about 35,000t of vanadium pentoxide (V2O5) equivalent of vanadium, market participants estimate.

Challenges ahead

The energy storage industry faces multiple challenges, despite its strong growth prospects, including potential oversupply driven by rapid capacity expansion, and difficulties in cost control for manufacturers resulting from the volatility of metal prices.

Data from China's Chemical and Physical Power Sources Industry Association show that 142.2GWh of new lithium-ion energy storage battery capacity began operations in China in the first half of this year, with an additional 752.5GWh of capacity under construction during the same period. But a considerable portion of newly built energy storage stations are yet to be brought into use.

Escalating geopolitical tensions, especially higher tariffs imposed by the US, have also posed challenges to China's expansion of energy storage batteries in the global market. China is the world's dominant energy storage battery producer, with its shipments accounting for more than 90pc of the global total in 2024. The US' domestic development of energy storage batteries remains comparatively slow.

Meanwhile, the Chinese energy storage market is waiting for the government to introduce a more efficient electricity market mechanism to facilitate development. The core profit model for energy storage is arbitraging the differential between peak and off-peak electricity prices. But current pricing mechanisms are often hampered by narrow peak-to-off-peak price spreads and a lack of real-time pricing signals.

Author name: Ohmin Zhao, Market Analyst Team Manager, Metals