Stronger government signals and new industry initiatives to support energy storage systems (ESS) in Asia-Pacific are set to accelerate deployments, creating ripple effects across the battery and lithium market in 2026 as participants eye a new growth engine.
ESS deployment remains uneven across Asia-Pacific. China accounts for 88pc of the region's 85GW capacity in 2024, according to industry group Energy Institute. The remainder is concentrated mainly in Australia and South Korea.
These countries aim to scale up ESS buildout further. China is targeting 180GW of capacity by 2027, while South Korea plans to reach 2.22GW capacity by 2029. Australia has committed A$500mn ($337.75mn) to expanding local battery manufacturing.
Other Asian nations are also picking up pace. Vietnam is targeting up to 16.3GW of ESS by 2030, while Malaysia launched its first 400MW auction this year.
Governments are increasingly supporting integrated renewables and battery projects. India and the Philippines awarded such projects this year; Australia is auctioning dispatchable clean power contracts, and Malaysia intends to do this year, according to lawmakers.
"In Asia-Pacific, while spot markets exist in some jurisdictions, most markets still lack mature price signals and ancillary service frameworks needed for merchant energy storage investment," nonprofit EnergyTag's Asia Pacific head Shailesh Telang told Argus.
ESS deployment is still primarily backed by tenders, subsidies, regulated tariffs, or state-supported procurement, Telang noted. "Over time, market forces can take over, but today policy remains the primary driver," he said.
Industry initiatives could further support growth. Regional advocacy group Fessia launched in September and will initially focus on smoothing policy for ESS deployment and bankability in Vietnam and the Philippines.
Corporate standard-setter Greenhouse Gas Protocol is also consulting on switching from annual to hourly matching of clean power purchases. The requirement could spur demand for nighttime clean energy — and, in turn, batteries. But the clause is hotly debated and could feature leeway for smaller industries and emerging economies.
Meanwhile, the South Korean government's first ESS central contract market auction in 2025 drew intense interest, selecting eight operators out of 51 proposals for 563MW of ESS capacity — largely concentrated on the mainland. A second auction round followed later.
South Korea's ESS momentum, driven by its 2029 capacity target, aligns with domestic battery makers' pivot from electric vehicles. Top battery maker LG Energy Solution's (LGES) plans to produce lithium-iron-phosphate (LFP) ESS batteries domestically, citing the domestic energy ecosystem, starting with 1GWh.
South Korean battery makers' ESS focus will likely intensify as the US EV market slows. Leading firms such as Samsung SDI, LGES, and SK On have all redirected resources to tap the ESS market, particularly in the US, given the data centre and renewable energy build-out. Their once EV-dedicated lines are increasingly repurposed to produce ESS as EV market uncertainty lingers.
LFP reality sets in
Chinese-dominated LFP chemistry continues to see surging adoption in South Korea, which has firmly stepped into the space and closed multiple LFP ESS supply deals in 2025.
But China's dominant position in LFP still appears immovable, thanks partly to the scale of its domestic ESS and EV markets. The Chinese government is on track to more than double its new energy storage capacity to 180GW by the end of 2027 from 2024, it said in an action plan.
Strong growth persists among Chinese domestic energy storage firms such as Eve Energy, Cornex, Envision, Great Power Energy and Technology, and Hithium, commented a Chinese battery recycler — though the sector remains overshadowed by industry giant CATL.
Anticipation of robust ESS growth in China for 2026 — where Argus heard estimates between 30-100pc across multiple analysts and market participants — reflects varying degrees of optimism. Yet, one consensus stands out among market participants: ESS growth is confirmed and is dominating lithium market discussions near the end of 2025, supporting lithium prices and injecting fresh hope for market expansion.
