Wood Mackenzie: Energy Transition Demands $1.2 Trillion in Battery Storage

The global transition to renewable energy sources is set to require a staggering investment of **$1.2 trillion** in battery storage over the next decade, according to research from **Wood Mackenzie**. This figure is underpinned by an anticipated installation of more than **5,900 gigawatts (GW)** of new wind and solar energy capacity. As renewable sources like wind and solar become increasingly central to electricity generation, the need for large-scale energy storage systems grows more critical.

The findings align with earlier predictions from **Bloomberg New Energy Finance (BNEF)**, which estimated that wind and solar energy could account for half of the world’s electricity generation by mid-century. Despite the promising outlook, the intermittent nature of these energy sources presents a challenge that can only be addressed through significant advancements in battery storage technologies.

Robert Liew, research director at Wood Mackenzie, highlighted the urgency of this transition. “The power sector currently faces a capacity gap of **1,400 GW** for battery installations to achieve grid stability by **2034**,” he stated. This gap represents a substantial market opportunity, especially as nations focus more on enhancing their battery storage capabilities in light of growing renewable energy generation.

Recent trends indicate that the costs associated with battery energy storage have declined significantly. Wood Mackenzie reported that prices fell by an average of **10% to 40%** across global markets in the past year. This decline is expected to further bolster investments in energy storage solutions.

In the **United States**, the utility-scale battery storage capacity has expanded dramatically, experiencing a **15-fold increase** over the past five years to nearly **30,000 megawatts (30 GW)**. This growth has largely been driven by decreasing costs of battery technology, with **19 states** achieving at least **100 megawatts** of installed capacity during this period.

Despite this progress, the future of the U.S. battery production sector appears uncertain. Legislative changes under President **Donald Trump**, specifically the **OBBBA**, have rolled back many clean energy credits. This legislation is poised to substantially alter the landscape for battery manufacturing in the U.S., phasing out tax credits and funding for clean energy and electric vehicle production while promoting fossil fuel initiatives.

According to a report by the **International Council on Clean Transportation**, these cuts could lead to a **75% decline** in U.S. battery production, reducing expected output to **250 GWh** by **2030**, down from earlier projections of **1,050 GWh**. Consequently, electric vehicle sales are anticipated to be **40% lower** than previously estimated.

The **Inflation Reduction Act (IRA)**, passed in **2022**, had initially spurred the establishment of nearly **130 U.S. battery manufacturing facilities**, with fewer than half having begun construction. States such as **Texas**, **Michigan**, **Tennessee**, **Georgia**, **Kentucky**, and **Nevada** are likely to face significant adverse effects due to the reductions mandated by the OBBBA.

Despite these challenges, there are aspects of the OBBBA that may benefit domestic battery manufacturing. The act modifies the **Section 45X credit**, which supports the production of solar and battery components in the U.S. While it phases out credits for critical minerals used in batteries starting in **2031**, it retains credits for battery modules and other essential components, fostering domestic integration.

In contrast, **China** has pursued a different approach regarding grid stability and energy storage. Over the past year, the country accounted for **24.6 GW** of new global hydropower capacity, representing nearly **60%** of the global total. Of this, **7.75 GW** was attributed to pumped storage hydropower (PSH), a method recognized for its cost-effectiveness and long-duration storage capabilities compared to lithium-ion batteries.

China’s commitment to ramping up hydropower construction aligns with its ambitious goal of achieving carbon neutrality by **2060**. As of the end of **2023**, China had **436 GW** of installed hydropower capacity, which constitutes more than a third of the nation’s total **1,200 GW** from wind and solar sources.

The revised policies in China, effective from **January 2025**, are expected to further encourage the development of PSH projects, positioning the country as a leader in energy transition strategies. As the global demand for energy storage solutions grows, both the U.S. and China are at pivotal crossroads, determining the future landscape of battery storage and renewable energy investments.