China dominates 95% of the global energy storage battery market

China accounts for around 95% of the global market for lithium batteries used in energy storage, according to an estimate presented by Ouyang Minggao, a professor at Tsinghua University, at a battery technology conference in May 2026 and later published by China EV100. The significance of this dominance is growing as energy storage plays an increasingly important role in the operation of power grids.

Data from Benchmark Mineral Intelligence confirms this industrial concentration. In 2025, the world’s ten largest suppliers of energy storage battery cells were all China-based companies and together accounted for 90% of global shipments. Total cell shipments for these applications exceeded 600 gigawatt-hours, nearly double the previous year’s level.

This comes in a market that the International Energy Agency (IEA) describes as the fastest-growing segment among power technologies. In 2025, the world added 108 gigawatts of battery storage capacity, up 40% year on year, including around 87 gigawatts from large-scale projects. Global installed capacity is now 11 times higher than in 2021.

Electricity when it is needed

The need for storage stems from the nature of solar and wind power, whose output varies depending on weather conditions and the time of day. The European Commission notes that greater reliance on these sources makes investment in technologies capable of managing fluctuations in supply, including batteries, an essential part of the transition to clean electricity.

The IEA explains that batteries are charged during periods of excess generation and then discharge electricity when demand rises or output falls. Their rapid response also helps balance the grid and maintain its stability. Shifting electricity from the time it is generated to the time it is used has become one of the main applications of new storage projects.

For this reason, the US Energy Information Administration distinguishes between battery power capacity, which measures how much electricity a battery can deliver at a given moment, and energy capacity, which measures the total amount of electricity it can store. A battery with a power capacity of 1 gigawatt and an energy capacity of 4 gigawatt-hours can, in theory, discharge at that power level for four hours, before accounting for losses and operational constraints.

California provides a concrete example of how this works in practice. According to the IEA, batteries covered more than 40% of electricity demand during March. This allows part of the solar power generated during the day to be shifted to evening hours, when solar output declines.

The IEA classifies batteries among short-term flexibility tools suitable for supplying electricity continuously for periods ranging from one to eight hours. The average storage duration of new large-scale projects rose to three hours in 2025, compared with around two hours in 2023, reflecting their growing use in meeting grid needs throughout the day.

A domestic market supporting industry

China built its expansion on a policy combining the deployment of energy storage with the development of its domestic industry. In July 2021, the National Development and Reform Commission and the National Energy Administration set a target of more than 30 gigawatts of “new energy storage” by 2025, while supporting research and development, pilot projects, industrial clusters and broader participation of storage in electricity markets.

The results far exceeded that target. The National Energy Administration announced that capacity had reached around 136 gigawatts by the end of 2025, with energy capacity of 351 gigawatt-hours, more than 40 times the level recorded at the end of 2020. This category includes several technologies, while lithium battery storage alone reached around 131 gigawatts.

In its report on the sector’s development, the administration links the rise of grid-scale storage technologies to the electric vehicle battery industry. It also highlights progress in materials, manufacturing and system design, which helped increase the commercial lifespan of storage cells, measured in charge-discharge cycles, from around 5,000 cycles in 2021 to 15,000 in 2025.

Policy also evolved as the market expanded. In 2025, China removed the requirement to install storage capacity in order to secure approval for new renewable energy projects or connect them to the grid, according to the same report. By the end of the year, independent storage facilities accounted for 51.2% of total capacity, alongside growing participation in electricity markets and grid services.

Lower costs also helped expand the market. According to the IEA, the global average price of battery storage systems fell in 2025 to one-third of its 2020 level, driven by advances in manufacturing, technological improvements and stronger competition. The agency also links the expansion of storage to lower prices, abundant supply and relatively short project development times.

Dominance extends beyond battery assembly

At the heart of this market are lithium iron phosphate batteries, known as LFP, which accounted for more than 90% of global stationary storage installations in 2025, according to the IEA. The average price of LFP battery packs was more than 40% lower than that of nickel-manganese-cobalt alternatives.

The agency notes that these batteries have lower energy density than some technologies commonly used in electric vehicles, but they are generally cheaper and better suited to repeated charging and discharging. It adds that the lower energy density requirements of stationary storage help explain part of the technology’s cost advantage in this application.

China’s lead extends to the upstream stages of cell production. According to the Energy Technology Perspectives 2026 report, China accounts for around 97% of production capacity for negative electrode materials. The IEA also says that production of active materials for positive electrodes in LFP batteries, as well as their intermediate inputs, is almost entirely concentrated in China.

The IEA says battery factories in Europe and the United States import most of their components, with the majority coming from China.

It adds that nearly all batteries used in power grids depend on China at least at one stage of the supply chain. This means that simply building a cell factory is not enough to diversify supply.

Concerns in Washington and Brussels

US concerns also extend to the digital components that manage charging and discharging and connect storage systems to the grid. In an assessment published in January 2025, the US Department of Energy found that all storage system suppliers included in the review relied on a Chinese supplier for at least one component related to battery management, power conversion or inverters.

The report identifies risks linked to remote connectivity, software updates and control permissions. It warns that compromising an authorised party with access to these systems could allow harmful actions that affect their operation. It therefore recommends securing existing equipment, improving the design of new projects and investing in domestic manufacturing capacity.

Washington has also translated supply concerns into economic conditions. In February 2026, the US Treasury Department and Internal Revenue Service issued guidance implementing restrictions that link access to certain tax incentives for energy storage projects and manufacturing components to the degree of reliance on inputs associated with what the rules describe as “prohibited foreign entities.”

In Europe, the Net-Zero Industry Act covers battery and storage technologies and their components. The goal is for domestic manufacturing capacity to meet at least 40% of the European Union’s annual deployment needs for the technologies covered by the law by 2030, as part of efforts to strengthen industry and reduce strategic dependence on external suppliers.

In July 2026, the European Commission issued guidance on applying criteria beyond price in public procurement and renewable energy auctions, including supply diversification, sustainability and cybersecurity. The Commission says the aim is to use public demand to strengthen Europe’s industrial base and improve the resilience of clean-energy supply chains.

Diversification faces a cost gap

There are efforts to build alternatives. In August 2026, South Korea’s LG Energy Solution announced the start of production at its plant in Lansing, Michigan.

The company said it plans to have more than 50 gigawatt-hours of annual LFP cell production capacity in North America by the end of the year as part of its expansion in energy storage batteries.

Diversification, however, faces a significant cost gap. The IEA estimates that production costs in Europe and the United States may be around 50% higher than in China, even when government subsidies are excluded from the comparison. This means that competing with Chinese prices remains a major obstacle to building alternative supply chains that can remain viable over time.

The IEA also says that reaching manufacturing efficiency levels comparable with China requires time and sustained investment. In Chinese factories, the average yield of saleable output exceeds 90%, while new factories typically experience higher rates of non-saleable production, which weighs on their ability to achieve profitability.

The International Energy Agency stresses that correcting this imbalance will require substantial investment, international cooperation across the entire value chain, and sufficiently large and stable demand to justify the production of intermediate materials. These figures point to an industrial dependence that is difficult to reduce simply by building cell factories, even when the sun and wind used to generate electricity are local resources.

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