The global energy storage market is poised for continued expansion in 2026 following a record-breaking 106GW of installations in 2025, even as supply chain constraints, regulatory evolution, and emerging applications reshape the landscape, according to analysis from Wood Mackenzie.
The research highlights five key trends set to define the sector in the coming year, ranging from grid-forming regulation to the rise of alternative battery chemistries and the deployment of storage for large industrial loads such as data centres.
In 2025, the energy storage market saw major growth, with Europe experiencing a 160% surge in installations and emerging markets in the Middle East and APAC accelerating uptake.
China maintained its dominant role in the global supply chain, although local overcapacity and stricter domestic content rules have prompted manufacturers to diversify overseas.
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Wood Mackenzie senior supply chain analyst Jiayue Zheng noted that margin pressures remain acute in China’s domestic market, while international markets present better pricing discipline and profitability prospects.
“This market dynamic will drive Chinese manufacturers to aggressively expand overseas operations in 2026, prioritising market share gains over near-term profitability,” Zheng said, highlighting the strategic imperatives facing key suppliers.
Supply chain pressures that emerged late in 2025 are expected to persist into mid-2026, creating execution risks for developers and compressing margins. At the same time, the market’s growth trajectory is underpinned by broader decarbonisation imperatives and the increasing integration of variable renewable energy (VRE) into power systems.
In an interview with ESN Premium, Vaughn Morrison, partner at US law firm Troutman Pepper Locke, discussed foreign entity of concern (FEOC) restrictions on investment tax credit (ITC) eligibility had prompted their clients to act nimbly, restructuring their supply chains and negotiating risk allocations with suppliers and partners.
Battery storage with grid-forming inverters and alternative chemistries
Global VRE penetration reached approximately 36% of installed electricity capacity in 2025, with projections indicating this will climb to 56% by 2035. High VRE penetration has stressed traditional synchronous grids, making grid-forming energy storage a critical component for system stability.
Unlike conventional grid-following inverters, grid-forming systems can independently maintain voltage and frequency, enabling renewable-dominated grids to operate reliably.
In Europe, the European Network of Transmission System Operators for Electricity (ENTSO-E) recently published technical requirements to harmonise grid-forming capability, with formal regulation expected in 2026, signaling a shift from voluntary adoption to mandated integration.
Alternative battery chemistries are also emerging at scale as developers and operators seek cost-effective solutions to complement lithium-ion deployments. Sodium-ion battery storage, in particular, offer compatibility with existing lithium-ion manufacturing lines and are beginning to scale internationally.
In the US, Peak Energy is partnering with Jupiter Power to deploy up to 4.75GWh of capacity, which Wood Mackenzie described as the largest planned sodium-ion (Na-ion) project to date, although it does not appear the deal as reported by Energy-Storage.news in November last year pertains to a single project, and the agreement appears to cover an initial 725MWh, with an additional 4GWh option under a multi-year supply deal.
Flow batteries and iron-air systems are similarly gaining traction for applications requiring long-duration storage and flexible grid support.
Energy storage is increasingly being deployed to support large, inflexible loads, with data centres representing a rapidly growing segment.
The sector now accounts for the second-most common onsite generation source behind gas turbines, reflecting both the expansion of computing infrastructure and the long lead times and rising costs of conventional generation.
In the US alone, over 230GW of data centre projects have been announced, with Europe and China contributing 35GW and up to 78GW respectively. Storage for these applications is being integrated for interconnection support, load ramp management, resilience backup and clean power integration, offering a lower-carbon alternative to diesel or gas-based generation.
Co-located energy storage
Hybrid and co-located energy storage projects paired with solar or wind are also expanding globally beyond the US. Falling capture prices for solar PV and the operational need to shift generation beyond midday peaks are driving developers to deploy storage alongside renewables.
In APAC, Australia and India are leading this trend, with more than half of newly announced storage projects in 2025 paired with solar, wind, or both.
In Europe, co-located projects remain a smaller share of installations but are expected to grow as market dynamics shift, including increased incidence of negative electricity prices exceeding 500 hours per year in certain regions, creating incentives for storage integration.
The rise of co-location has also seen DC-coupled hybrid systems become a trending configuration in Australia. In a recent interview with ESN Premium, Neha Sinha, product manager for energy storage systems at Wärtsilä Energy Storage, said there is a necessity for co-located battery storage to address emerging market challenges and maximise system potential.
“As we see more and more solar PV plants being deployed, as we see curtailment issues, as we see decommissioning of coal plants in favour of these systems, it’s becoming clear that you need to be co-located with battery storage to maximise the potential of your system and to support the market demands,” Sinha told ESN Premium.
Commenting on the trends, Wood Mackenzie’s global head of energy storage, Allison Weis, described the market as undergoing a “fundamental transformation”.
Weis added that, while supply chain challenges and policy shifts create near-term headwinds in some markets, underlying drivers such as declining technology costs, grid stability requirements, and rapid expansion of high-demand loads like data centres ensure that storage will play an increasingly pivotal role in the global energy transition.
The trends outlined by Wood Mackenzie suggest that 2026 will be a defining year for storage’s role as a foundational technology in grids dominated by variable renewable energy, supporting decarbonisation while meeting the growing needs of large-scale electricity consumers.
Energy-Storage.news publisher Solar Media is hosting the Energy Storage Summit EU 2026 in London, UK, on 24-25 February 2026 at the InterContinental London – The O2. See the official website for more details, including agenda and speaker lists.
The Energy Storage Summit Australia 2026 will be returning to Sydney on 18-19 March. It features keynote speeches and panel discussions on topics such as the Capacity Investment Scheme, long-duration energy storage, and BESS revenue streams. To secure your tickets and learn more about the event, please visit the official website.
The Energy Storage Summit USA will be held from 24-25 March 2026, in Dallas, TX. It features keynote speeches and panel discussions on topics like FEOC challenges, power demand forecasting, and managing the BESS supply chain. For complete information, visit the Energy Storage Summit USA website.
ESN Premium subscribers can get an exclusive discount on ticket prices for all three above events.
