| Work Detail |
Although oversupply remains a feature of the lithium-ion battery production landscape, large production volumes are accelerating innovation and improving the competitiveness of energy storage. S&P Global analysis reveals that balance is likely to return to the global market in the coming years, as stationary energy storage and electric vehicle adoption continue to accelerate. Solar, wind and energy storage battery manufacturers have entered 2025 facing manufacturing oversupply and fierce price competition. Lithium-ion battery cell producers are not isolated from this trend, but there is reason to expect market conditions for manufacturers to improve as consolidation takes place and demand continues to grow, Sam Wilkinson, Head of Clean Energy Technology at S&P Global Commodity Insights, told ESS News . Last week, S&P Global outlined its expectations for clean technology markets in its Top Clean Trends for 2025 report . It paints a picture of market and investment growth as manufacturers battle falling prices. “There is an oversupply in the battery market right now. But I would argue that in no early-stage high-growth market will there be perfectly balanced supply and demand,” Wilkinson says. “But at some point in the next few years we will almost certainly see the opposite, once demand reacts to low prices, which it is already starting to do.” Advantages of scale S&P Global reports that global annual lithium-ion battery production will surpass 10 billion cells for the first time in 2024, driven by both oversupply and cost-cutting as a result of scale. “By some estimates and rough calculations, global lithium-ion battery cell production in 2024 was somewhere around 11 billion units. That’s the kind of volume that allows for cost reduction and makes innovation so powerful. When you’re making things at that volume, any small increase in efficiency, output, performance, or reliability is magnified. It allows you to move along that learning curve.” Nickel manganese cobalt (NMC) continues to account for the majority of lithium-ion battery production for the electric vehicle market. However, the expansion of stationary storage applications, both distributed and utility-scale, is causing lithium iron phosphate (LFP) to play an increasingly prominent role in battery manufacturing. LFP is also seeing greater acceptance in the electric vehicle market. And vertical integration is causing LFP manufacturers to rapidly innovate with higher energy densities and reduced costs. “[Stationary] energy storage has gone from something like 10% [of LFP production] a few years ago to 25% of global production by 2024. And that’s a trend that continues into 2025,” Wilkinson said. “What that means is that the lithium-ion battery manufacturing giants are now focusing on that. They’re innovating when it comes to making energy storage products specifically.” Wilkinson notes that while utility-scale containerized battery systems, in a standard 20-foot (1 foot = 3.2 meters) format, were rated at 2 to 3 MWh capacity earlier this decade, major producers are now announcing products of up to 6 to 8 MWh. Notable examples of rapidly improving energy density include CATL’s 6.25 MWh TENNER battery, launched in April 2024, and Envision’s 8 MWh system, which uses LFP cells from Japan’s AESC. Theyre increasing energy density or finding ways to fit more cells while overcoming thermal and safety challenges. Its impressive and its just due to innovation. Lows and consolidation Rapid innovation cycles and intense price pressure have come at a cost. The Top Clean Trends for 2025 report notes that across all clean technologies, “it is becoming increasingly difficult for new technologies to compete on price alone. But the window of opportunity is also narrowing for technologies not directly affected by oversupply.” Swedish battery-maker hopeful Northvolt is a prime example of this dynamic. The company collapsed in November 2024, with $5.84 billion in debt, including more than $300 million owed to the European Union in the form of guarantees to European investors. “Northvolt has shown us in great detail that it turns out that making batteries is not that easy,” says Wilkinson. “It’s actually quite difficult to do and you can buy the best [production] equipment and you can employ some of the best people in the business, but you can still fail to make a battery that anyone wants to buy.” Despite the difficult market dynamics, the European Union and the United States appear willing to continue supporting local lithium-ion battery production through incentives or tariffs. Production of batteries for electric vehicles, in particular, is set to expand outside China, where the advantage of locating production next to vehicle manufacturing is more pronounced. It makes a lot of sense to locate battery factories close to EV factories, in a very different way to the energy storage sector, where end markets are much more fragmented and dispersed, Wilkinson noted. S&P Global forecasts that 82 GW/216 GWh of stationary storage will be installed worldwide by 2025. |
