Increasing Demand for Battery Energy Storage System Market


The global battery energy storage system market size is expected to grow from USD 4.4 billion in 2022 to USD 15.1 billion by 2027, at a CAGR of 27.9%.

The growth of the market is attributed to the increasing demand for grid energy storage systems owing to ongoing grid modernization, growing penetration of lithium-ion batteries in renewable energy sector, and rising trend of adopting low-carbon and less fossil fuel-based economy and ongoing renewable energy revolution. However, high capital expenditure required for installing battery energy storage systems is restraining the market growth.

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On the flip side, surge in number of rural electrification projects worldwide, increase in need for continuous power supply attributed to rise in number of datacenters, and decline in prices of lithium-ion batteries are expected to create huge opportunities for the adoption of battery energy storage system in the coming years. Moreover, the battery energy storage system manufacturers are facing challenges due to factors such as complexity in installing battery energy storage systems at islands or in remote areas, overheating of lithium-ion batteries, and aging of lithium-ion batteries.

Based on battery type, the market for the lithium-ion batteries held the largest share in 2021 and is estimated to remain the same during the forecast period. The growth of this segment is attributed to the advantages of the battery such as high energy and power density, which leads to low standby losses and a high life expectancy of about 5–15 years with 98% efficiency. Also, lithium-ion-sulfur battery energy storage systems support frequency regulation, demand charge reduction, grid-buffering, and renewable integration, which are suitable for on-grid connections.

Based on connection type, the on-grid segment holds the largest share of the battery energy storage system market in 2021 and is expected to hold significant CAGR during the forecast period. The on-grid connections exhibit lower upfront costs than the off-grid system, as the surplus energy is sent to the grid, which can be used later on a metered basis. The reduction in the energy bills for the customers relying on the utility grid for electricity is expected to drive the growth of the segment. The demand for grid modernization from renewable energy suppliers and new regulatory policies for the energy sector are also driving the growth of the on-grid battery energy storage system market for utilities.

Based on application, the market for utilities application is dominant in 2021. The need to fulfill the requirement of peak electricity demands is the major factor contributing to the growth of the market for utility. The utility BESS provides power quality, frequency, and voltage control services in case of sudden fluctuation in the energy supply. The battery energy storage systems enable grid operators to save electricity when there is a surplus of renewable energy. The increasing demand for a reliable and efficient supply of electricity in most regions and the growing need for renewable energy are responsible for the high demand for battery energy storage systems in the utility sector.

The battery energy storage system market has been segmented into North America, Europe, APAC, and RoW. The market in APAC is expected to grow at the highest CAGR from 2022 to 2027. The region hold the largest share of battery energy storage system market in 2021. APAC is a hub for the battery energy storage system industry. APAC is expected to witness plans for electrification in remote areas, which are mostly off-grid in several countries. The use of residential energy storage technology will enable to increase access to electricity for these remote and island communities in the region. Energy storage investments are expected to increase substantially within the APAC region as the governments in growing economies are making new policies to improve the reliability and quality of the power distribution facilities to the residential customers. The governments of various countries in this region are focusing on minimizing the adverse effects of the energy sector on the environment. These factors lead to the growth in the deployment of battery energy storage systems in residential and public utility applications.

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