Batteries andSecure Energy
Transitions

World Energy Outlook Special ReportINTERNATIONAL ENERGYAGENCYThe IEA examines thefull spectrumof energy issues
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Foreword
At the International Energy Agency (IEA), we monitor and analyse the progress of more than
500 energy technologies on a daily basis, providing valuable insights into the trajectory of
the global energy sector. This process supports the development of energy policies andfosters dialogue at the highest levels of policy making.
In this new report, we provide an in-depth examination of a technology that is a linchpin indelivering clean energy transitions and protecting energy security. Batteries will be critical toachieving the energy goals agreed by nearly 200 countries at the COP28 climate change
conference in Dubai, notably tripling renewable energy capacity by 2030, doubling the paceof energy efficiency improvements and transitioning away from fossil fuels.
Together with renewables and other clean energy solutions, batteries can ensure reliable
and abundant supply of electricity to households and businesses throughout the world.
Batteries are already the beating heart of our technology-led societies and essential to thedevices, such as phones and computers, that are embedded in modern life. Now, as clean
energy transitions pick up pace, the role of batteries is expanding significantly, and so too is
our reliance on them. Manufacturers are producing batteries for an ever-growing range ofconsumer and industrial products as demand expands rapidly, from the drivetrains in electricvehicles to utility-scale power storage in our electricity systems.
Going forward, I see batteries having a profound impact on two sectors which are key pillarsof the global energy transition – namely transport and power. Improvements in battery
technology combined with rapidly falling costs, mean that electric vehicles in many parts of
the world are increasingly competitive on price with conventional cars. In the power sector,
new battery capacity globally has doubled year-on-year, with 2023 setting a new record for
installations. Battery costs have declined by 90% in less than 15 years. And today, utility-scalebatteries paired with solar PV are already competitive with new coal in some countries like
India and, in the next few years, will be with new natural gas in the United States and newcoal in China.

IEA. CC BY 4.0.

Reducing emissions and getting on track to meet international energy and climate targets
will hinge on whether the world can scale up batteries fast enough. More than half the jobthat we need to do will rely, at least in some part, on battery deployment. Our analysis showsthat energy storage more broadly will need to increase sixfold by 2030 to help meet the goals
set at COP28, a target that will be met almost exclusively by batteries.
Yet, obstacles to progress remain. Costs must continue to come down to drive further uptake
across a wide range of sectors. Battery manufacturing capacity has more than tripled in thelast three years, but it remains too concentrated in only a few countries, as does theextraction and processing of the critical minerals on which it relies. However, the good news
is that new chemistries for batteries will help reduce over-reliance on only a handful of key
ingredients, and improving the recycling of raw materials will in time limit the need for new
critical minerals supplies.

Foreword3

Governments have an important part to play in building out resilient local and international
supply chains to ensure that securely and sustainably produced batteries come to market ata reasonable cost. Legislation such as the Inflation Reduction Act in the United States, theNet Zero Industry Act in the European Union and the Production Linked Incentive in India aregood examples of how policy can affect real change in industry by backing technology
manufacturing. But supportive policies are also needed to help speed up deployment byminimising barriers to market entry for developers and reducing red tape that can often stifle
new projects.
I would like to thank the IEA colleagues who worked on this special report on Batteries andSecure Energy Transitions for their excellent and insightful analysis – under the leadership of
Laura Cozzi, Director of Sustainability, Technology and Outlooks, and lead authors
Brent Wanner and Apostolos Petropoulos. The report is the first ever comprehensive
assessment of the state of play across the entire battery ecosystem. It details what needs tobe done to fully leverage this technology to address the world’s energy and climate
challenge. If electricity is the future, batteries will charge us towards it.

IEA. CC BY 4.0.

Dr Fatih Birol
Executive Director
International Energy Agency

4International Energy Agency | Batteries and Secure Energy Transitions

Acknowledgements
This study was prepared by the Directorate of Sustainability, Technology and Outlooks in cooperation with other directorates and offices of the International Energy Agency (IEA).
The study was designed and directed by Laura Cozzi, Director, Sustainability, Technology and
Outlooks. The lead authors and co-ordinators of the analysis were Apostolos Petropoulos
and Brent Wanner.
Principal IEA authors of the report were: Oskaras Alšauskas (lead on transport),
Yunyou Chen (power), Julie Dallard (power, flexibility), Amrita Dasgupta (lead on criticalminerals, transport), Shobhan Dhir (battery chemistries, supply chain) , Michael Drtil(power), Musa Erdogan (investment), Eric Fabozzi (power), David Fischer (lead on
investment), Vincenzo Franza (Clean Energy Ministerial), Yun Young Kim (critical minerals),
Teo Lombardo (battery chemistries, supply chain), Vera O’Riordan (transport), Camille
Paillard (flexibility, policies), Alessio Pastore (power), Nikolaos Papastefanakis (power), Max
Schoenfisch (lead on power, flexibility), Leonie Staas (transport), Ryota Taniguchi (lead on
policies), Gianluca Tonolo (lead on energy access), Anthony Vautrin (demand-side response)and Ginevra Vittoria (transport). Other key contributors were: Mohini Bariya, Blandine
Barreau, Eric Buisson, Olivia Chen, Davide D'Ambrosio, Nouhoun Diarra, Vincent Minier,Gabriel Saive, Oskar Schickhofer and Thomas Spencer.
Marina Dos Santos and Reka Koczka provided essential support.
Edmund Hosker carried editorial responsibility.
Debra Justus was the copy-editor.
Valuable comments and feedback were provided by other senior management andnumerous other colleagues within the IEA. In particular Tim Gould, Timur Gül andBrian Motherway, as well as Heymi Bahar, Stéphanie Bouckaert, Paolo Frankl, Ilkka Hannula,Dennis Hesseling, Pablo Hevia-Koch, Tae-Yoon Kim, Christophe McGlade, Araceli Fernandez
Pales, Brendan Reidenbach, and Jean-François Gagné (Clean Energy Ministerial).
A high-level workshop was held at IEA headquarters in Paris on 27 February 2024, with morethan 100 representatives from governments, industry including battery and vehicle
manufacturers, finance and academia. Participants from over 20 countries and regions
provided valuable insights and feedback for this report.

IEA. CC BY 4.0.

Thanks go to the IEA Communications and Digital Office for their help in producing the report
and website materials, particularly to Jethro Mullen, Poeli Bojorquez, Curtis Brainard,
Jon Custer, Hortense de Roffignac, Astrid Dumond, Merve Erdil, Grace Gordon, Julia
Horowitz, Oliver Joy, Isabelle Nonain-Semelin, Robert Stone, Sam Tarling, Clara Vallois,
Therese Walsh and Wonjik Yang. IEA Office of the Legal Counsel, Office of Management andAdministration and Energy Data Centre provided assistance throughout the preparation of
the report.

Acknowledgements

5

IEA. CC BY 4.0.

Many high-level government representatives and international experts from outside of the
IEA have contributed to the process, from early consultations to reviewing the draft at a laterstage, and their comments and suggestions were of great value. They include:
Philippe Adam

CIGRE

Ali Al-Saffar

The Rockefeller Foundation

Alessandra Amaral

Asociación de Distribuidoras de Energía Eléctrica
Latinoamericanas

Arina AnisieInternational Renewable Energy Agency

Suresh Babu

Department of Science and Technology, Government of India

Christopher Baker-Brian

Bboxx

Natalia Baudry

Commission de régulation de l'énergie

Harmeet Bawa

Hitachi Energy

Mark Beveridge

Benchmark Mineral Intelligence

Mridula BhardwajInternational Solar Alliance

Philippe Biensan

Automotive Cells Company

Tord Bjørndal

ØrstedEdward Borgstein

Global Energy Alliance for People and Planet

Randolph Brazier

HSBC

Klaas Burgdorf

Swedish Energy Agency

Anthony Burrell

National Renewable Energy Laboratory

Sandra Choy

Department of Climate Change, Energy, the Environment andWater, Government of Australia

William Chueh

Stanford University

Giuseppe Cicerani

Enel Green Power

Patrick Clerens

European Association for Storage of Energy

Marina Colombo

World Economic Forum

Vincenzo Conforti

Glencore

Jon Creyts

RMI

Brian Cunningham

US Department of EnergyFrank Daufenbach

UmicoreGabriele Davies

Crossboundary

Romain Desrousseaux

Neoen

Chris Doornbos

E3 Lithium

Arnaud Dubief

Hydrovolt

Thomas Duveau

Access to Energy InstituteThomas Fässler

Technical University of Munich

Cécile Fournier

Renault Group

Naohide Fuwa

Toyota Motor Europe

6International Energy Agency | Batteries and Secure Energy Transitions

IEA. CC BY 4.0.

Maurizio Gastaldi

Syensqo

Begna Gebreyes

Africa Finance Corporation

Daniel Gheno

Schneider Electric

Craig Glazer

PJM Interconnection

Pilar Gonzalez

Iberdrola

André Gronke

Farasis Energy Europe

Raphael Guiollot

Engie Access

Afnan Hannan

Okra SolarJohn Keane

Solar Aid

Sam Khouzami

Microsoft

Andreas Klein

Northvolt

Vasiliki Klonari

WindEurope

Artur Kopijkowski-Gożuch

Polskie Sieci Elektroenergetyczne

Takanori Kumagai

Toyota Motor Corporation

Xiao Lin

Botree Recycling Technologies

Michael Lippert

SAFT

Leon Liu

BYD

Philippe Loiseau

BoralexTodd Malan

Talon Metals

Yasuo Matsuura

Kansai Transmission and Distribution

Léo Mauger

Akuo Energy

Oscar Miguel

CIDETEC

Nikhil Murarka

Husk Power Systems

Laura Nichol

Natural Resources Canada

Kentaro Oe

Ministry of Economy, Trade and Industry, Japan

Stig Olav Settemsdal

Siemens Energy

Ines Pan

Power for All Carolina

Demetrios Papathanasiou

World Bank

Brian Perusse

FluenceNico Peterschmidt

INENSUS

Inga Petersen

Global Battery AlliancePaula Pinho

Directorate General for Energy, European Commission

Sharif Qamar

The Energy and Resources Institute

Julia Reinaud

Breakthrough Energy

Oliver Reynolds

GOGLA

Veli-Pekka Saajo

Council of European Energy Regulators

Eugenio Santacatterina

Midac Batteries

Acknowledgements

7

Tsuyoshi Sasaki

Toyota Central Research & Development Laboratory

Dirk Uwe Sauer

RWTH Aachen University

Thore Sekkenes

European Battery Alliance

Vera Silva

GE Grid Solutions

Mikkel Sørensen

Danish Energy Agency

Julia Souder

Long Duration Energy Storage Council

Iain Staffell

Imperial College London

Evelina Stoikou

BloombergNEF

Kieron Stopforth

KrakenFlex

Richard Storrie

Li-Cycle

Cédric Thoma

Tesla

Tali Trigg

European Bank for Reconstruction and Development

Winfried Wahl

Hithium Energy Storage

Soichiro Watanabe

Panasonic Energy

Claus Wattendrup

Vattenfall

Charles Weymuller

EDF

Urban Windelen

Energy Storage Systems Association

Akiyuki Yonekawa

Honda Motor

Liu Ziyu

CATL

The work reflects the views of the International Energy Agency Secretariat, but does notnecessarily reflect those of individual IEA member countries or of any particular funder,
supporter or collaborator. None of the IEA or any funder, supporter or collaborator that
contributed to this work makes any representation or warranty, express or implied, inrespect of the work’s contents (including its completeness or accuracy) and shall not be
responsible for any use of, or reliance on, the work. This report and any map included herein
are without prejudice to the status of or sovereignty over any territory, to the delimitationof international frontiers and boundaries and to the name of any territory, city or area.
Comments and questions are welcome and should be addressed to:Laura Cozzi
Directorate of Sustainability, Technology and Outlooks
International Energy Agency
9, rue de la Fédération
75739 Paris Cedex 15
FranceIEA. CC BY 4.0.

E-mail: weo@iea.org

8International Energy Agency | Batteries and Secure Energy Transitions

Table of Contents
Foreword ................................................................................................................................. 3
Acknowledgements ................................................................................................................. 5
Executive summary ............................................................................................................... 11
1

Status of battery demand and supply

17

1.1 Introduction................................................................................................... 18
1.1.1 Batteries and secure energy transitions ............................................ 18
1.1.2 Battery use in the energy sector........................................................ 20
1.1.3 Recent developments in battery costs .............................................. 21
1.2 Battery use in electric vehicles ...................................................................... 22
1.2.1 Leading EV markets ........................................................................... 23
1.2.2 EV battery chemistry ......................................................................... 25
1.2.3 Navigating bottlenecks: Policy and infrastructure challenges ........... 28
1.2.4 Policy support for EV batteries .......................................................... 29
1.2.5 Opportunities related to the expanding battery market ................... 31
1.3 Battery use in the power sector .................................................................... 32
1.3.1 Batteries have multiple roles in power systems ................................ 35
1.3.2 Batteries facilitate access to electricity ............................................. 42
1.3.3 Battery chemistry for storage applications ....................................... 45
1.3.4 Policy support for battery storage ..................................................... 47
1.3.5 Regulatory barriers to battery storage .............................................. 51
1.4 Investment in batteries ................................................................................. 53
1.4.1 Investment by sector and location .................................................... 53
1.4.2 Venture capital investment in battery start-ups ............................... 55
1.5 Global battery supply chain ........................................................................... 57
1.5.1 Lithium-ion battery manufacturing ................................................... 60
1.5.2 Critical minerals in batteries .............................................................. 61
1.5.3 Risks in the critical minerals supply chain and price volatility ........... 63
1.5.4 Direct investment in critical minerals by battery and EV producers . 64
2

Outlook for battery demand and supply

67

2.1 COP28 commitments and the role of batteries............................................. 68

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2.2 Outlook for EV batteries ................................................................................ 73
2.2.1 Regional outlook for EV batteries ...................................................... 76
2.2.2 What type of batteries will power future EV fleets? ......................... 77
Table of Contents

92.2.3 Innovation in battery technology beyond 2030 ................................ 80
2.2.4 Evolving relationship between EVs and electricity networks ............ 82
2.3 Outlook for battery storage in the power sector .......................................... 86
2.3.1 Regional outlook for battery storage................................................. 87
2.3.2 The evolution of the chemistry mix ................................................... 91
2.3.3 Role of battery storage ...................................................................... 92
2.3.4 Costs and competitiveness of utility-scale battery storage ............... 98
2.3.5 Behind-the-meter battery storage .................................................. 103
2.3.6 Battery storage to achieve universal access to electricity ............... 106
2.4 Investment outlook for batteries ................................................................ 110
2.4.1 Global and regional investment outlook ......................................... 110
2.4.2 Risks to scaling batteries investment .............................................. 111
2.5 Battery supply chain .................................................................................... 112
2.5.1 Future plans for battery manufacturing .......................................... 112
2.5.2 Rising demand of critical minerals for batteries .............................. 116
3

Policy implications and recommendations

121

3.1 Introduction................................................................................................. 122
3.2 Electric vehicles ........................................................................................... 123
3.2.1 Expanding EV adoption beyond key markets .................................. 123
3.2.2 Impact of average battery pack size on future demand .................. 124
3.2.3 Electric vehicles and power systems ............................................... 125
3.3 Power .......................................................................................................... 126
3.3.1 Risks of delayed battery storage expansion .................................... 126
3.3.2 Utility-scale battery storage ............................................................ 130
3.3.3 Behind-the-meter battery storage .................................................. 132
3.3.4 Energy access ................................................................................... 132
3.4 Investment in batteries ............................................................................... 133
3.5 Manufacturing and supply chains ............................................................... 134
3.5.1 Developing resilient, sustainable and affordable supply chains ...... 134
3.5.2 Ensuring secure, reliable and resilient critical minerals supplies .... 135

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Annexes
Annex A. Definitions............................................................................................................ 141
Annex B. References ........................................................................................................... 153
10International Energy Agency | Batteries and Secure Energy Transitions

Executive Summary
Batteries are an essential part of the global energy system today and thefastest growing energy technology on the market
Battery storage in the power sector was the fastest growing energy technology in 2023 thatwas commercially available, with deployment more than doubling year-on-year. Strong
growth occurred for utility-scale battery projects, behind-the-meter batteries, mini-grids andsolar home systems for electricity access, adding a total of 42 GW of battery storage capacity
globally. Electric vehicle (EV) battery deployment increased by 40% in 2023, with 14 million
new electric cars, accounting for the vast majority of batteries used in the energy sector.
Despite the continuing use of lithium-ion batteries in billions of personal devices in theworld, the energy sector now accounts for over 90% of annual lithium-ion battery demand.
This is up from 50% for the energy sector in 2016, when the total lithium-ion battery market
was 10-times smaller. With falling costs and improving performance, lithium-ion batteries
have become a cornerstone of modern economies, underpinning the proliferation of
personal electronic devices, including smart phones, as well the growth in the energy sector.
In 2023, there were nearly 45 million EVs on the road – including cars, buses and trucks – andover 85 GW of battery storage in use in the power sector globally.

Lithium-ion batteries dominate battery use due to recent cost reductions andperformance improvements
Lithium-ion batteries have outclassed alternatives over the last decade, thanks to 90% cost
reductions since 2010, higher energy densities and longer lifetimes. Lithium-ion battery
prices have declined from USD 1 400 per kilowatt-hour in 2010 to less than USD 140 per
kilowatt-hour in 2023, one of the fastest cost declines of any energy technology ever, as aresult of progress in research and development and economies of scale in manufacturing.
They have also achieved much higher energy densities than lead acid batteries, allowing
them to be stacked in much lighter and more compact battery packs.

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Lithium-ion batteries dominate both EV and storage applications, and chemistries can beadapted to mineral availability and price, demonstrated by the market share for lithium
iron phosphate (LFP) batteries rising to 40% of EV sales and 80% of new battery storage in
2023. Lithium-ion chemistries represent nearly all batteries in EVs and new storage
applications today. For new EV sales, over half of batteries use chemistries with relatively
high nickel content that gives them higher energy densities. LFP batteries account for theremaining EV market share and are a lower-cost, less-dense lithium-ion chemistry that does
not contain nickel or cobalt, with even lower flammability and a longer lifetime. While energy
density is of utmost importance for EV batteries, it is less critical for battery storage, leading
to a significant shift towards LFP batteries.

Executive Summary11

Policy support has given a boost for batteries deployment in many markets
but the supply chain for batteries is very concentrated
Strong government support for the rollout of EVs and incentives for battery storage are
expanding markets for batteries around the world. China is currently the world’s largest
market for batteries and accounts for over half of all battery in use in the energy sector today.
The European Union is the next largest market followed by the United States, with smallermarkets also in the United Kingdom, Korea and Japan. Battery use is also growing in emerging
market and developing economies outside China, including in Africa, where close to
400 million people gain access through decentralised solutions such as solar home systems
and mini-grids with batteries in order to achieve universal access by 2030.
While the global battery supply chain is complex, every step in it – from the extraction ofmineral ores to the use of high-grade chemicals for the manufacture of battery
components in the final battery pack – has a high degree of geographic concentration.
Battery manufacturers are dependent on a small number of countries for the raw material
supply and extraction of many critical minerals. China undertakes well over half of global raw
material processing for lithium and cobalt and has almost 85% of global battery cell
production capacity. Europe, the United States and Korea each hold 10% or less of the supply
chain for some battery metals and cells today.

Achieving COP28 targets will hinge on battery deployment increasing
sevenfold by 2030
Batteries are key to the transition away from fossil fuels and accelerate the pace of energy
efficiency through electrification and greater use of renewables in power. In transport, agrowing fleet of EVs on the road displaces the need for 8 million barrels of oil per day by 2030
in the Net Zero Emissions by 2050 (NZE) Scenario, more than the entire oil consumption forroad transport in Europe today. In the power sector, battery storage supports transitions
away from unabated coal and natural gas, while increasing the efficiency of power systems
by reducing losses and congestion in electricity grids. In other sectors, clean electrification
enabled by batteries is critical to reduce the use of oil, natural gas and coal.

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To triple global renewable energy capacity by 2030 while maintaining electricity security,
energy storage needs to increase six-times. To facilitate the rapid uptake of new solar PV
and wind, global energy storage capacity increases to 1 500 GW by 2030 in the NZE Scenario,
which meets the Paris Agreement target of limiting global average temperature increases to
1.5 °C or less in 2100. Battery storage delivers 90% of that growth, rising 14-fold to 1 200 GW
by 2030, complemented by pumped storage, compressed air and flywheels. To deliver this,battery storage deployment must continue to increase by an average of 25% per year to2030, which will require action from policy makers and industry, taking advantage of the factthat battery storage can be built in a matter of months and in most locations.
In the NZE Scenario, about 60% of the CO2 emissions reductions in 2030 in the energy sector
are associated with batteries, making them a critical element to meeting our shared
12International Energy Agency | Batteries and Secure Energy Transitions

climate goals. Close to 20% are directly linked to batteries in EVs and battery-enabled
solar PV. Another 40% of emissions reductions are from electrification of end-uses andrenewables that are indirectly facilitated by batteries.

Batteries bolster multiple aspects of energy security
Battery storage helps to strengthen electricity security in all markets. As the nature ofelectricity demand and supply changes, with more electrification and more variablegeneration from wind and solar PV, battery storage is well placed to provide short-term
flexibility for periods of 1-8 hours continuously, and thus to help power system operators
ensure there is enough supply to meet peak demands. Its fast and accurate responses tomarket signals, in a matter of seconds, make battery storage ideal for providing support for
grid stability, and it is already being used for this purpose in many markets. Battery storage
can also serve as critical back-up generators in case of grid outages or emergencies, ensuring
uninterrupted power supplies to critical facilities such as hospitals, emergency response
centres and infrastructure like grid substations and communication networks.
Batteries in EVs and storage installations reduce the need for imported fossil fuels,
increasing self-sufficiency in many countries. EVs reduce the need for oil imports in many
countries, including China, Europe, India, Japan and Korea. The need for natural gas and coal
imports is reduced directly by battery-enabled renewables displacing natural gas-fired andcoal-fired power, and indirectly by the electrification of industry and buildings where the useof electricity replaces fossil fuels.

Further cost declines for batteries improve their affordability in all
applications and make them a cost-effective part of energy systems

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Further innovation in battery chemistries and manufacturing is projected to reduce global
average lithium-ion battery costs by a further 40% from 2023 to 2030 and bring sodium-ion
batteries to the market. In the NZE Scenario, lithium-ion chemistries continue providing thevast majority of EV batteries to 2030. Further innovation both reduces the upfront costs oflithium-ion batteries and brings about additional improvements in their performance,
notably in the form of higher energy densities and longer useful life. Sodium-ion batteries
provide less than 10% of EV batteries to 2030 and make up a growing share of the batteries
used for energy storage because they use less expensive materials and do not use lithium,
resulting in production costs that can be 30% less than LFP batteries. Beyond 2030, battery
costs are likely to decline further, and solid-state batteries are on track to be commerciallyavailable, with the potential to bring massive performance gains.
Solar PV plus batteries is competitive today with new coal-fired power in India and, in thenext couple years, become competitive with new coal in China and new natural gas-fired
power in the United States. Even in the Stated Policies Scenario (STEPS), which is based on
today’s policy settings, the total upfront costs of utility-scale battery storage projects –including the battery plus installation, other components and developer costs – are projected
Executive Summary13

to decline by 40% by 2030. This makes stand-alone battery storage more competitive withnatural gas peaker plants, and battery storage paired with solar PV one of the mostcompetitive new sources of electricity.
The amount of battery storage capacity added to 2030 in the STEPS is set to be more than
the total fossil fuel capacity added over the period. A significant part is behind-the-meter
battery storage paired with rooftop solar PV, including many individual batteries aggregatedinto virtual power plants, as it becomes an increasingly attractive option for consumers in aworld of broadly stable or rising retail electricity prices. For electricity access, the average
electricity costs of mini-grids with solar PV and batteries halve by 2030.
Falling battery costs are set to raise the share of cost-competitive electric cars in the market
from around 50% today. Currently, the least expensive EV models are available in China,
with lower sticker prices than comparable gasoline or diesel cars. In advanced economies,
there is still a price gap for electric cars that takes years to recover through lower fuel andmaintenance costs. Battery price cuts and intense competition among car makers are set tomake more types of EVs in more markets competitive. A growing number of EVs will havelower sticker prices than gasoline or diesel cars directly, and many others will cost slightly
more to buy but save money for consumers over a few years.

Scaling up the global battery market creates new opportunities fordiversifying supply chains
The global market value of batteries quadruples by 2030 on the path to net zero emissions.
Currently the global value of battery packs in EVs and storage applications is USD 120 billion,rising to nearly USD 500 billion in 2030 in the NZE Scenario. Even with today’s policy settings,
the battery market is set to expand to a total value of USD 330 billion in 2030. Booming
markets for batteries are attracting new sources of financing, including around USD 6 billion
in battery start-ups from venture capital in 2023 alone.

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Batteries are a “master key” that can unlock several much bigger transformations andmuch bigger industrial prizes. The global car market is valued at USD 4 trillion today, andleadership in it will depend on battery technology. Batteries also support more wind andsolar PV, which capture USD 6 trillion in investment in the NZE Scenario from 2024 to 2030,
by balancing out their variations and stabilising the grid.
Battery manufacturing is a dynamic industry and scaling it up creates opportunities todiversify battery supply chains. Battery manufacturing capacity is set to expand rapidly and,
if all announced plants are built on time, would be practically sufficient to meet the battery
requirements of the NZE Scenario in 2030. While China is set to expand its battery
manufacturing significantly, announced plans imply that its share of the global market will
decrease to about two-thirds of the global total in 2030 as other regions scale up. Both
Europe and North America have announced plans to boost their domestic battery
manufacturing capacity, each set to grow their market share to about 15% in 2030 and able
to provide almost all their domestic demands for batteries.
14

International Energy Agency | Batteries and Secure Energy Transitions

There are important risks for batteries that could hinder their growth andcontributions to energy transitions, energy security and affordability
Scaling up critical minerals supply in time to meet rising needs is essential to the success ofbatteries and requires action to address policy and regulatory barriers. In the NZE Scenario,
demand for critical minerals for batteries expands rapidly by 2030, with manganese, lithium,graphite and nickel increasing at least sixfold, and cobalt more than tripling. While thisrequires new mining and refining, innovation on chemistries, enhanced recycling and “rightsizing” of batteries can cut demand for critical minerals by about 25% by 2030.
Failing to scale up battery storage in line with the tripling of renewables by 2030 would riskstalling clean energy transitions in the power sector. In a Low Battery Case, the uptake ofsolar PV in particular is slowed down, putting at risk close to 500 GW of the solar PV needed
to triple renewable capacity by 2030 (20% of the gap for renewables capacity between the
STEPS and NZE Scenario). If other low emission sources were not able to replace the lost
solar PV, emissions reductions in the power sector would stall in the 2030s, putting the targetof limiting the global average temperature rise to 1.5 °C out of reach.
The Low Battery Case would lead to prolonged use of coal and natural gas in the power
sector and raise fuel import bills. Analysis indicates that import bills would be an average of
USD 12.5 billion more per year from 2030 to 2050 in importing countries, with Europe andKorea as most exposed to this risk for natural gas imports and India for coal imports.

Recommendations for batteries to fulfil their roles
For batteries to scale up as necessary to support ambitious clean energy transitions, policy
makers and regulators need to take action to support their deployment and minimisebarriers and bottlenecks. Policy and regulatory frameworks need to ensure that batteries
are able to participate in markets and are remunerated appropriately for the services they
provide to the power system. The large-scale adoption of EVs calls for wider availability ofaffordable models and the rollout of charging infrastructure. Promoting smart charging will
be vital to integrate rising numbers of EVs into power systems and reduce the need for grid
reinforcements.

IEA. CC BY 4.0.

Policy makers and regulators need to work with national and international partners andwith industry to support the development of battery supply chains that are secure, resilientand sustainable. Building supply chains requires a comprehensive approach thatencompasses all stages from raw material extraction, refining and manufacturing through to
end-of-life product management and recycling, minimising their carbon footprint. Battery
recycling has the potential to be a significant secondary source of supply of critical minerals
that is more sustainable and less geographically concentrated than primary supply. Targeted
policies such as minimum recycled content requirements and tradeable recycling credits canfoster its growth in the short term, especially if international standards can be established.

Executive Summary

15

Chapter 1
Status of battery demand and supply
A century of development underpinning rapid growth
S U M M A R Y• Batteries are an important part of the global energy system today and are poised toplay a critical role in secure and affordable clean energy transitions. In the transport
sector, they are the essential component in the millions of electric vehicles (EVs) soldeach year. In the power sector, they are becoming increasingly important in utilityscale and behind-the-meter applications as their costs fall and as the share ofelectricity generated by solar and wind rises.

• Average battery costs have fallen by 90% since 2010 due to advances in battery
chemistry and manufacturing. Today lithium-ion batteries are a cornerstone ofmodern economies having revolutionised electronic devices and electric mobility, andare gaining traction in power systems. Yet, new battery chemistries being developed
may pose a challenge to the dominance of lithium-ion batteries in the years ahead.

• The total volume of batteries used in the energy sector was over 2 400 gigawatt-hours(GWh) in 2023, a fourfold increase from 2020. In the past five years, over 2 000 GWh
of lithium-ion battery capacity has been added worldwide, powering 40 million
electric vehicles and thousands of battery storage projects. EVs accounted for over
90% of battery use in the energy sector, with annual volumes hitting a record of morethan 750 GWh in 2023 – mostly for passenger cars.

• Battery storage capacity in the power sector is expanding rapidly. Over 40 gigawatt(GW) was added in 2023, double the previous year’s increase, split between utilityscale projects (65%) and behind-the-meter systems (35%). Battery storage has many
uses in power systems: it provides short-term energy shifting, delivers ancillary
services, alleviates grid congestion and provides a means to expand access toelectricity. Governments are boosting policy support for battery storage with moretargets, financial subsidies and reforms to improve market access.

• Global investment in EV batteries has surged eightfold since 2018 and fivefold forbattery storage, rising to a total of USD 150 billion in 2023. About USD 115 billion –the lion’s share – was for EV batteries, with China, Europe and the United States
together accounting for over 90% of the total.

IEA. CC BY 4.0.

• China dominates the battery supply chain with nearly 85% of global battery cell
production capacity and substantial shares in cathode and anode active material
production. The extraction and processing of critical minerals is also highly
concentrated geographically, with China in the lead in processing the most criticalminerals. Battery minerals prices have been volatile in recent years, rising steeply in
2021 and 2022 before falling sharply in 2023 and in the early months of 2024. This
underlines the need for more investment and diversification as the market expands.
Chapter 1 | Battery demand and supply

17

1.1

Introduction

Batteries have found a wide range of uses since they were first introduced over a century
ago, and in recent years have become increasingly important in both the transport andpower sector. Their average costs fell by 90% from 2010 to 2023, while improving theirperformance characteristics including higher energy densities 1 and longer cycle life. 2 As aresult, batteries are now well placed to play an important part in transitioning to lowemissions energy systems.
In the power sector, energy storage in general and battery storage in particular helps tomaintain electricity security by supporting grid stability, helping to meet peak load andimproving integration of rising shares of variable renewables. To ensure a stable and reliable
power supply, electricity demand and electricity generation need to be in equilibrium at all
times. Historically, conventional sources of electricity including coal and natural gas haveoperated flexibly, adapting their output to match demand. Energy storage, in the form ofhydropower with reservoirs, has long been a part of many power systems and supports
electricity security by providing a buffer between available electricity supply from othersources and demand. Recently, batteries have emerged as another practicable way to store
energy. Declining costs of batteries have made them a competitive source of flexibility inmany parts of the world in stand-alone applications as well as when paired with solar
photovoltaics (PV) or wind power.
In the automotive industry, a shift to electric vehicles (EVs) 3 is increasingly seen by
governments and manufacturers as having an essential role to reduce air pollution andgreenhouse-gas (GHG) emissions. This transition entails a transformation of the traditional
automotive supply chain because EVs require fewer moving parts than cars using internal
combustion engines (ICEs) and depend critically on their battery pack. As a result, industries
that traditionally were not closely linked are increasingly working together. For example,
many vehicle manufacturers are entering into joint ventures with battery producers andcomponent manufacturers and securing offtake agreements with mining companies or withbattery material suppliers. As well, utilities are collaborating with auto makers and battery
manufacturers to identify potential synergies.

1.1.1

Batteries and secure energy transitions

Batteries are a desirable feature of the energy landscape, and they are set to play an essential
role in providing stability and flexibility in power systems as variable renewables scale up.
Plus, batteries are at the heart of the shift to EVs which is rapidly gaining ground. Given thatthe power and transport sectors currently account for over 60% of global energy-related
1 Energy density is a measure of the amount of energy that a battery can store relative to its weight or volume.

IEA. CC BY 4.0.

2 The cycle life of batteries is the number of charge and discharge cycles that it can complete before losing

performance.

3 Electric vehicle includes battery electric and plug-in electric vehicles.

18

International Energy Agency | Batteries and Secure Energy Transitions

carbon dioxide (CO2) emissions, means that they have a crucial part to play in helping
countries to fulfil commitments made at the 28th Conference of Parties of the United Nations
Framework Convention on Climate Change in December 2023. Those pledges include tripling
global renewable energy capacity by 2030, doubling the rate of energy efficiency
improvements, and facilitating the transition away from fossil fuels.
Batteries have an essential role to support of the goal of tripling the installed capacity of
renewables worldwide. By facilitating the integration of rising shares of solar and wind
generation by providing energy storage, batteries help to reduce the use of coal and naturalgas, and to promote faster electrification and increased use of electricity in heating andcooling, and in industry. They also support the transition away from fossil fuels as risingnumbers of EVs reduce the demand for oil products.
Batteries also play a critical role to enhance energy security. By helping to reduce fossil fueldemand in multiple sectors, they cut fossil fuel requirements in importing countries, thusincreasing their level of domestic energy independence. Batteries also support stability andresilience of electricity grids, offer a way to provide backup power for homes, businesses andservices (including hospitals and other critical infrastructure). Batteries can also provide
critical service in the case of emergencies caused by extreme weather or other disruptions.
Expanding electromobility brings with it a new era where the traditionally separate sectorsof power and transport increasingly interact. Rising EV use increases demand for electricity,
but the interactions go beyond that: advances in batteries for EVs have spill-over effects that
benefit batteries used for storage applications, while the rising number of EVs offers
potential for demand-side management in the power sector.

IEA. CC BY 4.0.

Battery use is significantly expanding across the energy sector, with new highs in EV sales
and record levels of additions of battery storage in the power sector. One-in-five cars soldworldwide today is electric, and an increasing number of solar and wind power projects are
paired with batteries. Announced new battery cell manufacturing facilities worldwide aremany. Global scaling up of battery production offers numerous opportunities across the
supply chain. However, it also brings a number of challenges, a high geographicalconcentration of required critical minerals, a need for recycling and re-purposing facilities,
and needs to tackle regulatory and policy barriers.
This decade is crucial to scale up battery cell and material production by ensuring theavailability of machinery and production equipment, as well as to establish effective
regulatory and policy frameworks to ensure a sustainable and equitable transition. The shift
from a fossil fuel-based energy system to one reliant on renewable energy and other lowemissions sources will boost demand for energy storage, and thus for batteries and thecritical minerals required. This requires careful planning, international collaboration,
diversification of critical minerals supply and the adoption of sustainable practices across theentire battery supply chain. Governments, vehicle manufacturers, battery makers, mining
companies, recycling firms, utilities and grid operators all need to work collaboratively toaddress the challenges.
Chapter 1 | Battery demand and supply

191

1.1.2

Battery use in the energy sector

The volume of battery use in the energy sector was over 2 400 gigawatt-hours (GWh) in 2023
– a fourfold increase since 2020. More than 2 000 GWh of lithium-ion battery volume has
been added over the last five years, powering over 40 million electric vehicles and thousandsof battery storage projects (Figure 1.1).

GWh

Figure 1.1 ⊳Lithium-ion battery volumes in use by type of application in the
global energy sector, 2015-2023

2 500

Off-grid
Behind-the-meter

2 000

Utility scale
Electric vehicles

1 500
1 000
500

2015 2016 2017 2018 2019 2020 2021 2022 2023
IEA. CC BY 4.0.

Lithium-ion battery volumes in use have surged over the last three years to 2 400 GWh
Note: GWh = gigawatt-hours.

IEA. CC BY 4.0.

Increased demand for lithium-ion battery volumes stems from higher EV penetration, with
EVs accounting for over 90% of the increase from 2015 to 2023. Strong uptake of EVs is
supported by a variety of fuel economy targets, CO2 standards, financial incentives and EV
mandates. The deployment of battery storage in power systems is also accelerating, with afocus on grid stability, backup systems and the continued expansion of variable solar PV andwind generation.
The global market for battery storage doubled in 2023, reaching over 90 GWh and increasing
the volume of battery storage in use to more than 190 GWh. Most growth in battery storageis from utility-scale systems, while behind-the-meter battery storage accounts for 35% ofannual growth in 2023. Off-grid battery storage is currently at much lower volumes. Battery
storage of all sizes is well-suited to providing short-term flexibility – shifting energy acrossseconds, minutes or a few hours – but can provide a broader range of services to powersystems. These include ancillary and reserve services, provision of system adequacy andcongestion management in transmission and distribution systems. Financial incentives,
including tax credits and grants, as well as requirements to pair storage with new solar orwind projects are also driving deployment. The increase in behind-the-meter battery storage
is concentrated geographically, with support measures and relatively high electricity prices
driving the uptake in leading markets such as Australia, Germany, Japan and parts of the
20

International Energy Agency | Batteries and Secure Energy Transitions

United States. Battery storage is one of several energy storage technologies used in the
power sector, with pumped hydro being the largest by far. Compressed air energy storage,
flywheels and thermal storage are also gaining traction in several markets.

1.1.3

Recent developments in battery costs

The past decade can be seen as the era of the lithium-ion battery. Its fundamental advantage
over older alternatives such as lead acid or nickel cadmium batteries is their much higher
energy density and longer cycle life. While lead acid batteries have specific energies (energy
stored per unit of weight) in the range of 35 to 40 watt-hours per kilogramme (Wh/kg),
lithium-ion batteries today have a demonstrated range of specific energies around90-300 Wh/kg at the cell level. With their higher energy density, lithium-ion batteries can bestacked into much lighter and more compact battery packs.
A lithium-ion cell has four main components: cathode, anode, electrolyte and separator. The
cathode and anode store lithium ions, from which the technology derives its name. The
primary function of separator is to prevent short circuits, while the electrolyte facilitates the
movement of lithium ions from the cathode to the anode during the charging mode and viceversa during the discharging mode. Today there are several varieties of lithium-ion batteries,
and they continue to evolve as the result of research and development (R&D) to improveenergy densities, charging times, safety and lifetime use while also cutting costs.
Today 90% of lithium-ion batteries in use are for electrification in the transport sector.
Batteries for EVs must be energy dense, small and light. Battery storage, by contrast, does
not have such strict requirements for size and weight, but instead prioritises low costs anddurability. Trends from the automotive industry have often transferred to the power sector,
and improvements in EV batteries could significantly benefit batteries used for storage,
whereas the converse may not necessarily be true. However, both sectors are looking tominimise the carbon footprint of their battery use and to maximise opportunities for battery
reuse and recycling. For example, EV batteries could potentially be repurposed for secondlife applications such as behind-the-meter or storage solutions.

IEA. CC BY 4.0.

Over a decade, lithium-ion battery prices (including cell and pack costs) have declined fromaround USD 800 per kilowatt-hour (kWh) to less than USD 140/kWh in 2023, thanks tocontinued progress in R&D, economies of scale and technological innovation. This has
increased the share of raw material costs in the total cost of batteries (see section 1.5.3) andbattery prices now depend in large part on the price of critical minerals, which can be volatile.
For example, spikes in battery metals prices in 2022 resulted in the first ever year-on-yearincrease in battery prices (Figure 1.2). However, an upsurge in minerals supply and enhanced
battery manufacturing capacity, coupled with lower than anticipated demand in specificregions, particularly China, resulted in a significant price decrease in 2023, with the cost ofbatteries falling below 2021 levels.
The battery industry continues to invest in low-cost cathode chemistry known as lithium iron
phosphate (LFP) (see section 1.2.2). These packs and cells had the lowest global weighted
average prices of all lithium-ion batteries in 2023, with prices falling below USD 100/kWh for
Chapter 1 | Battery demand and supply

21

1

the first time (BNEF, 2023a). Even in the initial months of 2024, LFP cell prices have continued
their downward trajectory, and were well below USD 100/kWh in March 2024 (Benchmark
Minerals, 2024). On a regional basis, lithium-ion battery prices were lowest in China andaround 10-20% higher in the United States and Europe. Nevertheless, the reduction in pricevariance compared to the levels seen in 2022 and 2021 suggests a trend toward convergencein battery prices in different markets.

USD per kWh (2023, MER)

Figure 1.2 ⊳Lithium-ion battery pack and cell prices, 2013-2023

800

Pack price-11%

Cell price

600
-35%
400

-23%
-25%

200

-18% -13% -13%

-6%

+7%

-14%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
IEA. CC BY 4.0.

Prices for lithium-ion batteries steadily declined over the last decade with a spike in 2022,
but dropping again in 2023
Notes: USD = US dollars, kWh = kilowatt-hours. Prices are weighted average across regions and chemistries.
Source: IEA analysis based on BNEF (2023a).

1.2

Battery use in electric vehicles

IEA. CC BY 4.0.

Worldwide sales volumes of batteries for EVs rose to an all-time high of over 750 GWh in
2023 reflecting a surge in EV uptake (Figure 1.3). Today nearly one-in-five new cars sold iselectric. Both bigger cars and range concerns have driven an increase in the average size of
EV battery packs in recent years.
Worldwide the volume of batteries for electromobility has quadrupled over the past three
years, with batteries for passenger light-duty vehicles (PLDVs) accounting for over 90% of
this increase. This growth is attributed to stronger support policies compared to thoseavailable for medium freight and heavy freight trucks and buses, as well as fewer barriers
associated with the larger batteries and power requirements needed for electrifying heavyduty or long-distance transport. Electromobility is also accelerating in other modes with theelectrification of two/three-wheelers and city buses moving ahead especially fast,
particularly in emerging market and developing economies.

22

International Energy Agency | Batteries and Secure Energy Transitions

GWh

Figure 1.3 ⊳EV battery volumes in use by vehicle type, 2015-2023

2 500

Freight trucks
Two/three-wheelers

2 000

Buses
Light-duty vehicles

1 500
1 000
500

2015 2016 2017 2018 2019 2020 2021 2022 2023
IEA. CC BY 4.0.

EV battery volumes have quadrupled over the past three years, mostly in passenger cars
Notes: Light-duty vehicles include passenger cars and light commercial vehicles. Freight trucks include medium
and heavy freight trucks.

1.2.1

Leading EV markets

China dominates the global EV battery market, accounting for more than half of total EV
battery volumes in 2023. The European Union and United States together accounted for 30%
of total EV battery volumes in use (Figure 1.4).

IEA. CC BY 4.0.

EV sales are experiencing rapid growth worldwide. The market share of electric cars has
increased more than sevenfold over the past five years, reaching 18% in 2023. Today, nearly
40% of all new cars sold in China are electric, while in the European Union it is over 20% of
all new car sales and 10% in the United States. Batteries used in electric cars in these three
regions represent 80% of the global battery volumes in use today in the energy sector. Thereis huge untapped electrification potential in emerging market and developing economies
other than China, where electric cars currently constitute only 2% of sales, despite large yearon-year growth in countries such as India (up 70% in 2023) and Indonesia (up by over 60% in2023), albeit from a small base.
China is seeing a gradual reduction in its dominance of the global battery market as EV sales
accelerate in advanced economies and its domestic electromobility market matures. Overthe last five years, China’s share of battery volumes used in global EV fleets has declined fromover 65% to around 55% as support mechanisms and regulations intensify in other regions.
The growing preference for electric sport utility vehicles (SUVs) and EVs with longer driving
ranges in advanced economies is further boosting battery demand. On average, battery
electric SUVs are 15% more energy intensive than medium-size EVs, which means that theyrequire a battery that on average is 30% larger (Box 1.1).
Chapter 1 | Battery demand and supply

23

1

GWh

Figure 1.4 ⊳Battery volumes in use in EV fleets by region and market share ofelectric cars in sales, 2015-2023

2 500

20%

2 000

16%

1 500

12%

1 000

8%

500

4%

2015

2017

2019

2021

Other
Japan
Korea
United Kingdom
United States
European Union
China
Market share ofelectric cars(right axis)

2023
IEA. CC BY 4.0.

China accounts for around 55% of battery volumes in use in EV fleets, but its
share is gradually declining as EV sales accelerate elsewhere

The volume of EV batteries in use in various countries broadly reflect their domestic battery
manufacturing capacities and the size of their automotive industries. China, Europe and theUnited States are currently the largest EV markets, accounting for 90% of the global EV fleet.
China accounts for 83% of global battery production, Europe and the United States foranother 13%, and Korea and Japan for the remaining 4%. China’s leadership position in global
both battery plant capacity and EV manufacturing facilities enables it to supply its own EV
market, powering the world’s largest electric car fleet with the most affordable batteries.
Intensifying competition between battery producers trying to gain lucrative EV market sharemeans that EV prices are dropping in some segments and regions, which is likely to further
boost EV sales.
Box 1.1 ⊳Batteries to meet passenger-kilometre demand

IEA. CC BY 4.0.

Types of passenger transport have various purposes, range requirements and seating
capacity, all of which influence the size of the battery requirement. When planning asustainable and low-emissions transport sector, it is crucial to consider not only fueleconomy but also the battery capacity required for operation and the relative efficiencyof various modes of transport, measured in terms of passenger-kilometres. For example,
battery electric buses require a lower battery capacity per passenger-kilometre thanpassenger cars due to higher occupancy rates.
Two/three-wheelers have the highest efficiency in terms of battery capacity needs perpassenger-kilometre served, although ranges may differ for each mode. Battery poweredbuses offer the second most efficient performance for passenger-kilometres provided,24

International Energy Agency | Batteries and Secure Energy Transitions

followed by small EVs (40 kWh) and average size EVs (approximately 60 kWh). SUVs(around 80 kWh) demonstrate the least efficient performance on a passenger-kilometre
basis, requiring double the battery capacity per passenger-kilometre of small EV(Figure 1.5).

Wh/pkmFigure 1.5 ⊳Battery capacity per passenger-kilometre of selected electricvehicle types, 2023

4
3
2
1

SUVs

Average size cars

Small cars

Buses

Two/threewheelers
IEA. CC BY 4.0.

An electric SUV requires twice the battery capacity
as a small electric car on a passenger-kilometre basis
Notes: Wh/pkm = Watt-hour per passenger-kilometre, SUVs = sport utility vehicles. Analysis assumes
average occupancy per vehicle type.

Prioritising public transport and smaller vehicles therefore makes sense in terms of
optimising future battery availability and minimising demand for the critical minerals thatbatteries require.

IEA. CC BY 4.0.

1.2.2

EV battery chemistry

Lithium-ion batteries are often categorised and named by reference to the composition ofelements in their cathode – one of the two electrodes in which lithium ions are stored during
charging and discharging cycles. The most common chemistries are: lithium nickel
manganese cobalt oxide (NMC); lithium nickel cobalt aluminium oxide (NCA); lithium iron
phosphate (LFP); and lithium cobalt oxide (LCO). Differing combinations and proportions ofminerals in each battery chemistry type gives rise to different characteristics. LCO is one of
the most established chemistries and is primarily used in portable electronics due to its highenergy density and maturity. Today, NMC, NCA and LFP chemistries dominate in the EV
battery market. In recent years, alternatives to lithium-ion batteries such as solid-state andsodium-ion batteries have gained attention (Rudola et al., 2023).
Chapter 1 | Battery demand and supply

25

1

Today NMC and NCA account for a large share of EV batteries because their relatively highnickel content enables batteries to be produced with higher energy densities. Nickel has
gained ground at the expense of cobalt in large part because of the pressure for increased
EV range, although spikes in cobalt material prices and concerns over ethical mining practices
in the 2010s gave battery producers additional incentives to reduce the cobalt content inbatteries over the past decade. This has led to the development of many variations of NMC
chemistry, from the initial NMC 111 to variations with higher nickel content such as NMC 622
and NMC 811. 4 Even more nickel-rich chemistries such as NMC 955 have recently emerged.
However, higher nickel content requires more complex and controlled production processes,
and it remains challenging to remove cobalt completely because of the contribution it makes
to stability. The preference for increasing the content of nickel is also a feature of the NCA
chemistries that have historically been favoured by the auto maker Tesla.
LFP is a lower cost battery chemistry, over 20% cheaper today than NMC. It does not containnickel or cobalt, and it offers a more stable chemistry than nickel-rich chemistries, with
reduced flammability and a longer cycle life. However, it has a significantly lower energy
density, conventionally 20-30% lower than high nickel chemistries at battery cell level.
Despite its inferior energy density, the use of LFP for EV batteries has increased significantly
in recent years. It has been the leading chemistry for new EVs in China since 2021, and more
recently has begun to be used by European and US auto makers. The new popularity of LFPchemistry is primarily driven by its lower price and longer lifespan relative to the alternatives,
by energy density improvements such as the cell-to-pack (CTP) configuration and byimproved thermal stability. Its cost effectiveness and durability make LFP the preferredbattery chemistry for buses and commercial vehicles.
Choice of battery chemistry involves balancing performance, longevity and cost, anddepends on the target market and applications. Geographical location is also important inbattery chemistry selection, with LFP performing better in hot climates and NMC in colder
climates. Furthermore, producing different cathode chemistries requires specialised
expertise, and this is not evenly distributed globally. In 2023, NMC remained the dominantbattery chemistry, accounting for over half of the passenger car market, followed by LFP witha share of around 40%, and NCA with a share of about 7% (Figure 1.6). The increasing shareof LFP cathode chemistries over the past decade reflects improvements in energy densityand performance. Around 95% of the LFP batteries for electric passenger cars were used in
vehicles produced in China, driven by significant domestic investment, but non-Chinese
manufacturers are now increasingly investing in developing their own LFP products.

IEA. CC BY 4.0.

Solid-state batteries (SSBs) offer higher energy density and potential safety improvements
relative to traditional lithium-ion batteries, but so far it has proven challenging todemonstrate these advantages at scale and to overcome manufacturing hurdles. While SSBs

4 The numbers after NMC denote the relative ratios of each element in the composition of the battery

chemistry, i.e. NMC 111 has equal parts of nickel, manganese and cobalt.

26

International Energy Agency | Batteries and Secure Energy Transitions

may have limited impact in the next few years, their significance could rise substantially inthe 2030s if these challenges are overcome.
Figure 1.6 ⊳1Battery cathode chemistry in electric car sales, 2018-2023

100%

Other
LFP

80%

NMC 721 / 811
NMC 532 / 622

60%

NMC 111
40%

NCA

20%

2018

2019

2020

2021

2022

2023
IEA. CC BY 4.0.

NMC remains the dominant cathode chemistry for electric cars, while the share of LFP
batteries is increasing and reached its highest ever level in 2023

IEA. CC BY 4.0.

Sodium-ion batteries use lower cost materials and need fewer critical minerals than thebatteries that currently dominate the EV market and therefore are cheaper to produce.
Different cathode chemistries can be employed for sodium-ion batteries, with layeredoxides, typically using nickel, manganese or both, and Prussian white (made of sodium, iron,nitrogen and carbon) currently being the closest to mass commercialisation. Sodium-ion iscurrently the only viable battery technology that does not contain lithium. Sodium-ion
batteries can also use aluminium anode current collectors whereas lithium-ion batteriesrequire copper anode current collectors, so sodium-ion batteries also reduce copper usage.
They can cost 20-30% less than LFP batteries, but their relative cost advantage is dependent
on the lithium price which has been highly volatile over recent years.
Sodium-ion batteries can be manufactured using the same or similar manufacturing facilities
as lithium-ion batteries. This could facilitate their wider deployment, especially in compact
urban vehicles and storage applications (McKinsey & Company, 2023). However, the need toscale up supply chains, particularly for the hard carbon anode, currently is a significant
constraint on production. Moreover, sodium-ion batteries currently have up to 40% lower
energy density than lithium-ion batteries, which is likely to limit their use mostly to cars thatare primarily used in urban areas, two/three-wheelers and storage in the power sector.
Sodium-ion technology has been developed between the United States, Europe and China,
but most of the planned manufacturing capacity today is set to be located in China.

Chapter 1 | Battery demand and supply

27

Innovation in lithium-ion batteries meanwhile is bringing further improvements in theirdesign and their chemistry. On the design front, advances such as CTP 5 and cell-to-chassis(integrating cells directly into the vehicle chassis), are helping to deliver higher energy
densities and lower costs, although they raise issues in terms of battery repairability andrecycling, and may also require further work to ensure safety. On the chemistry front, theaddition and increase of manganese content in both nickel-based chemistries and LFP has
the potential to lower the costs of nickel-based chemistries without reducing their highenergy density, and to enhance the energy density of LFP batteries as the cathode moves tolithium manganese iron phosphate (LMFP). Improvements in silicon anodes may also lead tohigher energy density and higher voltage batteries while reducing dependence on the highly
concentrated supply chain of graphite anodes.

1.2.3

Navigating bottlenecks: Policy and infrastructure challenges

Global electric car registrations surged by 35% in 2023 compared with 2022, driving annual
EV battery volumes up to more than 750 GWh. However, a number of challenges need to be
tackled to maximise the future growth of EV markets.
The first challenge is affordability. Despite efforts by vehicle manufacturers to offer more
affordable EVs, they still tend to cost more to buy in western markets such as the UnitedStates and Europe than their traditional gasoline and diesel counterparts. On average,
consumers in Europe and the United States spend from USD 10 000 to 15 000 more topurchase a new EV model than they would spend for a comparable ICE model. Despite theupfront price difference, the payback period for a battery electric car in several markets
ranges from three to eight years, with the running costs of a battery electric car on averagearound 35% lower than for a gasoline car. 6 However, the price tag gap remains a major
barrier for many consumers. While manufacturers in the United States and Europe havetended to lean towards large and luxurious EVs, Chinese auto makers have focussed on small
and lower cost models. The least expensive EV models in China are priced nearly 10% lower
than their ICE equivalents (JATO, 2023). However, both Tesla and Volkswagen haveannounced plans to introduce electric car models priced around USD 25 000 after 2025.
The second challenge is the development of charging infrastructure, particularly outside of
China, the European Union and United States. In 2023, public charging infrastructure
increased by over 40%, but only 2% of the additions were located outside these regions.
While advances in battery chemistries will alleviate range anxiety, the development ofadequate charging infrastructure is also crucial.
A third challenge is the current lack of standardisation. Streamlining battery sizes, shapes
and packaging could cut costs, facilitate battery swapping, reduce costs for reuse and5 Cell-to-pack design integrates

IEA. CC BY 4.0.

assembly into modules.

cells directly into the pack structure, eliminating the need for separate

6 Assumes annual mileage of 10 000 kilometres, comparing medium-size cars and average weighting on thepassenger light-duty vehicle stock per region in 2023 (IEA, 2023a).

28

International Energy Agency | Batteries and Secure Energy Transitions

recycling, and facilitate disposal processes. On the other hand, standardisation could hinder
battery innovation and constrain manufacturers. Policy frameworks will need to balancethese competing considerations.
A fourth challenge is the need for continued battery innovation. Drivers for innovation
include further electrification beyond light-duty vehicles, environmental concerns, the desire
for a higher degree of energy independence and raw materials supply constraints. Providing
long-term planning clarity and certainty is essential. So is long-term policy support, as
provided for example by the Inflation Reduction Act in the United States, the “Fit for 55”
package in the European Union, the Faster Adoption and Manufacture of Hybrid and Electric
Vehicles Scheme in India and New Energy Vehicle policies in China. Long-term support fosters
domestic manufacturing and incentivises investment in battery-led energy transitions. The
battery end-of-life management industry faces a unique challenge in the current dynamic
conditions: the harmonisation of compliance mechanisms for support policies, like battery
passports, would help all stakeholders to tackle the challenges involved.
A fifth challenge concerns supply chains. As batteries play an increasingly vital role in theenergy transition, there is growing need for a resilient and sustainable value chain, and for
global collaboration to help achieve this. A highly concentrated market risks shortages of raw
materials and components. Strategic investment could diversify supply chains, including into
emerging market and developing economies outside China, and this could bring social andeconomic benefits for those economies, particularly if investments prioritise sustainability
and ethical labour practices.

1.2.4

Policy support for EV batteries

IEA. CC BY 4.0.

Policy support and the relatively high cost of EVs have concentrated global EV battery
demand in China, the European Union and United States, which together currently accountfor over 85% of the global electric car fleet. Early adoption in these regions was enabled bypolicies such as vehicle purchase incentives, the adoption of CO2 emissions standards andfuel economy targets. China was also an early adopter of domestic automaking and battery
manufacturing support through direct incentives, with decades of financial concessions tolocal firms paving the way for global EV and battery giants such as BYD and CATL. These
incentives were accompanied by fiscal support for purchasers of EVs. Public support schemes
for small and affordable EVs, including subsidies and incentives for both consumers andmanufacturers, have been key to China’s model, together with the availability of labour andaccess to finance.
The United States is now aiming to increase the adoption of EVs through the provision ofgenerous subsidies under the Inflation Reduction Act of 2022 for domestically produced
models that meet Clean Vehicle Tax Credit requirements, while simultaneously supporting
the domestic EV industry with over USD 15 billion offered in the form of production credits
for advanced manufacturing (Figure 1.7). Funding for charging infrastructure and local
battery production is also part of the package of policy initiatives in the United States, with

Chapter 1 | Battery demand and supply

29

1

the Infrastructure Investment and Jobs Act allocating nearly USD 7 billion in grants across thebattery value chain.
Figure 1.7 ⊳Government support for investment in EVs, charging andbatteries in selected countries, 2020-2023

China
India
United Kingdom
France
Spain
Korea
Italy
United States
Germany
5Electric vehicle incentives

10

15

20

Charging infrastructure

25
30
Billion USD (2023, MER)
Batteries
IEA. CC BY 4.0.

Since 2020, around USD 130 billion was provided to support
electromobility and USD 25 billion for batteries

Similar efforts are being made in the European Union, where CO2 standards are prompting
European auto makers to expand EV production. National subsidies in many EU member
states further support EV adoption. As battery demand rises, the EU Critical Raw Materials
Act sets 2030 targets to make the battery supply chain more secure. The Net Zero Industry
Act aims to ensure that 40% of the demand for certain clean energy technologies, including
charging infrastructure and batteries, is met by 2030 from production sites located in theEuropean Union. In parallel, it seeks to boost European production by fast-tracking
permitting and allowing financial and regulatory support. With support provided under the
EU Temporary Crisis and Transition Framework, battery producer Northvolt recently gained
approval for almost USD 1 billion in grants and guarantees to build an EV battery production
plant in Germany.

IEA. CC BY 4.0.

Similar kinds of support are also being provided elsewhere. India has allocated USD 2.5 billion
through its Production-Linked Incentive scheme in a bid to develop a domestic battery
manufacturing industry. Malaysia has introduced income tax breaks for domestic EV charger
manufacturers. Thailand has enacted a new USD 700 million subsidy scheme that aims tolower the production cost of domestic EV batteries.
Increasing financial support from governments in recent years, provided through clean
vehicle credits, tax credits and exemptions and state-backed loans, has led to a surge inglobal investment in EV batteries. Since 2020, nearly USD 130 billion has been spent by
30

International Energy Agency | Batteries and Secure Energy Transitions

governments to incentivise the production and uptake of EVs, including charging
infrastructure, notably through the EU Recovery and Resilience Facility and the US Inflation
Reduction Act. In addition, around USD 25 billion has been provided in financial support forbattery manufacturing and recycling, and in incentives for the deployment of battery storage
units.
As China's EV market matures, national subsidies are decreasing, with regional targets andpolicies now playing a more important role. Similarly, countries such as Norway, the United
Kingdom and certain EU member states are adjusting or reducing purchase incentives as their
EV markets develop. Governments in such markets can achieve financially sustainable road
sector electrification by redirecting support from private vehicle subsidies to charging
infrastructure development, for example as in China, Australia and the United Kingdom.
Other policies are likely to continue to provide support for EVs, even if that is not theirprimary objective. One example is low-emission zones, which are increasingly being adopted
in European cities.
The question of affordability is likely to continue to concern policy makers. Corporate cars
typically transition to private ownership after an average of three to four years. Therefore,
electrification goals for corporate fleets could boost the second-hand EV market, making EVs
more affordable for private consumers (Platform for Electromobility, 2021). Additionally,
interest-free or low-interest loans for electric cars could help to make EVs more affordable
and speed up decarbonisation of the road sector.
Policy makers will need to find a way to balance future EV growth policies and the desire tobuild domestic industries with concerns about the risks of geopolitical fragmentation. Secureand resilient supply chains will have an important role to play in this context. This is not aneasy balance to strike, but the cost-effective development of innovative battery
technologies, which is essential to reach global climate ambitions, ultimately depends on cooperation as well as on competition.

1.2.5

Opportunities related to the expanding battery market

IEA. CC BY 4.0.

Many emerging market and developing economies striving for economic growth andsustainability see opportunities in the expanding battery market, and more and moregovernments are looking to participate in global supply chains. Indonesia, for example, is on
track to become the largest lithium-ion battery and component manufacturing hub inSoutheast Asia, thanks to its abundant raw material resources. However, a wealth in raw
materials is not the only entry point. Batteries require a broad range of components thatvary over time as the chemistry evolves. Cell and battery component manufacturing isemerging as a lucrative market, for example, as is the recycling of metals from end-of-lifebatteries.
The battery market incorporates a wide span of economic activity with employment
opportunities at various skill levels, ranging from battery R&D, manufacturing andintegration to applications and recycling. There is scope for the global battery market to grow
Chapter 1 | Battery demand and supply

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1

very significantly in the years ahead. If the world were on track with the IEA Net Zero
Emissions by 2050 (NZE) Scenario, over two-thirds of the global auto manufacturing
workforce would be dedicated to EVs and vehicle batteries by 2030. Manufacturing of EV
batteries alone would create additional 3.5 million jobs by around 2030, equivalent to a thirdof the ICE vehicle manufacturing workforce today.

1.3

Battery use in the power sector

Over the course of the last decade, global installed battery storage capacity has increased
exponentially, from about 1 gigawatt (GW) in 2013 to over 85 GW in 2023. Over 40 GW was
added in 2023 alone, which was more than twice as much as in 2022. The strong increase inannual battery storage capacity additions recorded over the last five years has been driven
almost entirely by China, the European Union and United States, which collectively
accounted for nearly 90% of the capacity added in 2023.
About 65% of the capacity additions are for utility-scale systems, with behind-the-meter
battery storage responsible for about 35% of the annual additions on average. Utility-scalebattery storage refers to large applications connected directly to transmission or distribution
networks (front-of-the-meter), typically ranging from several hundred kWh to multiple GWh
in size. Behind-the-meter battery storage systems are generally installed at residential,commercial or industrial end-user locations, without a dedicated connection to the grid. They
are usually, but not always, significantly smaller than utility-scale batteries.

Deployment by region
China became the leading market for battery storage two years ago, with its share in annual
global additions rising from around 20% in 2019 to 55% in 2023 (Figure 1.8). Capacity
additions tripled in 2023 to 23 GW. About two-thirds of the additional capacity was utility
scale, driven mainly by provincial level mandates to pair new solar PV or wind power projects
with energy storage. Behind-the-meter storage capacity rose strongly as well, with largescale commercial rather than residential users driving the uptake, underpinned by subsidies
and increasing application of time-of-use electricity tariffs.

IEA. CC BY 4.0.

The United States is the second-largest battery storage market. Additions have roughly
doubled year-on-year, rising to over 8 GW in 2023. Utility-scale projects accounted for nearly
90% of the additional capacity in 2023, with California, Texas and other states in thesouthwest leading deployments. Improving economics have been boosted by market
reforms, falling equipment costs and an investment tax credit introduced as part of theInflation Reduction Act. This has allowed utility-scale batteries to make inroads into ancillary
service markets, where they are increasingly tapped to provide balancing services and secure
capacity in states with high shares of variable renewables generation.
Installed battery storage capacity in the European Union increased by 70% in 2023, withannual additions rising to nearly 6 GW. Nearly 90% of the capacity growth was associatedwith behind-the-meter storage, mostly in Germany and Italy, where high retail electricity
32

International Energy Agency | Batteries and Secure Energy Transitions

prices and incentives such as tax breaks and low-interest loans support the pairing of rooftop
solar PV with storage. Close to 80% of the rooftop solar PV installed in Germany and Italy in
2023 came with storage. On the utility-scale storage side, additions are increasingly
supported through capacity auctions. In Italy, for example, capacity auctions held in 2022 fordelivery in 2024 awarded contracts totalling 1.6 GW to battery storage, with some of thesesystems coming online in 2023.

GW

Figure 1.8 ⊳Battery storage capacity additions worldwide, 2013-2023

40

60%

30

45%

20

30%

United States

15%

Behind-themeter share(right axis)

Rest of world
Other Europe
Other Asia Pacific
European Union
China

10

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
IEA. CC BY 4.0.

Capacity additions doubled in 2023,
led by China, the United States and the European Union
Note: GW = gigawatts.

IEA. CC BY 4.0.

Other markets have also seen significant growth. Capacity additions in Australia jumped to
1.3 GW in 2023, rising more than 2.5-fold from the previous year. Utility-scale projects
accounted for nearly 60%, with high price spreads on the wholesale electricity market andhigh ancillary service prices driving investment. Behind-the-meter capacity rose strongly as
well, in part thanks to financial incentives that encourage the pairing of residential PV
systems with batteries. Utility-scale battery storage capacity additions in Japan and Korea
increased substantially in 2023 rising to more than 400 megawatts (MW) and 300 MW
respectively. Japan has also added over 300 MW of behind-the-meter battery storage
annually over the past four years. Behind-the-meter capacity additions in Korea peaked in2018, but the market crashed following the withdrawal of subsidies and has yet to regain its
2018 level. The United Kingdom added over a gigawatt of battery storage in 2023, becoming
Europe’s largest market for utility-scale batteries. Meanwhile Chile added nearly 250 MW ofutility-scale storage in 2023, making it the first country in Latin America to deploy battery
storage at scale.
In other regions, capacity additions have so far been limited. However, in addition to further
rapid acceleration in today’s core markets, capacity growth is expected to broaden into new
Chapter 1 | Battery demand and supply

33

1

markets over the next few years. Energy storage targets and financial support mean thatIndia in particular has significant potential to emerge as another large market for battery
storage.

Market leaders for battery storage in the power sector
The battery storage industry is not structured in the same way as the EV industry, which isdominated by car makers and battery manufacturers. It consists of battery cell and systemmanufacturers like CATL, Tesla, LG, Samsung and Panasonic; system integrators, including
companies like Fluence, Wartsilä, Sungrow, Saft, Nidec, NextEra and Powin; and developers,
who are primarily utilities and renewable energy project developers, but sometimes, andincreasingly often, large investors and oil and gas majors. There is some overlap in roles
within the industry. Tesla, for example, serves as both a manufacturer and an integrator,
while NextEra has roles as both an integrator and a developer.
Power companies are installing increasing volumes of battery storage, and batteries are
becoming more prominent in their strategic planning. A significant number of thesecompanies are renewable energy project developers, installing stand-alone battery storage
or integrating it with onshore wind or solar PV generation developments. The market,
particularly in the United States and Asia Pacific, is also shaped by investment firms that have
either acquired or partnered with developers to build substantial battery storage portfolios.
Notable examples include Blackrock and Australia’s CEP Energy.
Half of the top-ten leading global developers of battery storage are Chinese corporations(Table 1.1), which reflects the favourable conditions and the large market in that country.
Other key players predominantly are from Europe and the United States, with a recent
increase in announcements of battery storage projects from the United States stemmingfrom increased demand for storage in microgrid projects and investment support provided
under the Inflation Reduction Act.
In China, a long-standing leader in battery manufacturing, a significant number of companies
already have at least a few GW installed or at an advanced stage of development. Around74 of the top-100 developers of battery storage globally are Chinese.

IEA. CC BY 4.0.

In the United States, the two primary players, Hecate Energy and NextEra, aim to install
10 GW of battery capacity by 2026. Among the main US players, only AES is also developinga significant pipeline in other regions, primarily in Chile and Europe.
In Europe, Engie has over 6 GW installed or in an advanced stage of preparation and has set
itself a target of 10 GW by 2030. It is capitalising on the acquisition of US battery storage
companies such as Belltown in 2022 and Broad Reach Power in 2023, both with portfolios ofa few GW of projects. RWE is on track to reach 4 GW by 2027, taking account of current
projects and the acquisition of Con Edison Clean Energy Businesses in the US. By 2026 Enelaims to nearly double capacity to 4 GW, primarily in Europe, Latin America and theUnited States.

34

International Energy Agency | Batteries and Secure Energy Transitions

In Australia, the leading player is not a power generation company but a developer, Akaysha,
recently acquired by Blackrock. Akaysha is developing larger projects, for a total capacity of
2.8 GW, mainly in Queensland and New South Wales. These are set to be completed by nextyear.
Table 1.1 ⊳Leading investors in battery storage
Capacity installed orin an advanced stage(GW)

Main project
location

China
CNNP Rich Energy

11.8

China

CGN Wind Energy

8.5

China

State Power Investment

6.8

China

Huadian New Energy

5.6

China

China Energy Investment

5.6

China

Hecate Energy

10.9

United States, Canada

Nextera9.8

United States

Solar Proponent

5.5

United States (Texas)

Terra-Gen

2.4

United States (California)

AES

2.2

European Union, India, Latin America, United States

Engie1

6.3

Australia, European Union, Latin America, United States

NEOEN

4.3

Australia, Canada, European Union

RWE

4.0

European Union, United States

Enel

4.0

European Union, Latin America, United States

EDF

2.0

European Union, United Kingdom

North America

EuropeAustralia
Akaysha Energy

2.8

Australia

AGL Energy

1.5

Australia

CEP Energy

1.2

Australia

1 Includes the assets of the US companies Broad Reach Power and Belltown which were recently acquired by
Engie.

Note: Data includes installed capacity, projects under construction and projects at an advanced stage ofdevelopment that are likely to be commissioned in two to three years, including stand-alone and battery
systems capacity coupled with renewables projects.
Source: IEA analysis based on company reports, press releases and BNEF data.

IEA. CC BY 4.0.

1.3.1

Batteries have multiple roles in power systems

Batteries are highly versatile. Both utility-scale and behind-the-meter battery storage canprovide a wide range of services to electricity systems (Figure 1.9). In addition to energy
shifting, which helps to balance electricity supply and demand, utility-scale battery storage
can contribute to maintaining grid stability and security of supply by providing ancillary
Chapter 1 | Battery demand and supply

35

1

services such as inertia, voltage control and frequency regulation, grid forming, 7 anddelivering fast-starting reserves. 8 It can also supply capacity to ensure system adequacy andhelp manage congestion in electricity networks. Behind-the-meter batteries can provide
backup power and help consumers lower their electricity bills by allowing them to increase
the consumption of self-generated electricity, take advantage of variable electricity tariffs orreduce peak electricity consumption from the grid. If aggregated into virtual power plants(VPPs), they can also provide many of the same services as larger scale utility-scale systems.
Figure 1.9 ⊳Battery storage in power systems

IEA. CC BY 4.0.

Battery storage can provide a broad range of services to a power system
Note: Battery storage applications are represented along the dimensions: horizontal axis shows the location
within a power system; vertical axis shows the type of services.
Source: Adapted from Schmidt and Staffell (2023).

Whether it is economical to deploy batteries depends on the individual circumstances of theparticular case. The answer can vary from region to region, depending on the characteristicsof the electricity system and the regulatory environment. Value stacking by providing

7 Grid forming refers to the ability of an inverter-based source to provide voltage and frequency support to

IEA. CC BY 4.0.

electricity networks, particularly during or after disturbances or outages, or in independent systems.

8 Fast-starting reserves, also called fast reserves, quick start reserves or non-spinning reserves, deliver active

power quickly through increased output from generation or reduced consumption from demand sources, tohelp control frequency changes that can arise from sudden or unpredictable changes in generation or demand.

36

International Energy Agency | Batteries and Secure Energy Transitionsmultiple services at the same time can boost the economics of battery storage, but it also
increases the complexity of the business case.

1

Utility-scale battery storage
Energy shifting is a key application for utility-scale batteries, especially in electricity systems
with high shares of variable renewables with near-zero marginal costs. Utility-scale batteries
with one to eight hours storage duration can provide peaking capacity: they can be charged
in off-peak hours when the net demand is low, for example when solar PV generation peaks
during the day, and discharged when net demand is high, for example in the evening whensolar PV is not generating electricity. In competitive electricity markets, battery storage canmonetise its energy shifting potential by engaging in energy arbitrage, taking advantage ofprice spreads on wholesale electricity markets by charging in hours when the price is low anddischarging in hours when it is higher.

IEA. CC BY 4.0.

Due to their split-second responsiveness, batteries are also ideal providers of ancillary
services in power grids, such as frequency regulation, voltage support and operating
reserves. Furthermore, their black start capabilities can restore service after outages in placeof diesel generators. In many European countries, notably Germany, France and the United
Kingdom, batteries have already become key providers of frequency response and reserves,
facilitated by reforms that have enabled battery storage assets to access the markets forthese services. In systems with rising shares of variable renewables and declining
synchronous generation as conventional thermal power plants are retired, there is increasing
demand for inertia and short-circuit power, which batteries equipped with grid-forming
inverters can supply. For example, the 30 MW/8 megawatt-hour (MWh) Dalrymple battery
project in Australia provides frequency control plus inertia and short-circuit power: thisensures a reliable power supply in the regional network, which connects high shares ofvariable renewables generation but lacks synchronous generation. In the United Kingdom,869 MW of grid forming battery storage was recently awarded contracts to provide inertia
and short-circuit power to the system operator in a pathfinder scheme, with a view to
procure these services via markets. Supplying ancillary services has emerged in recent years
as an important revenue source for battery storage in several markets around the world,
driving over 15% of new project deployments annually, particularly for batteries with one totwo hours duration storage.
Providing capacity to support system adequacy is also an increasing application for battery
storage. Where regulation allows, participating in capacity markets enables the owners ofbattery storage to lock-in long-term revenues. In the United Kingdom, where revenues fromfrequency regulation have been declining as markets become saturated, multi-year contracts
awarded in capacity market auctions are becoming an increasingly important source ofrevenue for battery storage. Following the T-1 and T-4 auctions that took place in February
2024, contracted battery capacity in the capacity market is set to reach 16 GW in 2027, up
from 3.9 GW today. In regions without capacity markets, the capacity of storage assets canbe monetised through power purchase agreements which remunerate their availability to
Chapter 1 | Battery demand and supply

37

support power system operation. The Boulouparis battery project in New Caledonia, forinstance, was awarded a 12-year contract by the local network operator which remunerates
the battery owner for the services provided to the grid. The batteries will be able to deliver
50 MW of power over three hours, providing peaking capacity during evening demand peaks.
In addition, batteries can help to ease grid congestion by storing surplus power generated byrenewables at times of high production thus reducing curtailment and grid integration costs.
For example, with a 200 MW/800 MWh capacity the Dalian vanadium flow battery
demonstration project in China is designed to alleviate peak loads on the grid and serve as
an additional load point for the Dalian peninsula, enhancing grid stability. The first phase of
the project was commissioned in 2022, and full deployment is expected to reduce peak loads
by 8% from 2020 levels.
When used for congestion management, batteries minimise the need for transmission or
distribution network investment. This is the main application of so-called grid boosters inGermany, which are utility-scale batteries deployed to alleviate bottlenecks in thetransmission system and thus reduce the need for additional investment to reinforce certain
lines. Under the grid booster initiative, 950 MW of storage assets were approved by theregulator as part of the network development plan, and a total of 450 MW are already underconstruction in the control areas of two of Germany’s four transmission system operators.

IEA. CC BY 4.0.

The regulatory environment and the technical characteristics of grids are the key
determinants of what represents a viable use for batteries. In many jurisdictions with marketbased electricity systems, including the European Union, unbundling requirements impose
strict limits on the ownership and operation of storage by transmission and distribution
system operators (except in the case of selected pilot projects like the grid boosters
mentioned), so any congestion management services must be contracted from third parties.
In the United Kingdom, recently introduced distribution flexibility markets are based on open
public tenders where the costs and benefits of flexibility solutions provided by third partiesare compared to the cost of grid reinforcements: in 2022-2023, batteries represented morethan 30% of the contracts awarded, or nearly 600 MW of storage capacity. In France, boththe transmission system operator and selected distribution system operators have recently
launched local flexibility tenders which are open to battery storage assets. In California and
New York, distribution system operators increasingly make use of storage assets which are
co-owned or procured from third parties through power purchase agreements in order toreduce grid congestion, thereby avoiding or deferring expensive investment to reinforce
their grids.
Microgrids are another application for large battery storage. In Australia and parts of theUnited States, for example, regulators have introduced ad-hoc measures and programmes
to boost microgrid development, often based on storage solutions, in order to increase theresilience of critical facilities such as hospitals and large industrial consumers and of services
for communities, in particular low-income and disadvantaged communities. Microgrids
increase the resilience of the system by giving operators the possibility of disconnecting from38

International Energy Agency | Batteries and Secure Energy Transitions

the main grid through “adaptive islanding” in the event of major disruptions and maintaining
supply despite the loss of the main energy feeder.
Certain battery technologies can also be utilised for multi-day energy storage, addressing
longer peak demand periods, or compensating for episodes of low renewables generation.
An example is the first-of-its-kind 100-hour long-duration iron air battery project being built
in California, which will operate under the state resource adequacy programme. However,
the way that power markets are currently set up means that most grid services are focussed
on short duration storage. In the United States, for instance, existing market duration
requirements for operating reserves (less than one hour) and capacity (four hours) have led
to most installed utility-scale batteries having durations of four hours or less.
Historically, large-scale batteries have been mostly deployed for frequency regulation orenergy shifting. With the increasing amounts of power generated by variable renewables andthe small size of ancillary services markets, energy shifting is becoming the primary
application, and it accounted for about 85% of the installed capacity in 2023 (Figure 1.10). In
Germany, for instance, providing frequency control was the main driver for the deploymentof utility-scale systems, but emerging new applications have opened additional revenue
streams. These include the integration of variable renewables within the Innovation Tenderfor co-located generation and storage projects, the utilisation of storage as a transmission
asset, i.e. grid boosters, and the optimisation of energy consumption at industrial sites.
Figure 1.10 ⊳ Utility-scale battery storage capacity additions by application,
GW

2018-2023

30

Energy shifting andcapacity provision

25

Congestion
management

20

Ancillary services

15
10
5
2018

2019

2020

2021

2022

2023
IEA. CC BY 4.0.

IEA. CC BY 4.0.

Energy shifting and the provision of peaking capacity are theprimary applications of utility-scale batteries installed in recent years
Source: Adapted from BNEF (2023b).

Chapter 1 | Battery demand and supply

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If the regulatory framework allows, value stacking across these various applications canimprove the economics of battery storage and provide a hedge against single long-term
contracts. However, value stacking requires a more complex energy management systemand the increased frequency of dispatch resulting from value stacking can accelerate asset
degradation. Moreover, certain services may be mutually incompatible due to design
choices. For example, a system optimised for high-frequency, short-duration services might
not perform optimally for infrequent, longer duration ones. A reliance on value stacking also
increases the complexity of the business case and makes the prediction of revenues more
complex, representing a potential barrier for more risk-averse investors.

Behind-the-meter battery storage
Behind-the-meter battery storage refers to applications at the distribution level, installed at
residential, commercial and industrial end-user locations. They are connected directly to thebuilding and rooftop solar PV systems, behind the electricity meter and the building’s own
connection to the power grid. They form part of a suite of distributed energy resources thatare increasingly important in the integration of renewables. These systems can provide
benefits to both consumers and the grid by minimising costs and environmental impacts
while bolstering electricity security and supporting the electrification of industries.

IEA. CC BY 4.0.

Behind-the-meter batteries offer consumers multiple ways to save costs. By using excess
solar PV generation during the daytime to charge behind-the-meter batteries, consumers
can increase the self-consumption of electricity generated by a rooftop solar PV array. By
charging during hours when electricity prices are lowest, behind-the-meter battery storage
allows consumers subscribing to dynamic electricity tariffs to reduce their electricity bills.
The use of storage can also be timed to reduce a consumer’s peak demand, allowing themto save costs by opting for a smaller peak power supply subscription. Furthermore, individual
household level battery systems can be aggregated into VPPs and participate in the market(Box 1.2). In addition to cost-saving measures, behind-the-meter systems can improve
electricity reliability by providing backup power during unplanned outages and by ensuring
power quality: this is especially important for industry, hospitals and vulnerable customers
such as those with uninterruptible power supply setups.
From a system perspective, behind-the-meter batteries can provide many of the same
benefits as utility-scale batteries. If the right signals and incentives are in place, they can help
to reduce overall grid demand, lower grid stress by peak shaving and provide reserve
capacity. Compared to utility-scale systems however, behind-the-meter systems act at amore localised level, which can create opportunities to defer distribution grid expansion or
upgrades. When aggregated into VPPs, behind-the-meter batteries can also provide ancillary
services like frequency response, frequency regulation, voltage support and ramping
reserves. However, the extent to which the benefits of behind-the-meter batteries are
realised is highly dependent on the regulatory frameworks, most notably end-user electricity
tariff structures and the rules governing market access for aggregators. It is also dependent
on the deployment of smart metering.
40

International Energy Agency | Batteries and Secure Energy Transitions

Box 1.2 ⊳Behind-the-meter batteries and virtual power plants

Virtual power plants (VPPs) aggregate distributed energy resources, including behindthe-meter batteries, distributed renewables and flexible loads, and dispatch them as asingle electricity source. To establish a VPP, each distributed energy resource isconnected to a centralised control system that optimises their collective operation in
response to signals from markets and grid operators. Unlike individual behind-the-meter
batteries, which are limited in the extent they can interact with the grid, VPPs act liketraditional power plants in terms of the services they can provide and the markets they
participate in. If market rules permit, they can sell electricity on wholesale electricity
markets and provide ancillary services and support electricity security throughcontributions to capacity adequacy. However, they differ from traditional large-scale
power plants in that they have the ability to respond flexibly to constraints in local grids
by adjusting the output of the individual energy resources that comprise the VPP. This
makes them a potentially valuable resource in managing congestion in transmission anddistribution grids.
VPPs can offer owners of behind-the-meter batteries an additional opportunity tomonetise their energy storage capacity. Depending on market prices and tariff structures,
participation in a VPP may be more financially advantageous than simply maximising selfconsumption. VPP participants can be rewarded in multiple ways, including throughdirect payments for energy supplied, reduced electricity tariffs, or discounts on the
upfront cost of solar PV and battery systems: the details will depend on the specifics ofthe VPP. Some, but not all, VPPs require a contract in which aspects such as the maximum
annual utilisation of an asset by the VPP are outlined. VPPs can scale to relatively large
sizes, with some integrating several thousand assets, and are able to integrate larger
assets such as wind turbines, small-scale hydropower or utility-scale batteries alongsidesmaller ones.

IEA. CC BY 4.0.

Despite the benefits they offer, VPPs face many challenges, including regulatory andpolicy barriers and restrictive market rules. The decision for consumers about whether
to join a VPP is ultimately dependent on region specific and VPP specific factors. These
include not only the capital cost of a behind-the-meter battery or solar PV system, butalso how participants are rewarded for participating in the VPP, and how much local
regulation and tariff structures reward self-consumption and the direct export ofelectricity to the grid.
VPPs are proving to be innovative in finding opportunities, and this augurs well for the
future. In the United States, for example, a VPP in Vermont has aggregated behind-themeter batteries in homes to provide grid services like frequency regulation and peakshaving, demonstrating the potential for distributed batteries to offer ancillary services.
In Ontario, Canada, the system operator has enrolled 100 000 households in a VPP
programme, the Save on Energy Peak Perks programme.

Chapter 1 | Battery demand and supply

41

1

1.3.2

Batteries facilitate access to electricity

Batteries are increasingly being used in emerging market and developing economies toprovide storage in mini-grids and standalone solar systems which deliver electricity to those
without grid access or backup power to compensate for grid unreliability. This application ofbattery storage is set to rise as electrification efforts accelerate (Figure 1.11).

IEA. CC BY 4.0.

Figure 1.11 ⊳ Decentralised systems for access to electricity

IEA. CC BY 4.0.

42International Energy Agency | Batteries and Secure Energy Transitions

Four out of five people who have yet to gain access to electricity live in remote, sparsely
populated areas with low levels of existing energy demand. Extending electricity grids tothese areas is often very expensive with long lead times, and off-grid systems offer apragmatic way forward. They are already in widespread use: in 2023, 50% of newconnections in Africa were delivered through off-grid systems. Cost declines in solar PV
modules and battery technologies, together with modular system designs and creative
financing models such as PayGo, 9 are making solar-based off-grid systems increasingly
attractive, displacing alternatives such as fossil fuel generators. Batteries play a key role inthese systems, turning variable renewables generation into a reliable power supply. The
deployment of batteries for energy access is expected to accelerate as continued costdeclines in batteries improve their affordability.
Even where grid access exists, supply reliability and quality can be a major challenge. In manylarge cities in sub-Saharan Africa, over half of grid customers lack access to reliable power
considered as a connection that works most of the time (Gertler, Lee and Mobarak, 2017).
There are similar problems in rural areas with grid access. In Nigeria, for example, more thana quarter of businesses report electricity unreliability as the main obstacle to their business,and the average household receives just under seven hours of electricity per day (Pelz et al.,2023). In this context, many households and businesses with grid access want backup
generation, and the declining cost of solar PV and batteries and the rise of PayGo models areleading them to replace diesel backup generation with stand-alone solar systems. In Nigeria,
it is estimated that three out of four solar home systems sold are used for grid backup (WorldBank and GOGLA, 2022).
While off-grid and decentralised systems can be powered by varied sources, solar-based
systems are expected to remain dominant. There are two main types, differentiated by thescale of load and number of customers: mini-grids and stand-alone off-grid solar systems.
Stand-alone systems are further subdivided into solar home and solar lighting systems.
Mini-grids can power entire villages and towns, including many households and productive
uses. They can be fully independent from the grid or connected to it. Batteries integrated
into these systems range in scale from tens to thousands of kWh and ensure both evening
and nighttime energy availability, and continual demand-supply balance. Today, solar minigrids with an estimated combined battery volume of over 1.1 GWh supplying electricity toaround 20 million people.

IEA. CC BY 4.0.

Stand-alone off-grid solar systems power individual households or businesses and range
from small solar lanterns and multi-lighting systems to larger solar home systems (SHS). Solarlighting systems provide night lighting only, and do not alone qualify as delivering energy
access as defined by the IEA. In 2022, these smaller systems, which include small individual
smartphone scale batteries, in aggregate had a combined capacity of 0.4 GWh for around9 Such financing methods enable users to pay for energy through weekly instalments or other periodic

payments. It eliminates the upfront cost barrier for energy access, allowing consumers to make incremental
payments instead of paying for the entire system upfront.

Chapter 1 | Battery demand and supply

43

1

67 million units. SHS, which incorporate battery storage ranging from 20 Wh to a few kWh,meet IEA energy access definitions and are able to power some household appliances in
addition to lighting. In 2022, SHS had an estimated combined battery capacity of over
3.8 GWh and provided around 19 million households with basic or extended energy services
and back-up services. 10
Solar home systems and solar lighting are equipped with standard battery sizing options
embedded in ready to sell products which are often pre-packaged with appliances. On theother hand, battery systems for mini-grids are often bespoke, with their size based on
preliminary demand estimation studies. The choice of battery chemistries can varysignificantly by system type and geographic location, and depends on costs, local
maintenance capacity, developer experience and the nature of expected demand.
Figure 1.12 ⊳ Installed battery capacity in decentralised systems by type andGWhshare of lithium-ion batteries

4Mini-grids(10-1 000 kWh)

Large SHS
(0.2-5 kWh)

Small SHS
(20-200 Wh)

Solar lights/lanterns(1-20 Wh)

100%

3

75%

2

50%

1

25%

2015 2019 2022
2015 2019 2022
2015 2019 2022
2015 2019 2022
Deployed battery capacity
Share of lithium ion in annual additions (right axis)
IEA. CC BY 4.0.

Battery capacity in decentralised systems reached 5.3 GWh in 2022, a fourfold rise since2015 mainly driven by solar home systems; lithium-ion batteries dominate the market
Notes: kWh = kilowatt-hours, Wh = Watt-hours. The figure shows total installed and operational battery
capacity as columns and, the share of lithium-ion in new annual sales as confidence intervals.
Sources: IEA analysis based on data from GOGLA (2023) and ESMAP (2023). Ad-hoc analysis by GOGLA basedon data collected for the Global Off-Grid Solar Sales and Impact Reports from 2016 to 2022 is the basis of thelithium-ion share confidence intervals.

IEA. CC BY 4.0.

Thanks to their relatively low capital costs and ease of maintenance, supported by welldeveloped local skills, lead acid batteries have long dominated mini-grids. However, lithium10 The IEA minimum level of services is defined as the “basic bundle”, which includes more than one light pointthat provides task lighting, phone charging and a radio. The “essential bundle” category includes four lightbulbs for four hours per day, a fan for three hours per day and a television for two hours per day. The IEA“extended bundle” implies a refrigerator, four hours for lighting, four hours for TV and six hours for a fan. See
the IEA Guidebook for improved electricity access statistics (2023b).

44

International Energy Agency | Batteries and Secure Energy Transitions

ion batteries are quickly gaining ground due to their declining costs, the promise of longer
lifespans and lower levelised costs (ESMAP, 2023). As a result, they now account for aroundhalf of the mini-grid market. Lithium-ion, specifically LFP, is already the predominantchemistry in smaller SHS and solar lighting systems, rising from just above 60% to nearly
100% in 2022 (Figure 1.12). Larger stand-alone systems and generators are also quickly
embracing lithium-ion batteries, jumping in just 3 years between 2019-2022 from just below
50% to almost 95%.
Affordability remains a challenge for energy access initiatives and batteries still account fora highly variable 10-40% of total system costs depending on loads served, location andchemistries. Future battery cost declines will not necessarily be reflected fully or quickly inthe field. The expectation of future cost declines nevertheless can encourage investors anddevelopers to delay projects in the hope of improved financial outcomes, hindering urgently
needed expansion. Against this background, policy support is needed to ensure theprofitability of projects. Possible support measures include the exemption of energy accessbatteries and cells from onerous import tariffs and the provision of support for thedevelopment of local manufacturing industries.
Component failure also remains a challenge for batteries in energy access projects. Whileother components have lifespans of decades, many mini-grids experience unexpectedbattery failures in under five years. These failures may reflect faulty, untested or low-cost
components, and poor operation and maintenance. Premature battery failures can pushdevelopers to seek rapid recovery of capital costs instead of longer amortisation periods toimprove affordability. They can also seriously damage entire energy access projects,
drastically reduce the lifetime of products such as solar lighting devices and drive theaccumulation of e-waste: an estimated 220 million products are currently faulty or inlandfills. Overall, especially for newer battery chemistries, there is a need for increased
battery field testing and sharing of experiences to support more informed decision making
on batteries and ultimately to improve stand-alone system performance.

IEA. CC BY 4.0.

1.3.3

Battery chemistry for storage applications

Lithium-ion batteries dominate the battery storage market today (Figure 1.13). The
chemistries available for lithium-ion batteries used in storage applications are the same as
those available for the EV market (section 1.2) However, storage applications have different
technical requirements and characteristics such as cost, capacity to charge/dischargefrequently, safety and overall lifetime are prioritised over energy density. Lower costs, higher
cycle lives and safety considerations have led to a shift towards lithium iron phosphate (LFP)
batteries, which accounted for about 80% of the total battery storage market in 2023, up
from about 65% in 2022. LFP batteries are currently produced almost exclusively in China,
but other battery manufacturers are starting to develop them. Lithium-ion batteries are set
to remain a key part of short-duration (≤ 8h) storage, but alternative chemistries are being
developed either to compete with it or to complement it.

Chapter 1 | Battery demand and supply

45

1

Figure 1.13 ⊳ Announced, financial investment decisions and commissioned
storage projects by battery chemistry in 2021, 2022 and 2023

GW

2021

2022

2023

60

Announced
FID
Commissioned

40

20

LIB

Redox
flow

LIB

Redox
flow

LIB

Redox
flow
IEA. CC BY 4.0.

Lithium-ion battery chemistry is predominant for storage, with minimal shares for redox flow
Note: LIB = lithium-ion battery, FID = final investment decision.
Source: IEA analysis based on BNEF data.

IEA. CC BY 4.0.

Sodium-ion batteries do not use lithium, are constructed from less expensive materials thanlithium-ion batteries and need fewer critical materials. They attracted a lot of attention
during 2023 thanks to the first sodium-ion powered EV produced by Hina, and to productlaunch and mass production announcements from companies like CATL, BYD and Northvolt.
Sodium-ion batteries are less energy dense than lithium-ion batteries, but they could be 20%
and 30% cheaper than equivalent LFP batteries if produced at similar scales. However, thiscost advantage largely depends on the current price of lithium and also needs to be weighedagainst a potentially shorter service life than LFP batteries.
Neither lithium-ion or sodium-ion batteries are likely to be able to serve significant shares of
longer duration storage (across days) because of cost and technical challenges arising fromprolonged high states of charge. Other battery chemistries may be more suitable for longer
storage durations (Table 1.2). An alternative battery chemistry that could provide longer(multi-day) storage is redox flow batteries, which are built in a different way from sodiumand lithium-ion batteries. They are composed of two tanks that contain the liquids in whichenergy is stored: when charging/discharging the battery, these fluids are pumped into a cell
containing the electrodes. The physical separation of the two tanks solves the technicalchallenges arising from prolonged high states of charge. Energy, determined by the size ofthe tanks, and power, determined by how fast the liquids are pumped and the size of thesurface of the membrane, can be controlled separately. This battery can use different
chemistries, but vanadium is the most widely used and its supply chain is still small. Redox
flow batteries based on vanadium are already relatively mature. The main challenge will be
46

International Energy Agency | Batteries and Secure Energy Transitions

ability to scale up rapidly over the coming years. However, this is likely to happen only inresponse to adequate signals, for example through the emergence of longer duration storage
markets.
Table 1.2 ⊳Potential applications of various battery technologies for storage
applications by storage duration
Storage duration
4h or less

4h to 8h

Days

Weeks

Seasonal

Lithium-ion

●

●

●

●

●

Sodium-ion

●

●

●

●

●

Redox flow

●

●

●

●

●

Iron air

●

●

●

●

●

● Suitable● Marginal● Unsuitable

Iron air and other battery technologies that potentially could enable the storage of electricity
over longer durations measured in weeks, are still in their infancy. Currently it is not clear
whether those technologies can be developed so as to provide what is required in a costefficient way. For even longer duration storage, such as seasonal storage, battery
technologies are not fit for purpose, and other mechanical, e.g. pumped storage hydro, andchemical, e.g. hydrogen storage, technologies need to be deployed.

1.3.4

Policy support for battery storage

There is increasing government support for the deployment of battery storage. Countries aresupporting storage deployment with targets, subsidies and reforms that remove regulatory
barriers and improve access to markets (Table 1.3).

IEA. CC BY 4.0.

In the United States, the Inflation Reduction Act provides a federal tax credit of up to 50%
for storage projects. Nine states have adopted storage targets, amounting to more than
50 GW of cumulative additions over the next 20 years.
In China, the first national target was set in 2020 to install 30 GW of additional energy storageby 2025; the target has already been exceeded. Regional 14th Five Year Plans target almost
80 GW by 2025.Qinghai municipality was the first to require wind farms to pair at least 10%of their installed capacity with energy storage. A number of provinces have followed suit andextended the policy to solar PV, with pairing rates between 5% and 30%. These requirements
have become a major driver of battery storage capacity growth in China. Some provinces also
provide financial support to battery storage via feed-in tariffs or direct payments, while grid
tariffs and taxes are waived during charging for storage facilities that directly participate in
the market.
Chapter 1 | Battery demand and supply

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Table 1.3 ⊳Energy and battery storage targets in selected regions/countries
Battery
storage target(GW)

Energystorage target(GW)

Target year

Note

Australia

6.3

2030

Target in state of Victoria

China

78

2025

Excludes PHS

5.3

2030

1

2030

European Union
Greece3.1

Hungary
Italy

15

2030

Portugal

1

2030

Romania

0.24

2025

Spain
India

47.24

Japan

24 (GWh)

Korea

22

2030

73.93

2032

Additional 3.9 GW PHS
At least 0.4 GW BTM storage

2030
24.51

2036

Additional 1.75 GW PHS

United States
California

36.2

2045

Connecticut

1

2030

Maine

0.4

2030

1 GWh

2025

1

2030

New Jersey

2

2030

New Mexico

2

2034

New York

6

2030

Virginia

3.1

2035

Massachusetts
Nevada35.2

Note: PHS = pumped hydro storage, BTM = behind-the-meter.

IEA. CC BY 4.0.

In India, the recently released National Framework for Promoting Energy Storage Systems
requires renewables projects, excluding hydropower plants, to install energy storage with acapacity equivalent to at least 5% of the renewables capacity, and inter-state transmission
system charges have been waived for battery storage projects for a duration of up to
12 years. In addition, India has set up the Viability Gap Funding Mechanism to reimburse up
to 40% of the capital cost of storage projects.
In the European Union, member states are collectively targeting deployment of around
45 GW of storage by 2030 through National Energy and Climate Plans. Several member states
provide support for battery storage. Sweden, Spain, Italy and Germany have implemented
reforms to eliminate the double charging of taxes and grid tariffs for storage. Greece and
Italy have rolled out long-term remuneration mechanisms dedicated to storage, such as
contracts for differences, that provide battery storage projects with more stable long-term
revenue streams. The European Union also provides funding for selected battery storage
projects through the Innovation Fund and the Recovery and Resilience Facility.
48

International Energy Agency | Batteries and Secure Energy Transitions

In Japan, the importance of battery storage is recognised in the 6th Basic Energy Strategy
and the subsequent Battery Industry Strategy released in 2022. Japan aims to install around
24 GWh of behind-the-meter battery storage by 2030.
In Korea, the 10th Basic Plan for Long-term Electricity Supply and Demand sets a target of
approximately 26 GW of energy storage by 2036.
In Australia, the Australian Renewable Energy Agency more than doubled its funding from
AUD 81 million (USD 56 million) to AUD 176 million (USD 122 million) in 2022 to support eight
grid-scale lithium-ion battery projects. Currently, the federal government is implementing
the Capacity Investment Scheme, a revenue underwriting scheme that was expanded in 2023
to add a total of 32 GW of new dispatchable capacity, including battery storage, to theelectricity grid. The initial stage involves six tenders for batteries and VPP projects that are
to deliver 1 GW of firm capacity by 2025. In addition, the state of Victoria aims to install
6.3 GW of battery storage by 2035. The federal government is in the process of formulating
its first National Battery Strategy.

Policies targeting behind-the-meter storage
Several countries are directly supporting behind-the-meter storage or have regulatory andend-user pricing frameworks in place that do so. Measures include subsidies, dynamic ortime-of-use end-user electricity tariffs that incentivise energy shifting and permissive
regulation that enables distributed behind-the-meter storage to access electricity markets
through aggregators (Table 1.4).

IEA. CC BY 4.0.

Table 1.4 ⊳Behind-the-meter policy measures in selected countries
Financial support

Dynamic and/or
time-of-use tariff

Market access(through aggregators)

Australia●●●

Canada

●

●

●

China

●

●

●

Germany

●

●

●

India

●

●

●

Italy

●

●

●

Japan

●

●

●

Korea

●

●

●

United Kingdom

●

●

●

United States

●

●

●

Level of implementation● High ● Medium ● Low

Chapter 1 | Battery demand and supply

49

1

In Australia, national and state-level schemes, including tax breaks, subsidies and interestfree loans, incentivise the installation of behind-the-meter batteries. As part of its network
tariff reform starting in 2017, the Australian energy regulator mandated suppliers totransition from flat to variable, cost-reflective tariffs, which increases the attractiveness ofbehind-the-meter storage. By 2022, 26% of residential customers across the National
Electricity Market had adopted these forms of tariffs. In November 2023, energy and climatechange ministers in Australia agreed to develop a National Consumer Energy Resources
Roadmap. In March 2024, they agreed to a range of priority reforms under the Roadmap,
including nationally consistent standards, new consumer protections and network reforms
to unlock consumer benefits from behind-the-meter generation and storage.
In the United States, the Inflation Reduction Act includes a residential clean energy credit
that provides consumers with a 30% tax credit for the installation cost of clean energy
equipment, including behind-the-meter battery storage systems with capacity of at least
3 kWh. At state level, California has a support package for behind-the-meter storage that
includes time-of-use tariffs, additional incentives for self-generation and a specific storage
tariff. Similar measures have been adopted in Arizona, Massachusetts, Hawaii, Colorado and
New York.
Several member states in the European Union, notably Germany and Italy, promote theadoption of behind-the-meter storage through subsidies such as grants, low-interest loans
and tax rebates; although Italy recently phased out its Superbonus tax credit for home
improvements, which had underpinned most of the growth in behind-the-meter storage inrecent years. Across EU member states more generally, there has been a trend towards thepromotion of self-consumption and away from feed-in tariffs and net metering schemes forsolar PV. This has stimulated behind-the-meter storage.
The United Kingdom is one of the leading examples of a regulatory framework that enables
participation of behind-the-meter storage in electricity markets, creating benefits for thesystem and opening additional revenue streams for behind-the-meter storage. Throughaggregators, behind-the-meter batteries can participate in wholesale energy, capacity andlocal flexibility markets, while also providing grid services.
Canada introduced a 15% tax credit for investments in clean energy technologies such as
solar, battery storage and wind in its 2023-2024 Budget Law. At provincial level, Ontario is
introducing a pilot programme for dynamic electricity pricing for users with over 50 kW peakdemand starting in 2024, and Nova Scotia has set a battery capacity target of 300-400 MW
by 2030, including up to 100 MW to be connected to the distribution system or behind-themeter.

IEA. CC BY 4.0.

India announced the progressive introduction of a three-rate tariff in 2023. Starting from
April 2024 for small commercial and industrial consumers, it differentiates between normal
hours, “solar” hours and peak hours (with prices in solar hours 10-20% lower than in normal
hours), providing an incentive to deploy behind-the-meter storage.
In Korea, generous subsidies led to a boom in behind-the-meter storage capacity additionsin 2017, but their subsequent withdrawal prompted a decline from which the market has yet
50

International Energy Agency | Batteries and Secure Energy Transitions

to recover fully. Time-of-use tariffs predominantly are applied to high-voltage commercial
and industrial customers. Korea has begun phasing in time-of-use tariffs for residential
consumers in place of the previous flat tariffs. There are pilot projects for VPPs incorporating
behind-the-meter storage, but so far, the use of VPPs remains limited.
In China, financial support for behind-the-meter storage varies from province to province
and includes feed-in tariffs, subsidies and one-off investment grants. Policy support isgenerally focussed on industrial and commercial users (strict fire safety codes in many cities
prevent the installation of batteries in residential buildings), and time-of-use pricing is
becoming widespread for those users. Around 90% the provinces have policy measures inplace to encourage the development of VPPs.
Japan provides subsidies for behind-the-meter batteries that reduce the upfront cost by up
to USD 250/kWh. Moreover, many Japanese households equipped with rooftop solar PV are
coming to the end of the ten-year feed-in tariff between 2023-2030, after which thepayments they currently receive for feeding electricity into the grid will disappear or reducesignificantly. This is likely to encourage self-consumption and increase the attractiveness ofbehind-the-meter storage.

1.3.5

Regulatory barriers to battery storage

Most countries still lack an adequate regulatory framework for battery storage, which is a
key barrier to the development of viable business models. Even when short-term pricesignals are in place, merchant risk and uncertainty over long-term revenues may act as abrake on battery storage investment.

IEA. CC BY 4.0.

A common hurdle faced by storage operators in many jurisdictions is double taxation or
double charging of grid tariffs. Because of its dual character as both generation and load(demand), storage may be taxed both when charging and discharging, resulting in a systemic
disadvantage compared to other technologies. Even when there is no injection tariff, storage
systems can be exposed to withdrawal tariffs for each of their charging cycles.
There are also restrictions on market participation and services provision by battery storage
owners that limit their ability to contribute as fully as possible to energy systems. Some
battery services, such as black start capability or inertia, were traditionally provided byconventional power plants at no cost, while remuneration schemes for batteries do not yet
exist or are just being tested in pilot projects. In markets that are transitioning from regulated
to liberalised systems, it is often still not possible for battery owners to participate incompetitive procurement processes for system services or to undertake energy arbitrage onwholesale markets. In more advanced power markets, existing market products often do notenable battery storage to contribute to the provision of services as fully as they could. In
addition, since system operators are generally not allowed to own and operate storage
assets, transmission or distribution grid operators need to procure battery congestion
management services through tenders or on local flexibility markets. Such market-basedcongestion management mechanisms have not yet been widely adopted.
Chapter 1 | Battery demand and supply

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Table 1.5 ⊳Eligibility of battery storage by type of use by country
Type of use
Wholesalearbitrage

Ancillary
services

Capacity

Grid congestion relief
and/or grid deferral

●
●
●
●
●
●
●
●
●
●

●
●
●
●
●
●
●
●
●
●

●
●
●
●
●
●
●
●
●
●

●
●
●
●
●
●
●
●
●
●

Australia
CanadaChina
Germany
India
Italy
Japan
Korea
United Kingdom
United States
Status of battery eligibility:● Legally eligible● Eligible only in some jurisdictions, or in pilot projects, or for some services only
● Not eligible or type of use not available
These restrictions are widespread. For example, in the European Union the Agency for the
Cooperation of Energy Regulators has identified several member states in which batteries
are still not eligible to participate in short-term electricity markets and capacity mechanisms,
or to provide balancing and congestion management services. Moreover, local flexibility
markets are not well established in these countries, discouraging the uptake of behind-themeter battery storage. In China, the lack of market-based outlets for storage paired withwind and solar plants is leading to utilisation rates as low as 6%, which weighs on the
profitability of developers.

IEA. CC BY 4.0.

In many countries, and especially in emerging market and developing economies, the slow
progress being made in deploying smart meters is a further barrier to the full implementationof dynamic tariffs, development of VPPs and aggregation of distributed energy resources.
The absence of specific regulation regarding the operation of behind-the-meter batteries andtheir eligibility to participate in energy markets are major barriers to their adoption. Somenet metering schemes do not encourage behind-the-meter storage: in cases where excessenergy generated throughout a month is credited to the consumer account regardless ofwhen it was produced, the effect is to discourage the storage of surplus energy for use during
peak demand or low solar generation periods.
Existing market arrangements in general were designed for conventional technologies,
meaning that battery storage may not receive appropriate price signals to encourage an
52

International Energy Agency | Batteries and Secure Energy Transitions

optimal level of investment. An absence of locational signals means batteries are notincentivised to provide capacity where it is most needed, and the current arrangements for
dispatch and settlement periods are often not designed to attract investment in fastresponse flexible assets. Except in those cases where a carbon price is in place, current
market arrangements also risk failing to incentivise storage operations to support emissions
reduction targets. In China, for example, where the electricity mix is 65% reliant on fossil
fuels, the average utilisation of storage paired with thermal power plants is approximately
six-times higher than those of storage paired with wind and solar PV generation.
Delays in obtaining grid connections are also holding back the development and deploymentof battery storage in many jurisdictions, as regulatory processes for obtaining approvals andpermits can be complex and time consuming. According to the Lawrence Berkeley National
Laboratory, approximately 1 030 GW of storage projects in the United States were waiting in
the connection queue in 2023, up from 680 GW in 2022 (including the storage element ofhybrid projects) (Lawrence Berkeley National Laboratory, 2024). Long wait times (on average
nearly three years from interconnection request to an executed interconnection agreement,
and five years to commercial operations) risk deterring battery storage projects. The
situation is similar in many other jurisdictions. The costs of grid upgrades can also impede
battery storage projects.

1.4

Investment in batteries

1.4.1

Investment by sector and location

Investment in both EV batteries and battery storage has been strongly increasing – upeightfold in EV batteries and fivefold in battery storage since 2018. 11 Total investment was
USD 150 billion in 2023, of which USD 115 billion was for EV batteries and almost
USD 40 billion for battery storage (Figure 1.14).
China, Europe and the United States account for more than 90% of this spending. The
remainder is concentrated in other advanced economies. For every dollar invested in EV
batteries and battery storage in advanced economies and China in 2023, only USD 0.02 wasinvested in other emerging market and developing economies.

IEA. CC BY 4.0.

For EV batteries, the main reason for the geographic disparity is that spending on EV batteries
is closely related to sales of EVs, which in many emerging market and developing economies
remain a capital-intensive investment out of reach for many consumers. Supportive policies
are also a relevant factor. Sales of EVs have surged in some regions: In the United States they
have increased by almost 500% since 2020, in Europe by 250% and in China by 160%. Eachof these regions have implemented both demand and supply related policies to acceleratemarket demand and increase the availability of EVs while developing the charging
infrastructure. Holistic transport policy making in emerging markets and developing
11 The detailed methodology can be found in the World Energy Investment 2023 Methodology Annex (IEA,
2023c).

Chapter 1 | Battery demand and supply

53

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economies will be key to accelerating electric mobility – and also spending on EV batteries –together with low-cost debt financing for consumers, fiscal incentives, subsidies andincreased international financial support for the electrification of public transport (IEA,
2023d).

Billion USD (2023, MER)

Figure 1.14 ⊳ Global investment in EV batteries and battery storage, 2018-2023
EV batteries

Battery storage

2018 2019 2020 2021 2022 2023
China
Europe2018 2019 2020 2021 2022 2023
United States
Other

150

100

50

IEA. CC BY 4.0.

Investment in EV batteries and battery storage increased rapidly to USD 150 billion,
with spending highly concentrated in China, Europe and the United States
Note: MER = market exchange rate.

IEA. CC BY 4.0.

For battery storage, investment has increased as more regions have adopted supportive
policies and power market designs, and as higher levels of renewables penetration provide
expanded opportunities for profitable battery storage operations. Battery storage projects
often have to develop several revenue streams at the same time to be a profitable
investment, e.g. energy arbitrage, frequency regulation, peak shaving or, if integrated withsolar PV or wind power, the benefit from lowering curtailment of renewables. This especiallyholds for utility-scale units that can be used for renewables integration and to improve grid
flexibility. While representing the majority of capacity additions, such units accounted forless than half of total battery storage investment in 2023 as utility-scale batteries are
significantly cheaper per unit of capacity than smaller batteries intended for commercial orresidential use. Around 85% of the spending on utility-scale battery storage was in China andthe United States. In contrast, battery storage for commercial and residential applications,such as when combined with rooftop solar, has attracted most of the spending in Europe inrecent years.
A major reason why capital flows to battery storage remain highly concentrated in advanced
economies and China is the high cost of capital for clean energy projects in emerging market
and developing economies (Figure 1.15). Survey data from the IEA Cost of Capital
Observatory shows that the cost of capital for battery storage projects in emerging market
54

International Energy Agency | Batteries and Secure Energy Transitions

and developing economies is at least twice as high as in advanced economies. While macro
factors such as the rule of law and currency fluctuations are major contributors to this highcost of capital, so too are energy sector specific risks. These can include unclear or unstable
regulation, lack of reliability of revenues, lack of focus on downstream policies and delays in
obtaining grid connections. Increasing battery storage investment in Southeast Asia, Central
and South America and India suggest that some countries are successfully addressing someof these risks, for example, through enacting policy reforms, enhancing the credit worthinessof offtakers, and issuing hybrid tenders that combine renewables with battery storage (IEA
survey data shows that the cost of capital for battery storage tends to converge to that ofsolar PV projects in hybrid projects [IEA, 2023e]).
Figure 1.15 ⊳ Cost of capital ranges for solar PV and battery storage projects
with a final investment decision in 2022

15%

Solar PV
Battery storage

10%

5%

Emerging market anddeveloping economies

Advanced economies
IEA. CC BY 4.0.

Cost of capital for battery storage projects in emerging market anddeveloping economies is at least twice as high as in advanced economies
Note: Values are expressed in nominal, post-tax and local currency. Weighted average cost of capital for solar
PV projects represent responses for a 100 MW project and for utility-scale batteries a 40 MW project. Values
represent average medians across countries. Advanced economies represent values in the United States andthe European Union.
Source: Adapted from IEA (2024a).

IEA. CC BY 4.0.

1.4.2

Venture capital investment in battery start-ups

In the past decade, venture capital (VC) funding flowing to EV and battery start-up firms hasboomed because financial investors such as banks and VC or private equity funds see a
potential for future returns with high exit values. Many companies, including major
incumbent auto makers, also provide funding to start-ups in order to gain a stake in thedevelopment of new technology or to acquire concepts developed by new entrants that may
enhance their competitive edge.
Chapter 1 | Battery demand and supply

55

1

In 2023, global VC investment in start-ups developing battery-related technologies wasaround USD 6 billion, which was 20% lower than the previous year (Figure 1.16). Increasing
competition among EV and battery makers, geopolitical tensions, supply chain disruptions
and high interest rates are all likely to have reduced the availability of high-risk capital.
Nevertheless, battery VC investment remains three-times higher than the pre-pandemic
levels of 2018-2019. Taken together, start-ups headquartered in China, Europe and UnitedStates accounted for 95% of all VC funding for batteries in 2023.
Figure 1.16 ⊳ Global venture capital investment in battery start-ups by
All stages

10

Share of cumulative

Billion USD (2023, MER)

technology area and chemistry, 2015-2023

8
6
4

100%

Early stage

80%
60%
40%
20%

2
2015
Battery
Metals

2017

2019
2021
Components
Recycling and reuse

2023
Management
system2018-20202021-2023

Lithium

Non-lithium
IEA. CC BY 4.0.

VC investment in battery start-ups boomed from 2015 to 2021,
but has since slowed reflecting more challenging macroeconomic conditions

In 2023, early-stage investment 12 in battery start-up firms was around USD 400 million, while
growth-stage investment 13 totalled around USD 5 billion. Novel battery chemistry andcomponent makers accounted for 70-80% of VC investment, often for R&D and prototype
projects. Over the 2021-2023 period, a higher share of early-stage VC investment than inprevious years went to non-lithium battery chemistries such as metal-hydrogen, redox flow,
solid-state or sodium-ion, indicating investor appetite for alternatives to lithium based
technology. Another notable development was increasing funding for battery recycling andreuse, accounting for 15% of the total. Battery management systems have only attracted afraction of the total to date. In addition to battery chemistries, just under USD 400 million
was raised in 2023 by start-ups developing technologies for the extraction and refining of
critical minerals like lithium, cobalt and nickel on which batteries depend.
12 Early-stage investment includes seed and series A, referring to the first rounds of financing and the earlier

IEA. CC BY 4.0.

stages of development.

13 Growth-stage investment includes series B and growth equity, which refers to the later rounds of financing
as start-ups increase activity.

56

International Energy Agency | Batteries and Secure Energy Transitions

1.5

Global battery supply chain

Today’s global battery supply chain is very complex. It starts with the extraction of mineralores, which are refined to form high purity battery-grade chemicals. Advanced materials
synthesis subsequently produces cathode and anode materials (Figure 1.17). Similarlycomplex supply chains characterise other battery components such as electrolytes andseparators. These components are eventually combined in the manufacture of battery cells
which are then housed within a battery pack that is used in EVs or storage applications. In
storage applications, battery units include systems for battery management, energy andthermal management, power conversion and communication: these elements are notrequired in EV batteries because they are embedded in the EVs.
Figure 1.17 ⊳ Key links in the battery supply chain

IEA. CC BY 4.0.

IEA. CC BY 4.0.

The battery supply chain comprises multiple stages

China dominates production at every stage of the downstream battery supply chain. Over
half of global raw material processing for lithium, cobalt and natural graphite occurs in China.
With 90% of global graphite mining, China dominates the entire graphite anode supply chain
end-to-end (Figure 1.18). It also has almost 85% of battery cell manufacturing capacity andaccounts for 90% of cathode and 98% of anode active material global manufacturing
capacity. Europe, which is responsible for almost 20% of EV production, holds very little of
the global supply chain apart from 7% of battery cell manufacturing capacity, today mostly
Chapter 1 | Battery demand and supply

57

1

taking place in Poland and Hungary, and 10% of cobalt processing, which takes place mostly
in Finland. The United States is responsible for 10% of EV production and 6% of battery cellmanufacturing capacity. Korea has a considerable share of the battery supply chain
downstream from raw material processing, particularly in cathode material production.
Korea accounts for nearly 10% of global cathode active material manufacturing capacity.
Figure 1.18 ⊳ Geographical distribution of the global battery supply chain
MiningLithium
NickelCobaltGraphite
Lithium
NickelCobaltGraphite
CathodeAnodeBatteries

China
EuropeUnited States
Japan
Korea
Australia
DRC
Indonesia
RussiaRest of world

Material processing

Cell components

Battery cells
20%

40%

60%

80%

100%
IEA. CC BY 4.0.

China dominates across the entire downstream battery supply chain
Note: DRC = Democratic Republic of the Congo. Graphite refining is only refining of natural graphite tospherical graphite. Mining and processing are based on production data. Cathode, anode and batteries are
based on manufacturing capacity data.

IEA. CC BY 4.0.

In terms of raw material supply and extraction, battery metals are highly geographicallyconcentrated and thus are vulnerable to supply shocks and constraints. Australia produces
almost 45% of the world’s lithium, while Democratic Republic of the Congo (DRC) accounts
for 65% of the global cobalt production. Nickel supply is similarly concentrated, withIndonesia contributing to the largest share of production, representing 55% of total nickel
supply. Much of this nickel, in the form of lateritic deposits, historically could not be
economically refined into battery-grade nickel sulphate. However, over the past few years
Indonesia developed the capacity to turn these nickel ores into intermediate chemicals
through the use of high pressure acid leach processing. These inputs can be competitively
refined into battery-grade nickel with this route currently comprising around 60% of the
global supply of battery-grade sulphate.

58

International Energy Agency | Batteries and Secure Energy Transitions

Box 1.3 ⊳Carbon footprint of batteries

Carbon emissions related to batteries primarily arise from mineral refining, cathode andanode active material production, and manufacturing processes. Despite theseemissions, the environmental benefits of batteries outweigh their drawbacks. EVs
produce half the lifecycle CO2 equivalent emissions of internal combustion engine
vehicles globally, and these emissions are expected to fall as grid decarbonisation
progresses.
Figure 1.19 ⊳ Lifecycle emissions of NMC 811 and LFP battery packs in 2023
kg CO2-eq/kWh

and in the Announced Pledges Scenario in 2035

100

2023

2035
Recycling saving
Other

80

Recycling
Production

60

AM synthesis
Processing

40

Mining20

NMC811LFP

NMC811LFP
IEA. CC BY 4.0.

Battery lifecycle emissions drop by more than 30% by 2035
reflecting reduced material intensity and recycling
Notes: kg CO2-eq/kWh = kilogrammes of carbon dioxide-equivalent per kilowatt-hour; NMC 811 =LiNi0.8Mn0.1Co0.1O2; LFP = lithium iron phosphate; AM synthesis = active material synthesis. Recycling
saving refers to the emissions that are avoided thanks to the use of recycling materials. Other refers toemissions associated with other battery pack components like electronics and coolant. Production refersto cell and pack manufacturing. The Announced Pledges Scenario depicts a future where all countries hit
their aspirational targets, including national and regional net zero emissions pledges, on time and in full.
A more detailed description of the scenario is provided in Chapter 2.
Sources: IEA analysis based on data from Argonne National Laboratory (2022), EV Volumes (2024), Dai etal. (2019), Degen et al. (2023), Frith, Lacey and Ulissi (2023) and IEA (2023f).

IEA. CC BY 4.0.

The choice of battery chemistry is also crucial. Lifetime emissions from LFP batteries areabout one-third less per kWh at the pack level than those from high nickel NMC batteries(Figure 1.19). NMC lifetime emissions come mostly from critical minerals processing, 55%of the total, but also from the production of cathode and anode active materials (25%)
and battery manufacturing (15%). The equivalent figures for LFP lifetime emissions arearound 35%, 15% and almost 50% (IEA, 2024b).

Chapter 1 | Battery demand and supply

59

1

In the Announced Pledges Scenario (APS), battery lifecycle emissions decrease by 35%
for both NMC and LFP through to 2035. This reduction comes mostly from a 30% increasein energy density at the battery pack level, and from 20% of the cathode active material
being sourced through recycling. Both reduce material needs. The electrification ofbattery and battery components production is also important to reduce battery lifecycle
emissions as power systems are decarbonised.

1.5.1

Lithium-ion battery manufacturing

Lithium-ion battery manufacturing capacity has more than tripled in the past four years,
reaching 2.5 terawatt-hours (TWh) in 2023, with a third of this capacity added in 2023 alone.
This remarkable expansion has been propelled by a rapid rise in EV sales. This trend is set topersist.
Battery manufacturing capacity is heavily concentrated in China, which accounts for 83% of
current production capacity, up from 75% in 2020. Europe and the United States together
account for approximately 13% of global capacity (Figure 1.20). Global manufacturing
capacity is set to expand nearly fourfold by 2030 from current levels: if all announced projects
are realised fully and on time, China's share is set to decline to 67% by 2030.

TWh

Figure 1.20 ⊳ Lithium-ion battery manufacturing capacity by region, 2020-2023
3

Other
Japan

Korea
United States

2

Europe
China
1

2020

2021

2022

2023
IEA. CC BY 4.0.

Lithium-ion battery manufacturing capacity has more than tripled
since 2020, concentrated in China
Note: TWh = terawatt-hours. Battery manufacturing capacity refers to battery cells.

IEA. CC BY 4.0.

Source: IEA analysis based on Benchmark Minerals data.

Korean companies are emerging as pivotal international investors in battery manufacturing.
They own over 350 GWh of capacity outside Korea. Japanese and Chinese companies also
have battery manufacturing capacity in other countries, but the volumes are much smaller,
60International Energy Agency | Batteries and Secure Energy Transitions

about 55 GWh of Japanese non-domestic capacity, and less than 30 GWh of Chinese nondomestic capacity (Figure 1.21). In Europe, battery manufacturing capacity currently isdominated by Korean companies, with the LG Energy Solution plant in Poland alone
accounting for half of total manufacturing capacity in Europe.
Figure 1.21 ⊳ Lithium-ion battery manufacturing capacity by manufacturers’
TWhheadquarter locations, 2023

200

2 000

150

1 500

100

1 000

50

500

EuropeHeadquarters:

UnitedStatesChina

Europe

Japan

Korea

United States

China

Others
Korea

Japan

OthersIEA. CC BY 4.0.

Battery producers in Korea lead as primary investors in overseas markets with over
350 GWh of manufacturing capacity, followed by Japan and China
Note: TWh = terawatt-hours. Battery manufacturing capacity refers to battery cells.
Source: IEA analysis based on Benchmark Minerals data.

Incentives to boost the uptake of EVs or encourage the rollout of battery storage are
increasingly being paired with domestic manufacturing incentives aimed at establishing or
boosting domestic production of batteries and other elements of the EV value chain. In the
United States, for example, the Inflation Reduction Act of 2022 makes more than
USD 15 billion of production credits available for advanced manufacturing. In the European
Union, the Important Projects of Common European Interest (IPCEI) initiative offers
incentives to support battery manufacturing.

1.5.2

Critical minerals in batteries

IEA. CC BY 4.0.

As the need for batteries rises for clean energy transitions, the critical minerals that go into
them are becoming increasingly important both for industry and policy makers. The major
critical minerals required for lithium-ion batteries include lithium, nickel, cobalt, copper,
graphite, and manganese (Figure 1.22).
In cathodes, the various chemistries, i.e. the different minerals that compose them, are what
primarily determine the properties of the battery such as energy density and thermal
stability. NMC batteries, the traditionally popular choice for electric cars in the last decade
Chapter 1 | Battery demand and supply

61

1

due to their high energy densities, require nickel, cobalt and manganese. LFP batteries,
emerging as a favoured choice in both the EV and storage battery markets in recent years
due to their lower costs and higher thermal stability, do not require the use of nickel, cobalt
and manganese. In other chemistries such as NCA or lithium manganese oxide (LMO), nickel,
cobalt or manganese are still needed. Lithium is the essential building block for all variantsof lithium-ion batteries.
Figure 1.22 ⊳ Mineral intensities by battery chemistry for lithium-ion battery
cathodes used in EVs

NCA
NCA+
NMC 333
NMC 532
NMC 622
NMC 811
LFP
LMO
0.5
Lithium

Nickel1.0
Cobalt1.5
Manganese

2.0
kg per kWh
CopperIEA. CC BY 4.0.

Critical mineral use such as nickel, cobalt and manganese varies significantly dependingon the chemistry used in the cathodes of lithium-ion batteries

In anodes, graphite is the most widely used material for lithium-ion batteries, though the useof silicon has increased in recent years. In the longer term, lithium metal anodes are expected
to emerge with the advent of the all-solid-state battery. Copper is used in the anode current
collector for lithium-ion batteries, as well as in the transformers that deliver power at theright voltage, and the cables and wires of electric circuits within battery packs. Aluminium isused for the cathode current collectors.

IEA. CC BY 4.0.

Along with the cathode and anode, the electrolyte and separator are the main components
of battery cells. The electrolyte enables lithium ions to move between the cathode and theanode, which allows an electric current to pass through the external circuit and ultimately tocharge and discharge the battery. The separator prevents physical contact between acathode and an anode while ensuring the flow of lithium ions. Battery cells are thenconnected in series or parallel, making up a module. The stacked modules, together withcooling systems and battery management systems, make a lithium-ion battery pack that isthen used in EVs or storage applications.

62

International Energy Agency | Batteries and Secure Energy Transitions

Efforts to reduce the demand for critical minerals are putting a spotlight on potential new
chemistries. For example, sodium-ion batteries require significantly fewer critical minerals
than lithium-ion batteries, and sodium is one of the most common elements on earth. Unlike
lithium-ion batteries, sodium-ion batteries can also use aluminium anode current collectors,
reducing the amount of copper. In redox flow batteries, which could become an alternative
to lithium-ion for use in battery storage applications, vanadium is commonly used. However,scaling up its production could be challenging in light of current low levels of mining andrefining as well its high cost and limited manufacturing facilities for redox flow batteries.

1.5.3

Risks in the critical minerals supply chain and price volatility

The extraction, refining and processing of the critical minerals used in the cathodes andanodes of lithium-ion batteries is highly concentrated in geographical terms, which brings
considerable supply chain risks. The mining of nickel, cobalt and graphite is dominated byIndonesia, the Democratic Republic of the Congo and China respectively. The top-three
producers of copper account together for around half of global production, the top-three
producers of cobalt and nickel control over 70% of global production, and those of lithiumand graphite well over 80%. The refining stage is even more concentrated. China dominates
for nearly all minerals except for nickel, where Indonesia controls most refining (Figure 1.23).
Moreover, there has been little progress on diversification in recent years. Between 2019and 2023, the extraction of nickel and cobalt became more geographically concentrated,particularly in the case of nickel, and so did the refining.
Figure 1.23 ⊳ Share of the top-three countries in extraction and refining of
critical minerals for batteries in 2023

Refining

Extraction
Copper

Chile

China

NickelIndonesia

CobaltDRC

Lithium

Australia

Graphite

China Indonesia
China
China

China
25%

50%

China
75%

100%

25%

50%

75%

100%

Australia
Chile
Peru
DRC
Indonesia
Philippines
N.Caledonia
China
RussiaMozambique
Madagascar
Japan
Finland
CanadaArgentina
United States
IEA. CC BY 4.0.

IEA. CC BY 4.0.

Extraction and refining of the global battery minerals supply chain
are highly concentrated in geographical terms
Notes: N.Caledonia = New Caledonia, DRC = Democratic Republic of the Congo. Graphite extraction is fornatural flake graphite. Graphite processing is for spherical graphite.

Chapter 1 | Battery demand and supply

63

1

Recent volatility in critical mineral prices has caused concern in the battery mineral market
and highlighted the importance of adequate and reliable mineral supplies. Lithium pricesrose as much as nine-times between January 2021 and December 2022 (Figure 1.24). They
have since plummeted by nearly 80% from their 2022 peak. Other commodities also saw aprice surge in 2022 and a subsequent fall. The recent fall in prices is helping to put criticalmineral costs back on a declining trajectory, but there is a risk that it may at the same time
discourage investors from financing future mining projects. Inadequate future investment
would make it more difficult to increase and diversify supply and would increase the risk of
future price volatility.

Index (Jan 2021 = 100)

Figure 1.24 ⊳ Price developments for key battery minerals
Lithium

1 000

250

NickelCobalt

250

250

800

200

200

200

600

150

150

150

400

100

100

100

200

50

50

50

Jan
2021

Feb
2024

Jan
2021
Price

Feb
2024

Jan
2021

Feb
2024
2015-20 average

Graphite

Jan
2021

Feb
2024
IEA. CC BY 4.0.

Lithium prices rose as much as nine times between 2021 and 2022 and prices of mostbattery minerals surged in 2021 and 2022 before plunging in 2023
Notes: Assessment based on the London Metal Exchange (LME) Lithium Carbonate Global Average, LME Nickel
Cash, LME Cobalt Cash and LME Copper Grade A Cash prices. Nominal prices.
Source: IEA analysis based on S&P Global data.

1.5.4

Direct investment in critical minerals by battery and EV producers

IEA. CC BY 4.0.

Battery and EV manufacturers are taking steps to ensure a stable supply of raw materials.
Signing long-term binding offtake agreements for mineral supplies is a frequent strategy toensure future supply. Many manufacturers are pursuing this option.
An increasing number of battery and EV makers are also getting directly involved in the
upstream and downstream value chains, notably through investment in mines and refineries.
A consortium led by CATL confirmed in June 2023 that it is providing USD 1.4 billion to build
two lithium extraction plants in the Uyuni and Oruro salt flats in Bolivia (Bloomberg, 2023).
CATL also announced in November 2022 a 25% stake worth USD 3.7 billion in CMOC, thesecond-largest cobalt producer in DRC in November 2022 (Reuters, 2022). LG Chemical, aparent company of LG Energy Solution, provided USD 75 million of equity investment for
64

International Energy Agency | Batteries and Secure Energy Transitions

a 5.7% stake in Piedmont Lithium, a lithium miner in the United States (Piedmont Lithium,2023). SK On, a Korean battery manufacturer, signed a 10% acquisition deal with AustralianLake Resources to supply lithium from its Kachi project in Argentina (SK, 2022).
EV makers are taking similar steps to ensure stable critical minerals procurement. In May
2023, Tesla broke ground for its in-house lithium refinery in Texas (Tesla, 2023).

IEA. CC BY 4.0.

The steps being taken by both battery makers and EV makers should contribute to supply
chain resilience. Yet, further efforts are likely to be needed given the rapid scaling up of
demand and the crucial importance of critical minerals in battery manufacturing. As of 2023,
aggregated announced projects to build new battery gigafactories would be sufficient tomeet the NZE Scenario demand in 2030, whereas the expected pace of growth in mineral
supplies fell short. Further investment will be needed to create a diverse and resilient supply
chain that is capable of meeting expanding needs in the battery industry.

Chapter 1 | Battery demand and supply

65

1Chapter 2
Outlook for battery demand and supply
Role of batteries to achieve global energy and climate goals
S U M M A R Y• Batteries are set to play a leading role in secure energy transitions. They are critical toachieve commitments made by nearly 200 countries at COP28 in 2023. Theircommitments aim to transition away from fossil fuels and by 2030 to triple global
renewable energy capacity and double the pace of energy efficiency improvements.

• To facilitate the rapid deployment of new solar PV and wind power that is necessary
to triple renewables, global energy storage capacity must increase sixfold to 1 500 GW
by 2030. Batteries account for 90% of the increase in storage in the Net Zero Emissions
by 2050 (NZE) Scenario, rising 14-fold to 1 200 GW by 2030. This includes both utilityscale and behind-the-meter battery storage. Other storage technologies include
pumped hydro, compressed air, flywheels and thermal storage.

• Innovation reduces total capital costs of battery storage by up to 40% in the power
sector by 2030 in the Stated Policies Scenario. This renders battery storage pairedwith solar PV one of the most competitive new sources of electricity, including
compared with coal and natural gas. The cost cuts also make stand-alone battery
storage more competitive with natural gas peaking options. Lower costs make behindthe-meter battery storage more attractive for consumers. Further it facilitates
expanded opportunities to provide electricity access to the millions of people that lackit, cutting by nearly half the average electricity costs of mini-grids with solar PV
coupled with batteries by 2030.

• Batteries in electric vehicles (EVs) are essential to deliver global energy efficiency
gains and the transition away from fossil fuels. In the NZE Scenario, EV sales rise
rapidly, with demand for EV batteries up sevenfold by 2030 and displacing the needfor over 8 million barrels of oil per day. Batteries in EVs and storage applications
together are directly linked to close to 20% of the CO2 emissions reductions neededin 2030 on the path to net zero emissions.

IEA. CC BY 4.0.

• Investment in batteries in the NZE Scenario reaches USD 800 billion by 2030, up 400%
relative to 2023. This doubles the share of batteries in total clean energy investment
in seven years. Further investment is required to expand battery manufacturing
capacity. Announcements for new battery manufacturing capacity, if realised, would
increase the global total nearly fourfold by 2030, which would be sufficient to meetdemand in the NZE Scenario. The demand for critical minerals in batteries is set to risesignificantly, requiring investments in new projects, recycling and financial tools forsustainability. Battery recycling can provide a secondary source of materials, aiding
production while minimising battery-related waste. Artificial intelligence may offer
avenues to accelerate new battery chemistry development and to ease strain on
critical minerals.
Chapter 2 | Outlook for battery demand and supply

67

2.1

COP28 commitments and the role of batteries

In December 2023, nearly 200 governments reached agreement at the United Nations
Climate Change Conference of the Parties 28th session (COP28) on new global 2030 goals.
They aim to triple renewable energy capacity and double energy efficiency progress by 2030,
to accelerate the transition away from fossil fuels and substantially reduce methane
emissions. Collectively, these provide a clear vision for the future transformation of theenergy system. Batteries are set to play a pivotal role in realising this vision.

GW

Figure 2.1 ⊳12 000
9 000

Global installed renewable energy and energy storage capacityby scenario, 2022 and 2030
Renewables
3x

1 200

6 000

800

3 000

400

2022
Hydro
Solar PVSTEPS NZE
2030
Wind
Other renewables

Storage

1 600
6x

2023
Utility-scale batteries
Pumped hydroSTEPS NZE
2030
Behind-the-meter
Other storage
IEA. CC BY 4.0.

Energy storage capacity, led by battery storage, increases sixfold by 2030 in the
NZE Scenario and supports the tripling of renewables capacity goal

IEA. CC BY 4.0.

Notes: GW = gigawatts; PV = photovoltaics; STEPS = Stated Policies Scenario; NZE = Net Zero Emissions by 2050
Scenario. Other renewables include bioenergy, geothermal, concentrating solar power and marine. Other
storage includes compressed air energy storage, flywheel and thermal storage. Hydrogen electrolysers are notincluded.

Achieving the goal of tripling global renewable energy capacity by 2030 calls for rapidly
scaling up battery storage in the power sector to support grid stability, security of electricity
supply and integration of solar PV and wind power. In the Net Zero Emissions by 2050 (NZE)
Scenario, which meets the Paris Agreement target of limiting global average temperature
increases to 1.5 degrees Celsius (°C) or less in 2100, the tripling of global renewable capacity
is accompanied by a sixfold increase in total energy storage from 2023 to 1 500 GW in 2030.
Battery storage leads the way, with utility-scale and behind-the-meter projects combined
rising to 1 200 GW by 2030, accounting for 90% of overall growth in storage. Smaller amountsof storage are provided by pumped hydro – which is the largest source of energy storage
today but is projected in the NZE Scenario to be surpassed by battery storage in the mid2020s – and by compressed air, flywheels and thermal storage (Figure 2.1). Total energy
storage in the NZE Scenario is 50% higher than in the Stated Policies Scenario (STEPS), which
68

International Energy Agency | Batteries and Secure Energy Transitions

provides an outlook based on current policies, including energy, climate and relatedindustrial policies. Closing this gap is one of the key challenges in the power sector, alongwith the need to step up the pace of development in electricity grids (IEA, 2023a).
Box 2.1 ⊳World Energy Outlook Scenarios

The analyses presented in this report build on the World Energy Outlook-2023 (WEO2023), which includes three scenarios that explore different pathways for the energy
sector to 2050. These scenarios include the latest energy market and cost data and buildon the latest projections for economic, population and demographic trends. The
scenarios consider energy and climate-related policies and industrial strategies andexplore the implications of national plans, targets and Nationally Determined
Contributions (NDCs) across the world. The variations between the three scenarios
largely reflect the different policy choices made by governments. They are notpredictions – the IEA does not have a single view on the future of the energy system.
The STEPS is designed to provide a sense of the way in which energy systems mightdevelop based on a detailed review of the current policy landscape. Outcomes in the
STEPS reflect a detailed sector-by-sector review of the policies and measures that are inplace or that have been announced; aspirational energy or climate targets are notautomatically assumed to be met. It explores how energy systems might evolve under
today’s policy settings, taking account of industry action, including for example
announced plans to increase manufacturing capacity for particular clean energy
technologies.
The NZE Scenario describes a narrow but achievable pathway for the global energy sector
to reach net zero energy-related CO2 emissions by 2050 by deploying a wide portfolio ofclean energy technologies without offsets from land-use measures. It assumes that
advanced economies take the lead and reach net zero CO2 emissions earlier thanemerging market and developing economies. The NZE Scenario achieves the COP28 goalsof tripling global renewable energy capacity and doubling energy efficiency progress by
2030, while achieving universal energy access consistent with the energy-related targets
within the United Nations Sustainable Development Goals. The scenario is consistent
with limiting the global temperature rise to 1.5 °C (with at least 50% probability).

IEA. CC BY 4.0.

The Announced Pledges Scenario (APS) assumes that governments will follow throughand deliver on all announcements made, and that they will meet all commitments in fulland on time, including their NDCs and longer-term net zero emissions targets. As with
the STEPS, the APS is not designed to achieve a particular outcome, but instead provides
a bottom-up assessment of the energy trends that seem likely to emerge if countries fulfil
their energy plans and climate pledges. Countries without ambitious long-term pledges
are assumed to benefit in this scenario from the accelerated cost reductions and wider
availability of clean energy technologies.
Achieving the goal of doubling the rate of improvement for energy efficiency depends on
accelerated electrification and increased penetration of renewables, which together deliver
Chapter 2 | Outlook for battery demand and supply

69

2

a third of the needed improvement In the NZE Scenario. For example, electric motors are
two- to four-times more efficient than combustion alternatives and heat pumps are threeto five- times more efficient than gas boilers. Both are contingent on significant upscaling ofbattery deployment. In the STEPS, the market share of electric vehicles (EVs) 1 rises to around
45% by 2030; this increases to 70% in the NZE Scenario. This calls for an increase in annual
EV battery volumes to reach 3.5 terawatt-hours (TWh) by 2030 in the STEPS, up from nearly
0.8 TWh today, and nearly 5.5 TWh in the NZE Scenario. This surge for EV batteries meansthat EVs continue to account for around 90% of battery market across the energy sector
through to 2030, even with strong growth in battery storage (Figure 2.2).
Figure 2.2 ⊳Annual battery demand and battery pack market size by
application and scenario, 2023 and 2030
Battery pack market size

Annual battery demandBillion USD (2023, MER)

TWh

6
4
2

2023

STEPS

NZE

600
400
200

2023

2030
Electric vehicles

STEPS NZE
2030

Utility-scale batteries

Behind-the-meter
IEA. CC BY 4.0.

EVs account for about 90% of battery demand to 2030, while the value of the battery packmarket reaches USD 330 billion in the STEPS and nearly USD 500 billion in the NZE Scenario
Note: TWh = terawatt-hours; STEPS = Stated Policies Scenario; NZE = Net Zero Emissions by 2050 Scenario.

Progress on electromobility and renewable power generation through to 2030 is set to givea major boost to the battery pack market. In the STEPS, this market expands from roughly
USD 120 billion today to USD 330 billion in 2030, while the NZE Scenario propels it to nearly
USD 500 billion – about 1.5 times the current size of the solar PV market.

IEA. CC BY 4.0.

Achieving the broad COP28 goal of transitioning away from fossil fuels involves an important
direct or indirect role for batteries in every sector. Their use in EVs is pivotal in the
decarbonisation of transport. In the STEPS, EVs collectively avoid oil consumption of around
6 million barrels per day (mb/d) worldwide in 2030 and 22 mb/d in 2050, while faster
deployment in the NZE Scenario means EVs avoid around 1.5-times more oil by both 2030
and 2050 (Figure 2.3). Currently oil accounts for 92% of fuel consumption in road transport,
but this is set to decline to around 70% by 2050 in the STEPS. In the NZE Scenario, the1 Electric vehicles include battery electric and plug-in hybrid vehicles.

70

International Energy Agency | Batteries and Secure Energy Transitions

reduction is more pronounced and, by 2050, the role of oil in road transport nearly
disappears, driven by robust electrification and the adoption of low-emissions fuels likebiofuels. The use of batteries in the power sector similarly has important effects as batteries
become essential enablers for integrating solar PV and wind power and thus move to displacefossil fuels. Currently, unabated coal-fired power is the largest source of electricity in theworld, with a share of about 35%, but this is set to decline to less than 10% by 2050 in the
STEPS and to zero by 2040 in the NZE Scenario, largely due to the massive expansion of solar
PV and wind power. Unabated natural gas power generation with a share of 22% is thesecond-largest source of electricity today. It is also set to decline over time due to the rapid
growth of renewables.

mb/dFigure 2.3 ⊳Oil demand in road transport and savings from EVs by scenario,
2023-2050
STEPS

60

NZE

40

20

2023

2030

2040
Oil demand

2050 2023

2030

2040

Avoided demand from EVs

2050
IEA. CC BY 4.0.

Battery use in EVs significantly curbs future oil demand growth from the road transport in the
STEPS and avoids nearly 30 mb/d of oil use by 2050 in the NZE Scenario
Note: mb/d = million barrels per day; STEPS = Stated Policies Scenario; NZE = Net Zero Emissions by 2050
Scenario.

IEA. CC BY 4.0.

Reductions in the use of oil, natural gas and coal in other sectors are facilitated by clean
electrification, supported and enabled by batteries. In industry, switching from fossil fuels todecarbonised electricity for a number of products and processes, including steel making, isan important part of clean energy transitions. In buildings, the use of decarbonised electricity
for space and water heating is set to displace demand for natural gas and coal. Clean
electrification also helps to reduce the current carbon footprint of batteries themselves (seeChapter 1) and contributes to the COP28 goal of reducing methane emissions.
As a cross-cutting technology, batteries are directly linked to close to 20% of the total carbon
dioxide (CO2) emissions reductions from combustion needed in 2030 to change the course of
the global energy system and bridge the gap between the CO2 emissions trajectories in the
STEPS and NZE Scenario (Figure 2.4). In the NZE Scenario, EVs equipped with batteries savemore than 0.6 billion tonnes of CO2 emissions in 2030 compared with the STEPS, andChapter 2 | Outlook for battery demand and supply

71

2

3.7 billion tonnes of CO2 emissions in 2050. In the power sector, higher amounts ofrenewables enabled by battery storage in the NZE Scenario account for around 1 billion
tonnes of CO2 savings in 2030 compared with the STEPS, rising to over 2 billion tonnes by
2050. Through broader support of renewables and clean electrification, batteries are also
linked to an additional 40% of the CO2 emissions reductions needed to shift to a net zero
emissions pathway. This means that in total batteries help to deliver more than 60% of all
the CO2 emissions reductions needed to bridge the gap between the STEPS and NZE Scenario.
Rising demand for batteries and the needed critical minerals increase industrial activity,
particularly in regions with mining and manufacturing of battery components. Widespreadelectrification of processes and increasing use of renewables are set to improve the carbon
footprint of batteries and reduce its impact on total CO2 emissions.

Gt CO₂

Figure 2.4 ⊳Avoided CO2 combustion emissions linked to batteries and othertechnologies by scenario, 2023-2050

35
30

STEPS
Electric vehicles
Battery-enabled
renewables
Other renewables
and electrification

25
20
15
10

Other

5
2023

2030

2040

NZE
2050
IEA. CC BY 4.0.

Batteries in EVs and storage applications are directly linked to close to 20% of the CO2
emissions reductions needed in 2030 and indirectly linked to another 40%
Notes: Gt CO2 = gigatonnes of carbon dioxide; NZE = Net Zero Emissions by 2050 Scenario. Other includes
energy efficiency improvements, hydrogen and other fuel shifts, nuclear, carbon capture, utilisation andstorage, activity impact and behaviour measures.

IEA. CC BY 4.0.

Shifting the global energy system to a net zero emissions pathway requires clear policies tosupport the installation of battery storage to underpin the rapid deployment of variable
renewables. Current policy frameworks often hinder the integration of battery storage into
the power system or lead to remuneration schemes that fail to incentivise battery storage(see Chapter 1). Effective measures and actions are also needed to support deployment of
EVs and expansion of charging infrastructure, together with stringent fuel economy targets.
Battery manufacturers have unveiled ambitious capacity expansion plans which indicate thatthe battery market is set to expand rapidly. If fully realised, the announced pipeline of new
manufacturing would be sufficient to provide the annual battery volumes needed in the
NZE Scenario (section 2.5.1). Uncertainty inevitably remains about whether it will be
72

International Energy Agency | Batteries and Secure Energy Transitions

delivered in full, but the announced plans make clear a declaration of intent. Establishingscaled-up supply chains with a low-carbon footprint presents a formidable challenge, andbattery manufacturers and policy makers are increasingly focussed on how best to meet it.

2.2

Outlook for EV batteries

In 2023, annual electric car sales rose to a new high of approximately 14 million worldwide.
Nearly one-out-of-five new cars sold is now electric. This increases to nearly one-out-of-two
cars by 2030 and to nearly two-thirds of all new car sales by 2050 in the STEPS. In the
NZE Scenario, electric car sales rise even faster: their market share surges from around twothirds in 2030 (60 million new electric cars sold each year) to nearly 100% by 2050 (90 million
new electric cars sold each year). This trend is supported by reductions in battery costs
alongside commitments to decrease energy-related CO2 emissions. With the widespread
deployment of EV batteries, average battery prices are projected to decrease by another 40%
relative to current prices. This, combined with the future competitiveness of auto makers,
would reduce the payback period 2 for a battery electric car from 3 to 8 years today
depending on the market and car segment, to nearly 3 years across all regions (Figure 2.5).
The cost competitiveness of EVs, particularly electric cars, increases over time in both the
STEPS and NZE Scenario. Especially in the NZE Scenario, where EV deployment is widespread
across all regions, ensuring the availability of affordable EVs in all markets and making timely
investment in charging infrastructure are key for putting clean energy transitions on track.
Figure 2.5 ⊳Average EV battery price and EVs competitiveness in the STEPS
and NZE Scenario, 2023 and 2030

Million units

USD per kWh (2023, MER)

EV battery price
1 600
1 200

45

800

30

400

15

2010

2020
Historical

2030
NZE

Electric car sales

60

2023

STEPS
NZE
2030
Cost competitive
Cost premium
IEA. CC BY 4.0.

IEA. CC BY 4.0.

By 2030, the average battery price declines by 40% in the NZE Scenario, shortening thepayback period and increasing the share of EV sales which are cost competitive
2 The payback period is the time needed for savings in running costs (i.e. fuel and maintenance costs) tocompensate for the difference in upfront costs between an electric vehicle and a conventional internal
combustion engine vehicle.

Chapter 2 | Outlook for battery demand and supply

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As a result, annual battery volumes for EVs more than quadruple to 3 500 gigawatt-hours(GWh) by the end of this decade in the STEPS, and double again by 2050 (Figure 2.6). This
leads electricity demand for EVs to grow rapidly from over 130 terawatt-hours (TWh) today
to more than 1 000 TWh by 2030 and 5 000 TWh by 2050. Demand for electricity in shipping
and aviation add a further 14 TWh by 2050. In the NZE Scenario, annual EV battery volumes
climb to around 5 500 GWh by 2030 and a staggering 11 000 GWh by 2050, with the global
EV fleet requiring over 1 700 TWh of electricity in 2030 and almost 9 700 TWh in 2050.
Shipping sector electricity demand reaches 16 TWh by 2030 and over 80 TWh by 2050, withbattery-powered airplanes requiring nearly 120 TWh by 2050. This underscores the urgent
need for substantial advances in battery chemistries and manufacturing innovation alongwith significant investment and robust policy support underpinned by commitment tosustainable mining practices.

TWh

Figure 2.6 ⊳EV annual battery demand by vehicle type in the STEPS and gap
to the NZE Scenario, 2023, 2030 and 2050

12

NZE

Two/three-wheelers
Freight trucks
Buses

9

Light-duty vehicles
NZE

6

3

2023

2030

2050
IEA. CC BY 4.0.

By 2050, annual battery volumes in the road sector increase about ten-fold in the STEPS
and fourteen-fold in the NZE Scenario
Notes: TWh = terawatt-hours. Light-duty vehicles include passenger cars and light commercial vehicles. Freighttrucks include medium freight and heavy freight trucks.

IEA. CC BY 4.0.

In the STEPS, passenger cars and light commercial vehicles account for most of the growth in
EV sales over the rest of this decade. This reflects both the size of the fleet compared withheavy-duty vehicles 3 and the additional challenges involved in electrifying heavier vehicles
due to their size and the long distances they tend to travel. Two/three-wheelers and urban
buses also undergo rapid electrification in the STEPS, particularly in emerging market anddeveloping economies, though two/three-wheelers use relatively small batteries andtherefore account for a limited share of battery volume growth. Despite expansion of
3 Heavy-duty vehicles include medium freight, heavy freight trucks and buses.

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International Energy Agency | Batteries and Secure Energy Transitions

electrification, a number of emerging market and developing economies face challenges indeveloping charging infrastructure and delivering universal access to electricity.
In contrast, the NZE Scenario sees a rapid phase-out of internal combustion engines (ICE) in
all regions, starting with light-duty vehicles and extending to heavier vehicles. Achieving thisaim requires additional investment in public charging infrastructure compared to the STEPS
other than China: over USD 35 billion in cumulative terms is needed by 2030, increasing to
USD 470 billion by 2050. In the short term, light-duty vehicles account for about two-thirdsof the disparity in annual battery volumes between the two scenarios. Beyond 2030,
however, it is increasingly medium and heavy trucks that are responsible for the divergence
between the STEPS and NZE Scenario annual battery volumes.
Selected plans to phase out ICE vehicles

Table 2.1 ⊳Region/country

Type

Description

Year

CanadaPolicyAuto manufacturers and importers must meet annual ZEV targets for
LDV sales of 100% by 2035.

2023

Chile

Target 100% of sales of LDVs and public transport vehicles will be zero
emissions by 2035, and by 2045 for M/HDVs.

European Union Policy

100% CO2 emissions reduction for both new cars and vans by 2035.

2022
2021

IsraelTarget Reduce average emissions from LDVs by 100% in 2050.

2022

NorwayTarget 100% share of ZEVs in LDV sales by 2025 and in MDV sales by 2030.

2021

United Kingdom Policy

100% of new car and van sales will be zero emissions by 2035.

United States 4

PolicyAdvanced Clean Cars Rule II set a target for 100% ZEVs in LDVs by 2035. 2023

Auto makerType

Description

BMW

Target 50% of sales to be EVs before 2030.

2023

ChanganTarget 60% of sales to be ZEVs by 2030.

2021

Ford

Target 50% of sales to be fully electric by 2030.

2022

Geely

Target 40% of sales to be electric by 2025.

2022

Honda

Target 100% of sales to be ZEVs by 2040.

2022

Hyundai,
GenesisTarget Annual EV sales of 2 million units and BEV production share of 34% by
2030.

2023

Kia

Target 37% of sales to be EVs by 2030 reaching 1.6 million units per year.

2023

Mercedes-Benz

Target 50% of sales to be electric by 2030.

2024

NissanTarget 55% of sales to be electric by 2030.

2023

Volkswagen

Target 50% of sales to be BEVs by 2030.

2023

2017
Year

IEA. CC BY 4.0.

Notes: ZEV = zero emissions vehicle; LDV = light-duty vehicle; MDV = medium-duty vehicle;
M/HDV = medium/heavy-duty vehicle; auto maker = original equipment manufacturer of the automotive
industry; BEV = battery electric vehicle. Year corresponds to the year of implementation. All auto maker targets
are for the global market.
4 Ten states and the District of Columbia adopted the target: California, Maryland, Massachusetts, New Jersey,

New York, Oregon, Rhode Island, Vermont, Virginia and Washington. Colorado, New Mexico, and Delaware
have partial targets (California Air Resources Board, 2024).

Chapter 2 | Outlook for battery demand and supply

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The phase-out of ICE vehicles is supported by policy signals and underpinned by expanded
EV production plans of car and truck makers and battery manufacturers (Table 2.1). The
global discussion no longer revolves around whether EVs will enter the market, but rather
how quickly their market share will increase. Though there is less clarity for the heavy vehicle
segments where policy incentives are weaker, model availability is limited and progress indeveloping an adequate charging infrastructure is relatively slow. Policy support must be
strengthened if the world is to get on track to reach net zero emissions by 2050, particularly
for the electrification of long-distance transport. In parallel, well-designed policies areneeded to facilitate sustainable battery supply chains from raw material production to cell
assembly, together with measures for the effective tracking, recycling and reuse of battery
packs after their initial use in vehicles so as to ensure environmental sustainability
throughout the lifecycle of EV batteries (Box 2.2).

2.2.1

Regional outlook for EV batteries

Global annual battery volumes for EVs have risen nearly fivefold since 2020, with China
leading the surge. In 2023 China accounted for over 70% of the world's EV fleet and morethan half of global annual EV battery volumes. In the STEPS, China’s share of the global EV
fleet falls to 50% in 2030 as EV uptake spreads in other countries (Figure 2.7). In the NZE
Scenario, China’s share falls to less than 40% of the global EV fleet in 2030.

TWh

Figure 2.7 ⊳Global annual EV battery volumes by region and scenario, andthe share of China in the global EV fleet, 2023 and 2030

STEPS

6.0

NZE

100%

4.5

75%

3.0

50%

1.5

25%

2023

2030

Other EMDE
Advanced economies
China
Share of global EV fleet
in China (right axis)

2030
IEA. CC BY 4.0.

IEA. CC BY 4.0.

China maintains its rank with the largest EV battery volumes in 2030,
though the uptake of EVs in other regions dilutes the percentage
Note: Other EMDE = emerging market and developing economies other than China.

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International Energy Agency | Batteries and Secure Energy Transitions

China’s outsized share of the global EV market means that it is also the largest EV battery
market in the STEPS, accounting for over 40% of global annual EV battery volumes in 2030.
In the NZE Scenario, annual EV battery volumes in the rest of the world, especially in otheremerging market and developing economies, rises more rapidly than in the STEPS, reducing
China’s share in the global market to 30% by 2030. In the STEPS, the global EV battery market
in 2030 is significantly larger than today, and it is much larger in the NZE Scenario, whereannual EV battery volumes in 2030 are around 60% higher than in the STEPS.
The volume of batteries used in EVs in various regions in 2030 is much higher in the
NZE Scenario than in the STEPS. It is approximately 10% higher in China, around 80% higher
in advanced economies, and 170% higher in emerging market and developing economies
outside China (Figure 2.8). This underscores the pivotal role of battery volumes to bridge theconsiderable gap between the two scenarios, especially in emerging market and developing
economies other than China. It also emphasises the critical role of EVs to decarbonise thetransport sector to achieve the goals of the Paris Agreement and COP28, and to facilitate thetransition to sustainable energy pathways in all regions of the world.
Figure 2.8 ⊳Battery volumes in use in EVs in emerging market anddeveloping economies outside China by scenario, 2023-2030

TWh

STEPS

NZE
Other EMDE
excl. China
AfricaBrazilMiddle East
Indonesia
India
NZE

3

2

1

2023 2024 2025 2026 2027 2028 2029 2030

2030
IEA. CC BY 4.0.

EV battery volumes in the emerging market and developing economies outside China,
increase nearly twenty-fold in the STEPS and over fifty-fold in the NZE Scenario

IEA. CC BY 4.0.

2.2.2

What type of batteries will power future EV fleets?

Lithium-ion batteries stand out for their high energy density, efficiency, and cycle life. Today,
the two primary battery chemistries in use are high nickel – mostly nickel-manganese-cobalt(NMC) – and lithium-iron phosphate (LFP). Together they are set to continue to dominate
the EV market until the end of this decade. LFP and NMC battery chemistries meet EV
requirements for competitive pricing, long range, fast charging and safety. Their
Chapter 2 | Outlook for battery demand and supply

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2

technological maturity and established supply chain mean that lithium-ion batteries accountfor around 95% of annual EV battery volumes by 2030 (Figure 2.9). Moreover, rapid battery
demand growth will hinder new technologies from gaining significant market share quickly
at least in the short term.
Figure 2.9 ⊳Annual EV battery volumes by cathode chemistry in the STEPS,
2022-2030

4

TWh

Sodium-ion
LFP
Low-nickel
High-nickel

3

2

1

2022

2023

2024

2025

2026

2027

2028

2029

2030
IEA. CC BY 4.0.

Lithium-ion batteries continue to dominate the EV market,
accounting for about 95% of annual volumes by 2030
Notes: LFP = lithium-iron phosphate. High-nickel = mainly lithium nickel cobalt aluminium oxide (NCA) and
NMC chemistries excluding NMC111 and NMC532. Low-nickel = NMC111 and NMC532.

IEA. CC BY 4.0.

High-nickel batteries hold steady as a main technology to 2030, with around 50% of market
share. NMC cathodes, dominant among types of high-nickel batteries, accounted for close to
50% of annual EV battery volumes in 2023, and, in the STEPS, account for less than 40% by2030. With higher energy densities and recycle values than LFP batteries, NMC batteries havean advantage in some applications. They also have an advantage in markets with strictbattery recycling requirements, such as Europe, the United States and Japan, as currently
recycling of LFP batteries is not economical at scale. These regions represent a large market
and by 2030, they collectively form the largest EV battery market in the world in the STEPS.
However, affordability remains a key obstacle to high-nickel battery EV adoption, especiallyin price sensitive markets. NMC batteries also face other disadvantages relative to LFPbatteries. LFP batteries have a longer lifespan, perform better at higher temperatures, havehigher thermal stability and lower lifecycle emissions.
LFP batteries have experienced rapid market growth, particularly in China's EV market. LFPbattery technology has been exempt from patent fees since 2022, and since is being
increasingly adopted in advanced economies. Original equipment manufacturers are already78

International Energy Agency | Batteries and Secure Energy Transitions

making use of it. LFP battery chemistry is also gaining popularity beyond China, notably inSoutheast Asia and in advanced economies, thanks to its cost effectiveness, long lifetime andenhanced safety compared to NMC batteries. In the STEPS, LFP continues to solidify its
market position, with its share of annual EV battery volumes increasing from over 40% today
to nearly 50% in 2030.
Both NMC and LFP battery chemistries are being continually improved, as evidenced forexample in efforts to increase their manganese content, which could reduce the cost of NMC
batteries while preserving their high energy density, and equally could maintain the low costof LFP batteries while enhancing their energy density. The continuing evolution of theestablished battery chemistries poses a significant challenge for alternatives that seek tocompete.
Innovation in battery manufacturing is equally important. Scale up and automation havebeen the key drivers contributing to battery prices declines over the last decade.
Manufacturing batteries at scale requires high yields and great precision, typically requiring
years of sustained investment. Current promising energy density innovations include newbattery pack concepts, such as cell-to-pack and cell-to-chassis, 5 though the latter could makebattery recycling more difficult. The optimisation of manufacturing parameters, such as
through multi-layer electrodes, achieves improved battery performance and enables ultrafast charging.
Sodium-ion batteries have begun to catch up with lithium-ion batteries. Sodium-ion batteries
have similar applications to LFP batteries, although they have a lower energy density.
Sodium-ion batteries are increasingly seen as appealing alternatives to LFP batteries because
they may use less expensive, more abundant materials, and need fewer toxic raw materials.
As with LFP batteries, China is leading the development of sodium-ion batteries, with over
90% of announced manufacturing capacity located there. Current research and development
efforts for sodium-ion batteries focus on enhancing energy density, prolonging cycle life, andoptimising performance at lower temperatures (see Chapter 1).
Currently, few producers are capable of rapidly scaling up the supply chain and productionof sodium-ion batteries. This illustrates the challenges of introducing new battery
chemistries into a large and rapidly expanding market. Nevertheless, sodium-ion batteries
are set to gain traction in the late 2020s. In the STEPS, they account for around 5% of annual
EV battery volumes in 2030 and are mainly used in vehicles with low energy requirements,
such as city cars and two/three-wheelers. Sodium-ion batteries may be able to benefit fromexisting lithium-ion production facilities if demand justifies, since production requirements
for the two types of chemistries are similar. However, LFP will remain a formidable
competitor, and the price of lithium will play a crucial role in determining sodium-ion battery

IEA. CC BY 4.0.

5 Battery packs used in EVs are typically made of a series of modules, each one containing several battery cells.

In the cell-to-pack configuration, battery cells are assembled to build a pack without using modules, which
reduces the need for inert materials and increases energy density. In cell-to-chassis concepts, battery cells areused as part of the EV structure without assembling them into a battery pack beforehand.

Chapter 2 | Outlook for battery demand and supply

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development and competitiveness. If lithium supply is not constrained in the face of risingdemand, and if lithium prices continue to decline, that will help LFP in the battle forcompetitiveness and market share.
The current EV market is fragmented regionally due to battery export restrictions, with mostbatteries distributed through long-term supply contracts. Dominant battery chemistries varyby region, based on local manufacturing capacities and early adopter advantages.
Automotive industry partnerships with battery manufacturers will continue to shape battery
trends.

2.2.3

Innovation in battery technology beyond 2030

Innovation has the potential to reshape the battery chemistry mix in the market beyond
2030. Solid-state batteries (SSBs) employ solid or quasi-solid electrolytes instead of theconventional liquid electrolytes, which increases cell energy density and safety with reduced
flammability. Nevertheless, uncertainties surround the widespread adoption of SSB
technology in the mass market, primarily owing to integration challenges at the battery packlevel, i.e. applying high stack pressures, which today are about one order of magnitude higher
in SSBs than in lithium-ion batteries. These challenges may offset the higher energy density
at the cell level and result in higher costs, ultimately limiting the role of SSBs in the market
especially by 2030. Nonetheless, supporting the development of advanced SSBs remains
worthwhile, particularly for applications requiring long-range driving, such as electric
medium freight and heavy freight trucks, and especially in markets where the establishmentof widespread charging infrastructure or battery swapping is likely to face difficulties.

IEA. CC BY 4.0.

Lithium sulphur batteries also have the potential to make a mark in the EV battery market
beyond 2030. Lithium sulphur batteries offer high energy density, cost effectiveness and theuse of cathodes based on abundant and inexpensive sulphur. They can potentially make useof both liquid and solid electrolytes: liquid electrolytes have been undergoing R&D since the1960s. Challenges remain, such as the tendency of polysulfide shuttling to lead to low cycle
life, but efforts to overcome these challenges and develop solid-state lithium sulphur
batteries are continuing.
Box 2.2 ⊳EV battery recycling and reuse

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International Energy Agency | Batteries and Secure Energy Transitions

The lithium-ion battery recycling process aims to reclaim valuable metals such as lithium,nickel, cobalt, copper and aluminium. Pyrometallurgy involves high-temperaturesmelting to recover cathode metals, while hydrometallurgy uses chemical leaching formetal separation. These two methods are often used together with poorly sorted
feedstock. Direct recycling is an emerging method of recycling that preserves cathodestructure, reducing the need for raw material synthesis. It suits cathodes with fewer
valuable metals, such as lithium-iron phosphate, but requires customisation to eachchemistry, limiting production to the same battery type (IEA, 2023b).

Battery recycling capacity worldwide currently is about 2 million tonnes per year, of
which almost 85% is in China. A number of countries have plans to expand recycling
capacity, though China is set to remain dominant. Manufacturing scrap, comprisingaround 10% of current battery cell components production, is the main recycling source(IEA, 2024a). Policy mandates like extended producer responsibility foster collaboration.
Automotive industry, battery manufacturers, and mining and refining companies aregradually working more closely with independent recyclers.
Recycling rates are strongly influenced by policy, regulation and support for innovation.
This provides policy makers a clear opportunity to enhance the lifetime sustainability ofbatteries. Battery passports and standardised tracking can streamline end-of-lifecollection, ensuring a stable flow for recyclers. Onsite recycling aids supply, while
traceability enhances safety and high collection rates. Ambitious targets and R&D
support cost decreases and prepare recyclers for handling diverse battery chemistries,
fostering sustainability. As recycling is an expensive and energy-intensive process,operations may require support or incentives to help recyclers manage the impact of
initiatives like the European Union Battery Regulation, which mandates a 70% recycling
efficiency rate for lithium-ion batteries by 2030, including the less valuable LFP batteries
that are expected to account for nearly half of global EV battery market share by 2030.
Figure 2.10 ⊳ EV annual battery volumes with potential for recycling byregion in the STEPS, 2023 and 2030

GWh

End-of-life battery volumes

Manufacturing scrap battery volumes

80

240

60

180

40

120

20

60

2023

2030

Other EMDE
China
Advanced economies
Global2023

2030
IEA. CC BY 4.0.

Although limited today, almost 80 GWh of end-of-life and 210 GWh of manufacturing
scrap-based EV battery volumes become available for recycling in the STEPS in 2030

IEA. CC BY 4.0.

Notes: GWh = gigawatt-hours; Other EMDE = emerging market and developing economies excluding
China. Analysis assumes that EV batteries reach their end-of-life in the country in which they wereoriginally sold.

Chapter 2 | Outlook for battery demand and supply

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2

Clear regulatory frameworks and standards are needed globally before 2030 to manage
recycling and reuse of the rising number of EV batteries that come to the end of their life
in vehicles. EV batteries could retain up to 70-80% of their capacity after their first use,
therefore offer opportunities for second-hand EV markets and second-life applications.
Second-life battery applications, like behind-the-meter and utility-scale storage, fast
chargers and uninterruptible power supplies, enhance the environmental profile ofbatteries. However, the challenges involved in collection, dismantling and repackaging
hinder the development. Second-life batteries currently offer limited cost savings
compared to new batteries, potentially making their use outside of second-hand EV
markets less appealing.
In the STEPS, nearly 80 GWh of EV battery volumes reach the end of their first life in 2030,
with China accounting for more than half of volumes. Nonetheless, EV battery
manufacturing scraps remains the main source of battery materials for recycling plants,
with almost 210 GWh in 2030 (Figure 2.1). Scrap materials remain in nearly pristine state,making them easier and cheaper to recycle and feed back into the manufacturing plant.
Efficient recycling is vital if minerals are to be recovered after full utilisation of EV
batteries, with market prices guiding cost-effective routes, and policies and regulations
underpinning support and ensuring sustainability.

2.2.4

Evolving relationship between EVs and electricity networks

Batteries for EVs and storage are linked in several ways. First, there are synergies inmanufacturing batteries for EVs and storage applications: production processes andmanufacturing know-how from one industry can inform the other. Second, end-of-life EVbatteries can acquire a “second life” by being repurposed to be used in storage applications.
Third, EV batteries can supplement grid flexibility through programmable battery recharging
schedules when plugged into home, work or public charging units – this is termed “smart
charging”. Fourth, EV batteries can offer bi-directional charging, allowing EVs to supply
electricity either within a building (vehicle-to-building (V2B)), or directly into the grid(vehicle-to-grid (V2G)). While smart charging is a promising solution with a relatively
straightforward implementation pathway, bi-directional charging faces some uncertainties
related to the vehicle technical capability to offer the service, remuneration arrangements,
potential enhanced degradation of the battery and warranty voidance.

IEA. CC BY 4.0.

Potential for smart charging
By optimising EV charging operations, smart charging can provide flexibility to powersystems, reduce the need for grid reinforcements and public charging infrastructure, andhelp accommodate additional electricity demand. By reducing overall capacity andinfrastructure requirements, it can also lower the demand for critical minerals such ascopper. When paired with onsite renewables or a decarbonised grid, it can significantly
reduce energy-related CO2 emissions. When linked with smart tariffs, it can help consumers
to cut their electricity bills.
82International Energy Agency | Batteries and Secure Energy Transitions

Figure 2.11 ⊳ Smart charging benefits for an EV household, 2030 and 2050
EV share of household EV share of household
peak demand
electricity bill

Solar PV share of
EV consumption

40%

Smart charging
Without
With

30%

2

20%
10%

2030

2050

2030

2050

2030

2050
IEA. CC BY 4.0.

Smart charging offers many benefits to an EV household, e.g. significant peak demand
reduction, reduced utility bills and increased use of electricity generated onsite
Notes: Consumer response to dynamic tariffs via mono-directional charging is assumed in this analysis. The
solar PV share in electricity consumption depends strongly on charging patterns of the home system.

By 2030, smart charging could cut the contribution that EVs make to peak demand by morethan two-thirds and reduce the average electricity bill of EV owners by nearly 10 percentage
points (Figure 2.11). When paired with rooftop solar PV and smart charging, it could also
increase an EV-owning household use of self-generated electricity by over 10 percentage
points in 2050. A combination of batteries and smart charging could also reduce curtailment,
thus improving overall system efficiency.

Vehicle-to-building and vehicle-to-grid connectivity

IEA. CC BY 4.0.

Given the size of the EV market, V2B/V2G, if rolled out at scale, could reduce demand forbattery storage in the power sector. But there are technical, commercial and regulatory
obstacles that reduce the likelihood of broad deployment of such approaches in the nearterm. EV batteries are typically designed for fewer number of cycles than batteries forstorage applications, and additional charging and discharging may lead to faster degradationof the EV battery. Furthermore, V2B/V2G operations are usually not covered by EV battery
warranties, further reducing their attractiveness to consumers. V2G is also facing many of
the same regulatory hurdles with respect to access to potential markets and sources ofrevenue that other types of demand response and behind-the-meter battery storage
solutions are facing (see Chapter 1).
A typical behind-the-meter battery storage system is approximately 10 kilowatt-hours (kWh)in size, while the average battery size of an electric car is 40-60 kWh. To provide several hours
of supply to a household during peak times, an electric car battery would thus only need to
Chapter 2 | Outlook for battery demand and supply

83discharge around 15-25% of its total capacity. This shallow depth of discharge could limit the
impact on lifetime of the battery. At the same time, limited use of EV battery capacity for
V2B/V2G applications results in lower economic benefits for the end-use consumer. The
need to co-ordinate mobility and storage needs makes corporate fleets a more promising
V2B/V2G market than individual households: fleets offer the combined advantages ofbattery application predictability and larger aggregated flexibility services. EVs equippedwith LFP and sodium-ion batteries could be more suitable for V2B applications than NMC andlithium nickel cobalt aluminium oxide (NCA) batteries because of their lower cost and higher
cycle life, though it remains to be seen whether sodium-ion batteries can develop acompetitive advantage over LFP batteries.

1 500

120

1 000

80

500

40

EuropeUnited States

GWh

Thousand vehicles

Figure 2.12 ⊳ V2G-capable light-duty vehicle sales by region, 2023

Sales
Battery capacity(right axis)

China
IEA. CC BY 4.0.

China leads with over 1.4 million V2G-capable LDV sales in 2023, which could make
100 GWh of new battery storage capacity available for V2G integration
Note: V2G = vehicle-to-grid; LDV = light-duty vehicle.

IEA. CC BY 4.0.

Today there are more than ten electric light-duty vehicle models with bi-directional charging
capability. China leads for such models with over 1.4 million vehicles sold in 2023, which
together could potentially make 100 GWh of battery capacity over time available for V2G
integration (Figure 2.12). In Europe, fewer than 400 000 V2G-capable electric cars were soldin 2023, though this was about twice the sales in the United States. Taken together electric
LDV sales in China, Europe and the United States represent around 130 GWh of V2G-capable
battery capacity – an amount comparable to more than two-thirds the current global battery
storage capacity.

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International Energy Agency | Batteries and Secure Energy Transitions

Box 2.3 ⊳Battery swapping for deferred grid enhancement

Battery swapping is the process of replacing a depleted vehicle battery with a fully
charged one at a battery swapping station. This approach offers recharge times that are
twice as fast as ultra-fast charging. BSS operators lease batteries to consumers,
significantly reducing upfront EV costs. Swap-capable EVs can be designed with a small
battery for short trips to lower battery leasing costs or a larger battery for long journeys,or multiple small batteries for use as necessary. This model significantly enhances EV
affordability (GF Securities, 2020).
High upfront costs of a battery swapping station requires high utilisation levels relative
to an EV charging station to be competitive. They can yield a higher internal rate of returnthan plug-in stations once past the break-even point (Founder Securities, 2021).
Battery swapping offers potential benefits. It optimises battery usage by reducing grid
impact and leveraging renewable electricity and it requires less land per vehicle thanplug-in charging stations. The main drawbacks of battery swapping include the highcapital investment needed and a reliance on standardisation of EV models. For suchreasons, so far, some battery swapping businesses have not proven to be viable.
Figure 2.13 ⊳ Battery swapping stations by vehicle type andThousand stations

country/region, 2023

5

75

4

60

3

45

2

30

1

15

Cars

Heavy-duty
trucksRest of world
Other Asia
India
European Union
United States
China

Two/three-wheelers
IEA. CC BY 4.0.

Today, China has the vast majority of battery swapping stations for cars and trucks
and other Asia is notable for the two/three-wheeler market

IEA. CC BY 4.0.

Note: Heavy-duty trucks include medium freight and heavy freight trucks.

EVs equipped for battery swapping so far have been largely limited to China where they
enjoy significant policy support (Figure 2.13). In 2022, only 2% of new EVs worldwide
were swap-capable. In China they accounted for 4% of the EV market (Forbes, 2022).
Progress has been particularly strong for trucks in China, where half of all electric heavyChapter 2 | Outlook for battery demand and supply

85

2

duty trucks sold in 2023 were swap-capable (BNEF, 2024). China also hosts 80% of theworld’s battery swapping stations, with combined energy storage capacity of around
5 GWh – equivalent to the combined battery storage capacity of Japan, Korea and theUnited Kingdom (Fastmarkets, 2023). Battery swapping for two/three-wheelers is gaining
traction in India and other Asian markets, especially where the vehicles are used forcommercial purposes and cover long distances each day.
In addition to their benefits for busy drivers, battery swapping services have the ability
to reduce the peak load of a grid, improve grid flexibility by operating like power storage
stations and supports the grid with bi-directional charging. NIO and Aulton, an automaker and a smart energy service platform provider, already employ peak load shiftingin China. NIO’s battery swapping station used over 2.3 GWh of clean electricity between
2021 and 2022. Operating in this way reduces the need for grid enhancements. In the
STEPS, over 40% of two/three-wheeler sales in emerging market and developing
economies outside China are electric by 2030, creating scope for those countries tobenefit significantly from battery swapping technology.
Battery swapping also provides benefits for the second-life battery market. The batteriesof swap-capable vehicles can be extracted less expensively than others, creating astronger economic foundation for reuse. Moreover, battery swapping stations constantly
assess battery health using a centralised monitoring system. This provides an opportunity
for battery tracking standardisation – one of the key barriers for the establishment of asecond-life battery market.

2.3

Outlook for battery storage in the power sector

IEA. CC BY 4.0.

Global deployment of battery storage is projected to increase rapidly in the years ahead.
Growing shares of variable renewables in power systems are increasing the utility of storage.
At the same time, the cost of battery storage is falling and government support in many
regions is rising. Total global installed battery storage capacity increases ninefold by 2030
from 86 GW in 2023 to over 760 GW in the STEPS (Figure 2.14). In the NZE Scenario, whichsees a tripling of global renewable electricity generation capacity over the same period, total
global installed battery capacity rises 14-fold to 1 200 GW by 2030.
Up until today, more than 95% of capacity growth has taken place in advanced economies,
most notably the United States and European Union, and in China. These economies areprojected to continue to lead the deployment of battery storage. In the STEPS, advanced
economies account for roughly 40% of the global installed battery storage capacity in 2030,
down from about 55% in 2023. Around 50% of the installed capacity is in China. Other
emerging market and developing economies, especially India, are projected to see capacity
growth accelerate over the period to 2030, with their share in global installed capacity risingto nearly 10% in 2030. In the NZE Scenario, the speed and breadth of the global roll-out ofbattery storage is greater than in the STEPS, with emerging markets and developing
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International Energy Agency | Batteries and Secure Energy Transitions

economies outside China seeing the largest relative increase in the growth of battery
capacity: they account in 2030 for nearly 25% of global battery storage capacity, China for
35% and advanced economies for the remainder.

GW

Figure 2.14 ⊳ Global installed battery storage capacity by scenario, 2023-2050
6 000

Other EMDE
China
Advanced economies

5 000
4 000
3 000
2 000
1 000
2023

STEPS NZE
2030

STEPS NZE
2040

STEPS NZE
2050
IEA. CC BY 4.0.

Total installed battery storage capacity rises significantly in both scenarios, with strong
growth in emerging market and developing economies outside China in the NZE Scenario
Note: GW = gigawatts; STEPS = Stated Policies Scenario; NZE = Net Zero Emissions by 2050 Scenario; Other
EMDE = Emerging market and developing economies other than China.

Strong growth is set to continue after 2030 as batteries become vital sources of short-term
flexibility and secure capacity in power systems characterised by high shares of variable
renewables. By 2050, global installed battery storage capacity rises to close to 3 TW in the
STEPS and nearly 5 TW in the NZE Scenario.
As battery storage investment costs continue to fall and rising power system flexibility needs
increase the utility of bulk energy shifting, the share of battery storage systems withdurations between four and eight hours increases considerably relative to shorter duration
systems in both scenarios, especially in regions with high shares of solar PV in the electricity
mix. In the STEPS, the average duration of the global battery storage fleet increases fromaround two hours today to 2.7 hours in 2030 and 3.4 hours by 2050.

IEA. CC BY 4.0.

2.3.1

Regional outlook for battery storage

Strongly rising demand for battery storage means that annual battery storage capacity
additions will continue to increase rapidly in the coming years. Annual additions of utilityscale battery storage capacity rise from 26 GW in 2023 to over 100 GW in 2030 in the STEPS
and 175 GW in the NZE Scenario. Behind-the-meter storage continues to increase as well,with global annual additions rising from 15 GW in 2023 to 29 GW in 2030 in the STEPS andover 35 GW in the NZE Scenario.
Chapter 2 | Outlook for battery demand and supply

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2

Utility-scale battery storage
In the STEPS, annual utility-scale battery capacity additions in China increase by nearly 20%
per year between 2023 and 2030 to over 45 GW (Figure 2.15). Much of this growth is driven
by province-level regulation that requires the pairing of wind and solar PV projects withenergy storage, and more generally by the rising flexibility needs associated with theincreasing share of variable renewables in its power system (the combined share of wind andsolar PV in China’s electricity mix is projected to rise from about 15% today to over 35% in2030). Market reforms designed to establish and open electricity and ancillary service
markets are another factor driving battery capacity growth.
Figure 2.15 ⊳ Global utility-scale battery storage capacity additions,
GW

2019-2023, and by scenario in 2030

200

NZE

150
100

Rest of world
Other Europe
Other Asia PacificIndia
European Union
United States
China

50

2019

2020

2021

2022

2023

2030
STEPS
IEA. CC BY 4.0.

Utility-scale battery storage capacity additions expand significantly by 2030,
mainly in China and the United States

IEA. CC BY 4.0.

The United States remains the second-biggest market for utility-scale batteries, with annual
additions rising from close to 8 GW in 2023 to 28 GW in 2030 in the STEPS. State-level energy
storage targets and the Inflation Reduction Act storage tax credit are expected to drive andsupport this growth, with many utilities looking to battery storage to help achieve renewableenergy targets, reduce the emissions intensity of their electricity mix, and increase thereliability of power supply.
Capacity additions in India are projected to accelerate considerably over the next sevenyears, rising to nearly 9 GW in the STEPS, and making India the world’s third-largest market
for utility-scale batteries in 2030. Strong growth in PV capacity will drive up short-term
flexibility needs and increase the utility of energy storage. India has issued regulations
requiring wind and solar PV projects to pair at least 5% of their installed capacity withstorage.
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International Energy Agency | Batteries and Secure Energy Transitions

Utility-scale battery capacity additions in the European Union rise from less than 1 GW in
2023 to around 7 GW in 2030 in the STEPS. Several EU member states have already set
energy storage targets, and the EU’s electricity market reforms will require all member statesto establish energy storage targets as part of their National Energy and Climate Plans. The
rising share of wind and solar PV, paired with onsite storage in some countries, is expected
to support this growth, as is rising demand for secure capacity.
In the United Kingdom, annual capacity additions increase in the STEPS from under 1 GW
today to 3 GW in 2030, much of it contracted through the capacity market.
Australia, Japan and Korea remain the largest markets for utility-scale storage in the Asia
Pacific outside China and India, with combined additions rising to 3 GW by 2030. Australia
supports the roll-out of utility-scale battery storage through its Capacity Investment Scheme,
which seeks to facilitate the integration of rising shares of variable renewables and fill the
gap left by the planned retirement of significant amounts of coal-fired capacity over the
coming years. Near-term growth in Japan is underpinned by subsidies, and upcoming
capacity auctions for low-carbon capacity will provide a potential additional revenue stream
for utility-scale battery storage.
Annual utility-scale battery storage capacity growth in Central and South America, theMiddle East and Africa starts to accelerate around 2030 in the STEPS as capital costs continue
to decline and as rising shares of variable renewables increase power system flexibility needs.
The NZE Scenario sees stronger and more broad-based growth in battery storage capacity.
By 2030, global utility-scale battery storage capacity additions are 1.7-times their level in the
STEPS. Batteries play a crucial role to support an accelerated roll-out of renewables. They
also provide much-needed dispatchable capacity as the rapid electrification of end-usesincreases peak demand and as coal power plant fleets are phased out around the world.

Behind-the-meter battery storage

IEA. CC BY 4.0.

Global behind-the-meter battery storage capacity continues to increase steadily in the STEPS,
and total annual capacity additions nearly double from their 2023 level by 2030. Growthoccurs mainly in regions that are already seeing the bulk of the additions of behind-the-meterstorage today, encouraged by subsidies, high end-user electricity prices or the proliferationof time-of-use pricing. The conditions that support the adoption of behind-the-meter battery
storage are discussed in more detail in section 2.3.5 .
China remains the leading market for behind-the-meter battery storage, with annual
capacity additions rising in the STEPS from nearly 8 GW in 2023 to 17 GW in 2030
(Figure 2.16). China differs from most other regions in that many of its behind-the-metersystems are relatively large installations by commercial and industrial consumers seeking tobenefit from time-of-use pricing and are close to utility-scale systems in terms of size andcost. Some provinces have mandated the pairing of solar PV installed by commercial andindustrial consumers with energy storage. Both factors are expected to continue to drive
additions in capacity.
Chapter 2 | Outlook for battery demand and supply

89

2

Figure 2.16 ⊳ Global behind-the-meter battery storage capacity additions,
GW

2019-2023, and by scenario in 2030

40

NZE

30
20

Rest of world
Other Europe
Other Asia PacificIndia
European Union
United States
China

10

2019

2020

2021

2022

2023

2030
STEPS
IEA. CC BY 4.0.

Behind-the-meter battery storage additions nearly double by 2030, withthe biggest markets in China, the United States and European Union

With annual growth of around 5 GW per year to 2030 in the STEPS, behind-the-meter battery
storage capacity additions remain broadly stable in the European Union. Germany and Italy
have been responsible for most of the growth so far. In Germany, rooftop solar PV iscommonly paired with battery storage and attachment rates currently approach 80%.
Capacity growth is set to decline in Italy as subsidies expire, but additions are projected tocontinue to increase in Germany, where high domestic electricity prices and declining
equipment costs are expected to more than offset a gradual phase down of subsides.
The United States becomes the third-largest market for behind-the-meter storage in the
STEPS. Annual capacity additions increase from slightly less than a gigawatt in 2023 to nearly
4 GW in 2030. California, where residential rooftop solar PV is frequently paired with battery
storage, has been leading the way and will continue to play an outsized role through to 2030,
followed by Florida and Texas. Falling costs, lower feed-in tariffs for solar and theproliferation of time-of-use tariffs all contribute to the attractiveness of behind-the-meter
battery storage to consumers.

IEA. CC BY 4.0.

Australia and Japan are the second- and third-most important markets for behind-the-meterstorage in the Asia Pacific region. Government subsidies mean that investing in behind-themeter storage will remain financially attractive to consumers in both countries, in particularwhen paired with rooftop solar PV.
In other regions, conditions for behind-the-meter battery storage are less favourable. Whilethe number of installations is expected to increase in places with frequent outages and low
reliability power supplies, such as South Africa, their contribution to total global capacity
growth is likely to remain marginal.
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International Energy Agency | Batteries and Secure Energy Transitions

In the NZE Scenario, behind-the-meter battery storage capacity additions increase more
rapidly. By 2030, they are about 25% higher than in the STEPS, thanks to stronger growth inrooftop solar PV, a faster decline in costs, and high end-user electricity prices, all of which
increase the attractiveness of behind-the-meter storage to consumers.

2.3.2

2

The evolution of the chemistry mix

Lower costs, higher cycle lives and improved safety due to greater thermal stability meanthat LFP batteries – although less energy dense than nickel-based lithium-ion batteries – havebecome the technology of choice for battery storage in recent years, with their share inannual battery storage capacity additions rising from about a third in 2020 to 80% in 2023.
These characteristics seem likely to mean that LFP remains the dominant chemistry throughto 2030, accounting for the vast majority of the additional battery storage capacity coming
online between 2023 and 2030 (Figure 2.17).
Figure 2.17 ⊳ Battery storage capacity additions in GWh by cathodeGWhchemistry, 2019-2023, and 2030 in the STEPS

400

Other
Sodium-ion
LFP
Low-nickel
High-nickel

300
200
100

2019

2020

2021

2022

2023

2030
STEPS
IEA. CC BY 4.0.

LFP is set to continue to dominate the battery storage market,
with sodium-ion starting to make inroads towards 2030

IEA. CC BY 4.0.

Note: LFP = lithium-iron phosphate.

In recent years, sodium-ion batteries have attracted considerable interest from battery
manufacturers because they do not require relatively expensive critical minerals like lithiumand could potentially be produced at a lower cost than LFP batteries. Although slightly lessenergy dense, they share many of the characteristics of LFP batteries, including greater
thermal stability and higher cycle lives than other types of battery, and this makes thempotentially well suited for stationary storage applications. However, the cost advantage of
sodium-ion batteries will only be realised once manufacturing is scaled up to levels
comparable to lithium-ion batteries, and even then it very largely depends on the price oflithium, which has recently declined, but could rise again as demand grows: competing on
Chapter 2 | Outlook for battery demand and supply

91cost will be challenging if lithium prices remain low. There is considerable announced
manufacturing capacity, most of it located in China. As a result, we expect sodium-ion to start
making inroads into the battery storage market towards 2030 in all scenarios, with its sharein annual capacity additions rising to about 10% by 2030 and growing further beyond.
Alternative battery chemistries like redox flow or iron air could come into play after 2030, in
particular for longer-duration (greater than eight hours) storage. However, many technicalchallenges remain to be solved. While redox flow batteries based on vanadium are alreadyrelatively mature, vanadium is currently very costly, and the main challenge will be to
substantially scale up its production. Solid state batteries, although potentially promising forhigh energy density applications like EVs, are unlikely to be a competitive choice for battery
storage in the power sector, where energy density is a less important consideration.

2.3.3

Role of battery storage

Battery storage can provide a broad suite of services to the electricity system, ranging fromenergy shifting through to the provision of ancillary services and secure capacity, and the
management of bottlenecks in transmission and distribution systems.
The fast-rising share of variable wind and solar PV in power systems around the world,
coupled with an increase in the volume and variability of demand due to the electrificationof additional end-uses, such as EVs, air conditioning and electric heating, is driving asubstantial increase in the need for power system flexibility, in particular over shorter
timescales ranging from minutes to days. At the same time, the phase-out of coal in many
regions and rising peak demand are increasing the need for additional dispatchable capacity
to ensure adequacy of supply.
Battery storage is well placed to provide both short-term flexibility and secure capacity inpower systems with rising shares of variable renewables, especially with a shift towards
longer duration (four to eight hour) battery storage. In all scenarios, battery storage becomesa key provider of short-term power system flexibility, in particular after 2030. Together withsmart charging EVs, they provide over half of the global short-term flexibility required in
2050. They also become a vital source of secure capacity in hours with high electricity
demand and low output from renewables.

IEA. CC BY 4.0.

Beyond energy shifting, batteries are expected to make further inroads in ancillary service
markets in regions where they have not done so already, though the share of battery storage
targeting this application is set to decline as these markets become saturated and as theglobal battery fleet expands considerably.
Further growth is also expected in the number of battery storage systems whose primaryrole is congestion management and transmission/distribution investment deferral, inparticular in regions where the expansion of power grids lags behind the growth in the shareof variable renewables and the pace of end-use electrification. In emerging market anddeveloping economies with weaker electricity grids, batteries are likely to be increasingly
tapped to provide essential services beyond energy shifting and to help increase the92

International Energy Agency | Batteries and Secure Energy Transitions

reliability of power supplies, with an eye to functionalities such as black start capability,
islanding and grid stabilisation at the local level. Batteries providing these services however
are likely to account for a small share of global battery capacity compared to those thatprovide flexibility and secure capacity through bulk energy shifting.
Although batteries will play a crucial role in providing flexibility, stability and secure capacity
to power systems characterised by high shares of variable renewables, it is important torecognise that they are part of a suite of options that includes demand response, other typesof storage such as pumped storage hydro, thermal or compressed air energy storage, andflexible hydro and thermal power plants. All these options will be needed to provide
flexibility and capacity to ensure secure, decarbonised and affordable electricity supply at all
times. For example, pumped hydro capacity is targeted to reach 120 GW in China by 2030
and 27 GW in India by 2032. Digitalisation, which improves real-time information flows andfacilitates more advanced data analytics, has an essential part to play here as an enabler for
power system transformations relying on distributed assets like renewables and batteries.
Should battery storage grow more slowly than expected, there would be significant risks forclean energy transitions (see Chapter 3), and energy systems would need a significant pushtowards alternative solutions for the provision of short-term flexibility and for meeting peakdemand in a secure manner. Relying on unabated fossil fuel capacities to compensate for thelack of batteries would lead to an increase in CO2 emissions and make reaching emissions
reduction targets more difficult and more expensive.

Provision of flexibility
Battery storage is set to become an important source of short-term flexibility in powersystems around the globe.

IEA. CC BY 4.0.

Power system flexibility needs are driven primarily by the rising share of variable wind andsolar PV in electricity generation and by changes in electricity demand profiles. Flexibility
needs are defined over specific timeframes, ranging from milliseconds (to ensure gridstability) to short-term flexibility (hourly balancing) and seasonal flexibility needs (seasonalbalancing). The share of wind and solar in the global electricity mix rises from 12% today to
30% in 2030 and 54% in 2050 in the STEPS. In the NZE Scenario, which sees a tripling of theinstalled renewable energy capacity by 2030, it increases to 40% in 2030 and 71% in 2050. In
the APS, which assumes that governments around the world meet their energy and climate
pledges in full and on time, the share of wind and solar reaches 35% in 2030 and 64% in 2050.
Rising shares of wind and solar PV increase the variability of the net load – the load thatremains after removing wind, solar and run-of-river hydro generation from electricity
demand – while the electrification of additional end‐uses, e.g. electric heating, roadtransport or industrial processes, raises peaks and increases the variability of electricity
demand. Together they drive up power system flexibility needs. While these needs increase
across all timescales from hours to days and across seasons, it is short-term flexibility needs,
which measure the variability of the net load from one hour to the next, that see the sharpest
increase overall.
Chapter 2 | Outlook for battery demand and supply

93

2

Most of the projected increase in short-term flexibility needs worldwide is driven by thegrowth of solar PV, which, with its pronounced daily cycle, increases the hourly variability of
the net load. The increase in the variation of demand is the second-biggest driver: wind isless variable than solar over short periods of time and thus does not contribute as much tothe overall increase in short-term flexibility needs. In the APS, for example, average global
short-term flexibility needs double by 2030, driven largely by a tripling of global solar PV
capacity and a 26% increase in annual electricity demand. These flexibility needs
subsequently increase 4.5-fold by 2050 from their current level. (Figure 2.18).
Figure 2.18 ⊳ Global average short-term power system flexibility needs andIndex (2022 = 1)

supply in the APS, 2022-2050

5

Flexibility needs driver
DemandWind
Solar PV43

Flexibility supply
ThermalOther demand response
Electric vehicles
Batteries
Hydro

2
1
2022

2030

2050
IEA. CC BY 4.0.

Battery storage and directed charging of EVs provide the bulk of
the short-term flexibility needs that rise 4.5-fold by 2050

IEA. CC BY 4.0.

Notes: Other demand response includes the flexible operation of electrolysers, and flexible thermal storage
for water and space heating/cooling in buildings, and other appliances. The figure represents the global
average and therefore does not include the contribution of imports or exports.

Today, short-term power system flexibility needs are met mostly by hydro and dispatchable
thermal power plants capable of rapidly responding to variations in the net load. However,battery storage is set to become an important source of short-term flexibility in many powersystems by 2030 as renewables are scaled up and traditional providers of flexibility such as
coal‐fired power plants are retired. The flexibility provided by batteries lies in their ability toshift electricity generation from periods with surpluses to periods in which the net load ishigh. Since batteries are primarily for short duration storage, they are well suited to smooththe daily cycle of solar PV‐based electricity generation. This is illustrated in Figure 2.19, whichshows how batteries charge during the hours when solar PV is producing and discharge
afterwards. In competitive electricity markets, utility-scale battery storage responds tomarket price signals, optimising its charging and discharging cycles to maximise its revenue.

94

International Energy Agency | Batteries and Secure Energy Transitions

Figure 2.19 ⊳ Hourly electricity supply mix for a sample day in India
GW

in the APS, 2050

1 500

Battery charge
Battery discharge
Solar PV
Wind
Hydro
Oil
Natural gas
Coal
Nuclear
Other
Demand

1 200
900
600
300

0h

2

24h
IEA. CC BY 4.0.

Battery storage takes advantage of surplus solar generation to chargeduring the day and discharge during evening peak load

The batteries housed in EVs represent another significant source of flexibility. Whileuncontrolled EV charging by vehicle owners increases short-term flexibility needs because it
takes place mostly at home in the evening, delaying and timing this charging in accordancewith system needs (smart charging) can provide much-needed flexibility and help balance
the variations introduced by other electricity consumers or variable renewables such as
solar PV. In the APS, between 10% and 20% of EVs are able to adjust their charging in
response to electricity prices by 2030, rising to 40-60% by 2050, depending on the region.

IEA. CC BY 4.0.

EV users will need incentives to engage in smart charging either by taking action themselves
or by allowing some remote control of their energy use. Time-of-use tariffs provide a financial
incentive to encourage the shifting of EV charging to off-peak hours and are likely to be
increasingly important in the future. The flexibility potential would be even greater if EVs
were able to feed electricity back into the grid (V2G), thus effectively doubling as behindthe-meter storage (see Chapter 3). In the APS, battery storage and smart charging EVs
together provide 15% of the short-term flexibility needed to balance the system by 2030.
Their importance continues to increase by 2050, battery storage and EVs provide over halfof the total short-term flexibility needed for power systems, with demand response meetingan additional third of the requirements. Whether through different forms of batteries in EVs
or storage applications, thermal energy storage or pumped hydro, storage will cover the
majority of short-term flexibility requirements by mid-century.
While batteries are projected to play an important role in the provision of short-term
flexibility, our analysis indicates that they are poorly suited to balancing over longer periodsof time, such as across weeks or seasons. Options for seasonal flexibility include reservoir
Chapter 2 | Outlook for battery demand and supply

95

hydro, the flexible operation of thermal power plants, including low-emissions thermal
power plants, and further in the future, the flexibility provided by electrolysers producing
hydrogen and hydrogen-based fuels. More details on the future development of flexibility
needs and supply across all timescales, including across various regions located in different
climatic zones, can be found in the IEA report Managing the Seasonal Variability of Electricity
Demand and Supply (IEA, 2024b).

Contributions to capacity adequacy
Battery storage also provides secure dispatchable capacity to help meet peak demand,
ensuring a stable and reliable supply of electricity. Discharging batteries during peak hours
reduces the need for additional secure capacity from other sources, such as thermal peaking
power plants like gas turbines.
Owing to the increasing competitiveness of utility-scale battery storage with other sourcesof dispatchable capacity (section 2.3.4), the share of batteries in total dispatchable power
capacity is set to rise substantially (Figure 2.20). Conventional unabated fossil fuel power
plants currently account for 70% of available dispatchable capacity, while hydropower andnuclear contribute a quarter between them. In the NZE Scenario, batteries constitute oneeighth of the available dispatchable capacity by 2030, while the share of unabated fossil fuelsdecreases to below 50%. By 2050, batteries become the primary source of dispatchable
capacity globally, with installed capacity exceeding 4 TW.
Figure 2.20 ⊳ Dispatchable power capacity by technology in the
NZE Scenario, 2022, 2030 and 2050

2022
2030
2050

Oil
Bioenergy and waste
Hydrogen and ammonia
Coal
Natural gas
Nuclear
Hydro
Battery storage
Total
2

4

6

8

TW

10
IEA. CC BY 4.0.

IEA. CC BY 4.0.

Utility-scale battery storage expands rapidly to become
the largest source of dispatchable capacity by 2050
Notes: TW = terawatts. Hydrogen includes hydrogen and hydrogen-based fuel fired power plants.

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International Energy Agency | Batteries and Secure Energy Transitions

As its installed capacity increases, battery storage is increasingly called upon to provide
electricity in periods when the electricity system is short on capacity. Traditionally, theassessment of power system adequacy is based on its ability to meet peak demand. However,in systems characterised by high shares of variable renewables, the times during which thesystem is short on supply are the peak hours of the net load, when electricity demand is high,and the availability of variable renewables is low. In these hours, dispatchable sources tend
to produce at close to the maximum of their available capacity.
Battery storage can make a significant contribution to the electricity supply during thesehours. This is illustrated in Figure 2.21, which presents the electricity supply mix for selected
regions – Europe, India and Indonesia —during the 100 hours of the year with the highest
net load, compared to the average daily electricity supply mix, as projected for the APS in
2050. It highlights that battery storage is set to become a crucial provider of secure capacity
when the net load peaks and systems are short on supply. This is particularly the case insystems with a high proportion of solar PV. In regions like India or Indonesia, where solar
power becomes a major component of the electricity mix, battery storage can be charged
during the day when solar power generation is at its peak. These charged batteries can thensupply electricity during the evening when demand typically peaks, or is at any rate high, andsolar generation is not available. Their ability to fulfil this role will be facilitated by thesignificant increase in battery storage projects with longer durations (four to eight hours)that is projected in regions with high shares of solar PV.
Figure 2.21 ⊳ Daily average and peak hour electricity supply mix by
Share of electricity supply

region/country in the APS, 2050

100%

EuropeIndia

Indonesia

Other
Battery storage

80%

Hydro
Thermal60%

Wind
Solar PV

40%
20%

Daily

Peak

Daily

Peak

Daily

Peak
IEA. CC BY 4.0.

Batteries emerge as key providers of dispatchable capacity during peak hours when

IEA. CC BY 4.0.

demand is high and variable renewable generation is lower than average
Notes: This figure shows the average electricity supply mix over a day and the electricity supply mix in the
100 hours of the year with the highest net load (electricity demand less the contribution of wind, solar PV andrun-of-river hydro). Thermal includes coal, natural gas, nuclear, oil and hydrogen/ammonia. Other includes
bioenergy, geothermal, marine and waste.

Chapter 2 | Outlook for battery demand and supply

972

2.3.4

Costs and competitiveness of utility-scale battery storage

Capital costs of utility-scale battery storage
The costs for individual utility-scale battery storage projects can vary widely, depending on
specific site conditions, technology choices and regulatory regimes, with some recent
projects delivered for over USD 500/kWh and others for less than USD 200/kWh. However,in the STEPS, the total upfront costs of utility-scale battery storage with four-hour duration
are projected to decline from a global average of USD 290/kWh in 2022 to an average of
USD 175/kWh in 2030, a reduction of 40% over the period (Figure 2.22). After 2030, averageutility-scale battery storage costs are projected to continue to decline, and in 2050 they are
55% below their 2022 level.
Figure 2.22 ⊳ Average total system capital costs of utility-scale batteries
USD per kWh (2022, MER)

globally and in key markets in the STEPS, 2020-2050
World

400

400

300

300

200

200

100

100

2020

2030
one-hour2040
2050
two-hourfour-hour

eight-hour

2020

Key markets: four-hour

2030
United States
China

2040
2050
European Union
India
IEA. CC BY 4.0.

Total upfront costs of utility-scale battery storage decline 30-40% by 2030,
with the cost range narrowing in key markets
Note: MER = market exchange rate.

IEA. CC BY 4.0.

This decline in average costs in the STEPS means that the upfront investment for an average
battery project with a 20 MW output capacity and 80 MWh storage declines from about
USD 23 million today to USD 14 million in 2030. it follows recent fluctuations in the costs ofbattery storage, during which supply chain issues and critical mineral prices raised thedelivered cost of battery storage in several leading markets. Battery storage projects withlonger duration generally have a lower cost per unit, as project costs are spread across moreunits and there are economies of scale for the balance of system costs. Some regions seeeven larger reductions in total battery project costs, including the costs of the battery pack
as well as racking, cooling, management and system balance.

98

International Energy Agency | Batteries and Secure Energy Transitions

Regional average upfront costs for utility-scale battery storage with four-hour duration
currently vary from USD 200/kWh to over USD 300/kWh, but this range narrows over time
as more markets gain experience and take advantage of new technologies. China is thelowest cost region for new battery storage projects today and is projected to remain sothrough to 2030. Recent costs of utility-scale battery storage projects in the United Statesand Europe are at the higher end of the range today, but broader markets and more
extensive deployment drive down future costs. In India, strong growth in the battery storage
market enables deep cost reductions.
Projected cost reductions come from improvements in battery technology andmanufacturing, together with reductions in the balance of system costs for battery storage,
which could be accelerated by standardisation. Battery pack costs are driven down both bylearning from experience as they are deployed in storage applications and by spillover
reductions from their development for transport. The projected future reductions forbalance of system costs are based on local and global deployment combined with anassumed learning rate of 10% per doubling of cumulative installation. However,consideration of upfront costs alone has limitations because improvements in performance,
efficiency and longevity are not captured.
In the NZE Scenario, utility-scale battery storage costs are projected to decline more rapidly,
falling 40% by 2030. The additional deployment of battery storage in this scenario comparedwith the STEPS pushes battery storage down the cost curve faster in terms of bothtechnological innovation and the manufacturing process.

Stand-alone utility-scale storage
Levelised cost of electricity (LCOE) is a common metric encompassing all costs related to a
power technology, including upfront investment, financing costs, operation andmaintenance, fuel costs and carbon pricing where relevant. It is often used as a metric for
power plants and can be used similarly for the average cost of battery storage, if the charging
costs are considered as fuel costs. It can be applied to battery storage in stand-alone
applications or when paired with other technologies, such as solar PV. For technologies that
operate in similar ways, the LCOE provides a suitable metric for comparison.

IEA. CC BY 4.0.

For utility-scale battery storage in stand-alone applications, the global average LCOE for a
project with four-hour duration declines by over 30% from 2022 to 2030 in the STEPS, fallingfrom around USD 360/MWh to USD 240/MWh (Figure 2.23). The average cost of the same
project declines to USD 180/MWh by 2050. Throughout the period, the LCOE of individual
projects is projected to vary by approximately 20% from the average, depending on specifictechnology costs and average charging costs. In the NZE Scenario, the LCOE of battery
storage is projected to decline even faster as capital costs edge down more rapidly andinnovation improves performance and durability.
The cost reductions for utility-scale battery storage in the STEPS make it increasinglycompetitive with open-cycle gas turbines, even before considering the environmental costs
Chapter 2 | Outlook for battery demand and supply99

2

of local air pollution or CO2 emissions. This is a reasonable LCOE comparison to make, sinceutility-scale battery storage and open-cycle gas turbines both operate in a small number ofthe most valuable hours while also providing significant flexibility and supporting gridstability. Analysis indicates that four-hour duration battery storage can have a comparable
level of availability as open-cycle gas turbines during peak periods, though forecast errors
can substantially reduce this for batteries (often referred to as the capacity credit) (Awara etal., 2023).
Figure 2.23 ⊳ Indicative LCOE of stand-alone battery storage in the STEPSUSD per MWh (2022, MER)

compared with open-cycle gas turbines, 2022-2030

400

Low charging costs

High charging costs

300
200
100

2022

2030

2040

Battery storage
Gas GT high gas price2050 2022

2030

2040

2050

Gas GT high gas and CO₂ priceGas GT low gas price
IEA. CC BY 4.0.

Stand-alone four-hour battery storage becomes competitive with many gas turbine plants
by 2030 and competes with the even cheapest gas turbine plants by 2050

IEA. CC BY 4.0.

Notes: LCOE = levelised cost of electricity; MER = market exchange rate; gas GT = gas-fired turbine. Battery
storage represents utility-scale battery storage with four-hour duration. Assumed capital costs for gas GT are
USD 500/kilowatt. Gas GT high gas and CO2 category assumes prices of USD 15/megawatt-hour (MWh) for
natural gas and USD 60 per tonne for CO2 emissions. Gas GT high gas category price assumes prices of
USD 15/MWh for natural gas and zero for CO2 emissions. Gas GT low gas category assumes prices of
USD 3/MWh for natural gas and zero for CO2 emissions. Low charging costs in left chart assume a USD 20/MWh
electricity price for battery charging and high charging costs in the right chart assume a USD 80/MWh
electricity price.

By 2025, battery storage projects at the lower end of the cost range are cost competitive
with some open-cycle gas turbines operating in markets with high natural gas prices. By 2030,
stand-alone battery storage is able to compete on costs with gas turbines in more markets
and in a wider set of conditions, though gas turbines remain more competitive in markets
with low natural gas prices, such as the United States and producer economies. By 2040, an
average battery storage project is fully cost competitive with an average open-cycle gas
turbine and is less expensive in markets with higher natural gas prices.

100

International Energy Agency | Batteries and Secure Energy Transitions

Comparing the costs of utility-scale battery storage with other storage technologies depends
largely on the application and on local conditions, and many rival technologies are not yet
commercially available. 6 Comparisons with pumped hydro – the largest form of energy
storage in the world today – depend critically on the intended duration and annual discharge
cycles. For durations of less than four hours, battery storage today generally has a lower
LCOE than pumped hydro. As the duration gets longer, pumped hydro becomes more
attractive. For durations beyond eight hours, pumped hydro has a clear cost advantage overbattery storage in most cases. Specific site conditions, including the local geology, existingslope and land cover, are critical for the development costs for pumped hydro, and lead to awide range of individual project costs; battery storage is better suited to a standardised
project design and process than pumped hydro, and the costs of individual projects vary less.
Heat storage is another promising technology, though in most cases it produces heat as a
final product rather than electricity and so is difficult to compare on an LCOE basis. Gravity
storage is also less developed than battery storage, and cost estimates for early projects vary
widely.

Utility-scale battery storage paired with solar PV
Battery storage is well suited to being paired with solar PV: it can charge and discharge
efficiently so as to maximise the value of its output as conditions change, and it is designed
for thousands of cycles, enabling it to cope with one or more cycles per day over a decade ormore. The global average LCOE of an example project pairing battery storage with solar PV –20 MW/80 MWh battery paired with 100 MW solar PV – declines from USD 75/MWh in 2022
to USD 45/MWh in 2030 in the STEPS, a 40% reduction (Figure 2.24). This combines the cost
reductions for battery storage, around 40% by 2030, with those of utility-scale solar PV,
about 35% by 2030. Further learning-by-doing and innovation drive down the average costsof this example project to USD 35/MWh in 2050, more than 50% below the current level.

IEA. CC BY 4.0.

In evaluating the competitiveness of battery storage paired with solar PV against otherpower technologies, the significant differences in their operations mean it is not enough tolook at the LCOE alone. In these circumstances, assessment requires consideration of thevalue of the contribution made to power systems as well as technology costs. In the Global
Energy and Climate model, the competitiveness of power technologies is based on the valueadjusted LCOE for each technology, which combines the projected LCOE with the value ofthe technology to the system in terms of contributions to energy markets, flexibility services
and capacity adequacy. This provides a system view of the competitiveness of technologies
and is analogous to investors evaluating both the costs and expected revenues of potential
projects. The value-adjusted LCOE of battery storage paired with solar PV can be estimatedwithin this framework and compared with all types of power technologies

6 The levelised cost of storage is another metric that has been developed and applied for comparisons among

the suite of energy storage technologies (Schmidt & Staffell, 2023), (Jülch, 2016), (Zakeri & Syri, 2015), but is
not applied in the Global Energy and Climate model.

Chapter 2 | Outlook for battery demand and supply

101

2

Figure 2.24 ⊳ LCOE and value-adjusted LCOE for solar PV plus battery storage,
USD per MWh (2022, MER)

coal and natural gas in selected regions in the STEPS, 2022-2030

China

100

India

United States

80
60

VALCOE
Coal
Gas CCGT
Solar PV
with storage
LCOE Series7
Coal
Gas CCGT
Solar PV
with storage

40
20

2022

2030

2022

2030

2022

2030
IEA. CC BY 4.0.

Solar PV plus battery storage becomes more competitive than
new coal- and natural gas-fired plants in key markets by the mid-2020s
Notes: LCOE = levelised cost of electricity; VALCOE = value-adjusted LCOE; MER = market exchange rate; CCGT
= combined cycle gas turbine. Solar PV with storage = solar PV installation paired with four-hour duration
battery storage, scaled to 20% of the output capacity of the solar PV.

IEA. CC BY 4.0.

Solar PV plus battery storage is already competitive with coal- and natural gas-fired power insome markets. Based on comparisons of the value-adjusted LCOE in the STEPS, itscompetitiveness will soon spread to most leading markets, opening massive potential for
growth. In China, the value-adjusted LCOE of solar PV plus battery storage falls below that ofcoal-fired power around 2025 in the STEPS. In India, solar PV plus battery storage is alreadymore competitive than coal, and it remains so in the years ahead. In the United States, solar
PV plus battery storage outcompetes new efficient gas-fired power plants before 2025 andsubstantially extends its lead by 2030. In the European Union, solar PV plus battery storage
already easily outcompetes natural gas-fired power, thanks in part to the relatively highnatural gas prices in the European Union and relatively low utilisation rates for gas-fired
power plants together with the significant price placed on CO2 emissions.
Batteries paired with solar PV are also highly competitive with other low-emissions sourcesof electricity that are commercially available today. The value-adjusted LCOE of solar PV plus
battery storage is significantly lower than nuclear power in most markets today, though in
China it does not cross this threshold until around 2025 in the STEPS. Its closest competitors
are solar PV on its own, onshore wind in most markets, and offshore wind in China and theEuropean Union. By 2030, solar PV plus battery storage in the STEPS has a value-adjusted
LCOE that is equal to or lower than that of solar PV alone in the United States, European
Union, China and India, with the added value provided by the battery fully compensating for
102

International Energy Agency | Batteries and Secure Energy Transitions

its added cost. This indicates that the most cost-effective option for new solar PV projects inthese markets is likely to be to pair with battery storage.
Beyond 2030, additional low-emissions power technologies are on track to becomecommercial, including carbon capture, hydrogen and ammonia and advanced nuclear
designs such as small modular reactors. While the costs of these technologies are less certain,
it is likely to be difficult for them to compete successfully in most parts of the world withsolar PV plus battery storage.

2.3.5

Behind-the-meter battery storage

Behind-the-meter batteries are set to expand strongly to 2030 in key markets as a result of
their increasing affordability and potential to lower consumer bills and earn revenue,
together with supportive policy measures. They are linked in particular with rooftop solar PV
in all scenarios. In the STEPS, global installed capacity reaches 175 GW by 2030, with half ofthat in China and another third in the European Union and the United States combined(Figure 2.25). In the NZE Scenario, global installed capacity ramps up even faster to reach
200 GW in 2030, and about 10% of rooftop solar PV is paired with behind-the-meter battery
storage in most major markets by that date.
Figure 2.25 ⊳ Installed capacity of behind-the-meter battery storage
GW

in the STEPS, 2015-2030

250

Behind-the-meter batteries

200

25%
20%

NZE

150

15%

100

10%

50

5%

2015
China

2020
European Union

2025

Pairing ratio with rooftop solar PV

2030

United States

2015
Japan

2020

2025

2030

Australia and New Zealand

Other

IEA. CC BY 4.0.

IEA. CC BY 4.0.

Behind-the-meter batteries continue to expand strongly to 2030
and are increasingly paired with rooftop solar PV in leading markets

Across these markets, there are a few key factors that improve the prospects for behind-themeter batteries to 2030. One is that the investment costs of behind-the-meter batteriescontinue to decline in the STEPS to 2030, with those in China declining by 30% from 2020
Chapter 2 | Outlook for battery demand and supply

103

2

levels and those in the European Union by 20% (Figure 2.26). As behind-the-meter systems
generally involve almost no operating expenses, the initial investment and cost of capital
determine total costs. The investment costs for rooftop solar PV, which can help behind-themeter systems unlock their full potential, also decline by at least 40% from 2020 levels acrossmajor markets to 2030 in the STEPS. In China, where costs are already among the lowest in
the world, they fall by nearly 50% from 2020 levels by 2030. This lowering of the barrier toentry for consumers reduces the payback period as well, making it more attractive toconsumers in all regions.
Figure 2.26 ⊳ Costs of behind-the-meter batteries and rooftop solar PV
1 200

Behind-the-meter batteries

USD per kW (2022, MER)

USD per kWh (2022, MER)

in the STEPS, 2020-2030

900
600
300

2020

2025
United States

4 000

Rooftop solar PV

3 000
2 000
1 000

2030
European Union

2020

2025
China

2030

Australia
IEA. CC BY 4.0.

Costs continue to decrease to 2030 in key markets for bothbehind-the-meter batteries and rooftop solar PV
Note: MER = market exchange rate.

IEA. CC BY 4.0.

Another major factor in the rise of behind-the-meter batteries to 2030 is the evolution of
end-user electricity prices, which in the STEPS remain broadly stable or increase in mostmajor markets (Figure 2.27). Higher retail electricity prices, especially when combined with
time-of-use pricing, incentivise the uptake of behind-the-meter systems paired with rooftop
solar PV because the two together offer consumers a way to lower their reliance on the gridand give them some control over when they use it. Time-of-use tariff structures value behindthe-meter systems more highly than net metering or flat tariff structures and therefore
provide a bigger incentive for their use. As many markets move towards more dynamic
pricing and time-of-use tariffs, behind-the-meter batteries and rooftop solar PV are paired
together with increasing frequency in major markets. In the NZE Scenario, a combination oflower technology costs, higher pressure on electricity prices in the near term, and more timeof-use pricing means that use of behind-the-meter ramps up more quickly than in the STEPS.

104

International Energy Agency | Batteries and Secure Energy Transitions

Figure 2.27 ⊳ End-user electricity prices in key markets by scenario,
0.3

China

United States

Australia

Japan

European Union
Taxes
Before
taxes

0.2

2030

2030

2030

2030

NZE

STEPS

2022

NZE

STEPS

2022

NZE

STEPS

2022

NZE

2022

STEPS

NZE

2022

0.1

STEPS

USD per kWh (2022, MER)

2022 and 2030

2030
IEA. CC BY 4.0.

Broadly stable or increasing end-user electricity prices in the majority of leading markets
help to drive up customer savings from the use of behind-the-meter storage
Note: MER = market exchange rate.

IEA. CC BY 4.0.

Behind-the-meter systems offer multiple ways for consumers to reduce their electricity bills
without requiring changes in consumption habits. In regions with dynamic time-of-use
pricing, they can charge their batteries either from their rooftop solar PV system or from thegrid during off-peak hours and then discharge as needed during peak hours, thereby
obtaining the cost savings of demand shifting without actually changing the times when theyuse energy. Consumers will be further incentivised to invest in solar PV and behind-the-meter
batteries, and to make the fullest use of them, if grid feed-in is not prohibited or restricted,
and if selling back excess solar PV generation is remunerated at full retail prices. Used in thisway, behind-the-meter systems offer a way to maximise the use of what would otherwise be
wasted generation to the benefit of consumers while also reducing peak demand. In reducing
grid reliance, in addition, behind-the-meter systems offer the potential for consumers todownsize the grid connection itself, minimising another monthly charge.
In regions with tariff structures that include full retail value and dynamic pricing, consumers
with behind-the-meter battery storage are not necessarily limited only to engaging inarbitrage and selling excess energy to the grid at peak times. When aggregated into virtual
power plants, small residential behind-the-meter units can also participate in additional
markets for ancillary services, thereby unlocking new revenue streams. As renewables ramp
up, these flexibility and grid stability services will become increasingly valued. However, therevenue potential of these schemes is tariff-dependent and should therefore be weighedagainst the potential for self-consumption cost savings in order to maximise overall
consumer benefits and optimise the payback period for investments.
Chapter 2 | Outlook for battery demand and supply

105

2

Box 2.4 ⊳Batteries as backup power supply

During network outages or emergencies, battery storage can serve as critical backup
generators, ensuring uninterrupted power supplies to critical facilities such as hospitals,
emergency response centres and infrastructure like substations and communication
networks. These systems offer several distinct advantages over conventional diesel
generators. They have faster start-up and response times. Generally they also have lower
maintenance requirements as they have fewer moving parts, reducing the likelihood of
mechanical failures and the need for regular maintenance. They operate silently, which
is helpful in urban and residential areas where noise restrictions may apply, and they emit
zero emissions. Battery storage also eliminates the need for fuel storage, delivery andprocurement, thereby simplifying logistics. This is particularly advantageous in remote or
off-grid locations where access to fuel may be limited or costly. Electricity for charging
can be sourced from renewables installed onsite, or from the grid, further enhancing
their sustainability.
Battery storage can also play a pivotal role in facilitating islanding, in which localised
portions of the grid operate autonomously from the main network. This capability proved
invaluable when Hurricane Maria devastated Puerto Rico, for example: battery storage
systems were quickly delivered to the island nation to enable the creation of microgrids
to power critical facilities and communities amid widespread outages. Battery storage
has also been deployed as part of a microgrid project on Ocracoke Island in North
Carolina in the United States: the microgrid, made up of solar panels, diesel generators
and a 0.5 MW/1 MWh battery storage system, enables the island to operate
independently during network disruptions caused by hurricanes. By leveraging battery
storage and renewable resources, such as solar and wind, microgrids enhance local
resilience, reduce dependency on centralised generation, and expedite post-disasterrecovery efforts.
However, there are situations where battery storage may not be the most appropriate
option, particularly if local regulations require longer periods of backup power. This is thecase when the electricity supply is usually very stable and, like in many parts of Europe,
power outages are very rare. The emergency regulations for critical infrastructure inthese countries often require longer bridging times in the rare event of a long duration
failure of the electrical supply. Sizing batteries to supply power for multiple days is
generally prohibitively expensive. In these cases, diesel generators, which, unlike
batteries, can be easily and quickly refilled with fuel, will still be needed in order to ensure
the power supply over longer periods.

IEA. CC BY 4.0.

2.3.6

Battery storage to achieve universal access to electricity

Almost half a billion people gain energy access through decentralised systems by 2030 in the
NZE Scenario, most of them relying on solar PV and battery storage obtain a reliable, highquality electricity supply. Over half gain access via mini-grids, driving annual battery capacity
106International Energy Agency | Batteries and Secure Energy Transitions

additions for mini-grids to a peak of nearly 10 GWh by 2030 (Figure 2.28). This is more thaneight-times the current total mini-grid installed capacity, and 30-times more than additionsin 2023, but it is by no means impossible if compared with the global battery storage market,
which in 2023 alone saw the deployment of over 90 GWh of new capacity.
Figure 2.28 ⊳ Battery storage by type for new electricity access with
GWh

decentralised systems in the NZE Scenario, 2023, 2025 and 2030

10Solar home systems

Mini-grids

Other
Lead acid8

Lithium-ion
6
4
2

2023

2025

2030

2023

2025

2030
IEA. CC BY 4.0.

Lithium-ion batteries dominate in decentralised systems, though lead-acid batteriescontinue to play a role in mini-grids and the share of other battery types rises
Notes: Other includes sodium-ion, flow batteries and other battery chemistries/technologies. Technology mix
can vary drastically depending on market evolution.
Sources: IEA analysis based on the IEA access database and model, and ESMAP (2023) and GOGLA (2023)
resources.

An additional 220 million people gain access through solar home systems (SHS) by 2030 in
the NZE Scenario, nearly 90% of which live in Africa. This entails a sixfold increase in annual
SHS battery capacity additions, which surpass the 2 GWh mark by 2030. Where policy andfinancing have been favourable, SHS deployments have increased very fast in previous years.
Creative financing models and adequate targeted incentives schemes are critical to addressaffordability challenges.

IEA. CC BY 4.0.

These capacity additions only include households gaining access for the first time, and theyexclude smaller solar lighting and lantern systems not matching the IEA definition of access.
Demand for additional capacity will also come from households that purchase larger or
additional systems to increase their access to energy services, from grid-connectedcustomers seeking backup in the face of unreliable grid supply, and from commercial andother non-household users.
Projections of battery technology splits are uncertain. However, there is broad consensus
that lithium-ion batteries will remain the dominant choice for SHS and will secure more than
Chapter 2 | Outlook for battery demand and supply

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2

half of the min-grid market by 2030. In the same period, lead-acid batteries generally are
expected to maintain a sizeable share of the mini-grid market to 2030: up to one-third,
according to a recent report (ESMAP, 2023). The staying power of the lead-acid battery is
attributable to its safety, its ability to tolerate higher temperatures and its relatively low
capital cost. Emerging chemistries could also gain ground over time if their capital costs
continue to decline. The long lifespans of sodium-ion and flow batteries could make bothpromising candidates. Second-life EV batteries could also be an option, given that they retain
70-80% of their initial capacity. If administrative and technological barriers such as a lack ofstandardisation can be overcome, they could be competitive with lead-acid batteries in price,or even become cheaper.
The scale of battery deployments required by the NZE Scenario to deliver universal energy
access by 2030 is set to be supported by continuing cost declines in battery storage in tandemwith cost declines for other technology components. The LCOE delivered by mini-grids andlarger SHS is already competitive with that of diesel or petrol generators, especially in remoteregions. Practical considerations add to the attractiveness of mini-grids and SHS over diesel
backup generators, which are noisy, inconvenient, polluting and require ongoing fuelpurchases and refill which is prone to theft, plus are subject to volatile diesel prices. As gridconnected customers in Africa are estimated to spend USD 28-50 billion annually on fuel fordiesel backup generation, switching to solar-based systems could enable vast collective
savings (International Finance Corporation, 2019).
Figure 2.29 ⊳ Historical and projected LCOE from solar PV plus battery storage
USD per kWh (2022, MER)

in mini-grids to 2030

0.6
0.5

Historic
NZE-36%

Cost reductions
Battery
PV modules
Others and opex

0.4
0.3

-46%

0.2
0.1
2015

2022

Reductions

2030 NZE
IEA. CC BY 4.0.

IEA. CC BY 4.0.

Average generation costs for mini-grids with PV plus battery storage have declinedby over one-third since 2015 and are projected to nearly halve from 2022 levels by 2030
Notes: LCOE = levelised cost of electricity; NZE = Net Zero Emissions by 2050 Scenario; MER = market exchange
rate; opex = operating expenditure.

108

International Energy Agency | Batteries and Secure Energy Transitions

We estimate that the LCOE of an average solar PV plus battery mini-grid or large SHS could
nearly halve by 2030, taking the costs of the former to below USD 0.20/kWh (Figure 2.29).
This is lower than current residential tariffs in many European countries and several countries
in Africa, including Kenya, Rwanda and Mali. While falling battery costs contributesignificantly to LCOE reductions (40% of the total), batteries remain a key contributor to thecapital costs of mini-grids and SHS. They need to be efficiently sized to enhance affordability.
LCOE for mini-grids can be significantly reduced by shifting electrical loads whenever possible
to the daytime, when solar generation can be used directly without needing to be cycled
through a battery. In one model, increasing the daytime load factor from 20% to 40% leads
to a reduction in LCOE by 25% (ESMAP, 2023). Big evening peak demand, on the other hand,
can heavily undermine system affordability by increasing the storage capacity required. Thismeans that storage costs need to substantially decline further to increase the affordabilityof end-uses that heighten evening peaks, such as electric cookstoves. Creative businessmodels and pilot projects meanwhile are promoting more effective and economical design
and use of battery systems across the off-grid sector (Box 2.5).
Box 2.5 ⊳Models for mini-grids and solar home systems

Operational models for mini-grids and SHS vary widely. Batteries play specific roles in allof them. Innovative models are critical to improve affordability and long-term value.
Approaches that integrate utility and off-grid development efforts can stimulate demandand lower costs through co-operation (World Bank, 2024). In its Utilities 2.0 programme,Power for All brings together utilities and solar mini-grid developers for faster and least
cost access to electricity, with the former fielding upfront investment and the latter
responsible for customer relationships and billing. The mini-grid provides initial accessand stimulates demand until the arrival of the grid, after which its role switches toenhancing local reliability. Some mini-grid components can be re-deployed at a new site.
In this model, batteries transition from providing off-grid reliability to supporting grid
services.

IEA. CC BY 4.0.

Battery oversizing is a challenge for many mini-grids. Batteries that are oversized andunderused substantially increase costs for all customers. To avoid this, developers takevarious approaches. Some promote additional, income generating night load (such as
telecommunications) to monetise overcapacity. Others incentivise daytime demand,such as agricultural processing, to lower storage capacity needs per kWh sold. Timevarying pricing models encourage daytime demand through an explicit economic signalthat reflects the reality that it costs more to cycle electricity through storage than to use
direct solar power production.
Some mini-grids are designed to run in parallel with the main grid from the start. In apilot project in Nigeria, small mini-grids incorporating renewable generation and storage
are built alongside the grid to provide reliability guarantees to industrial customers.
These systems benefit from serving well-developed and high-load levels, and can have
Chapter 2 | Outlook for battery demand and supply

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2

outsize economic value for industrial processes that suffer significant setbacks frompower interruptions. They can also displace high volumes of diesel consumption andreduce bulk grid overloading.
Reliability and resilience guarantees are attractive features of off-grid systems that are
enabled by battery storage, yet can be disrupted by battery failure. An interesting model
aims to combine the modularity of SHS with the scaled resilience of a mini-grid through“mesh grids”. Mesh grids interconnect several SHS with smaller and cheaper lines,
creating a decentralised network of generation and storage, and are able to provide up
to 3.6 kW per connection to remote communities where commercial mini-grids are notviable. Their design makes them resilient to the failure of a single component and enables
capital and operating expenditure savings on poles and distribution lines. Spreading
battery capacity across multiple households and small commercial customers also helps
to reduce the risk of oversizing.

2.4

Investment outlook for batteries

2.4.1

Global and regional investment outlook

Batteries in EVs and storage applications are key to the electrification of transport and to themaintenance of reliable electricity supply as countries increase the level of variable
renewables in their electricity systems. In the NZE Scenario, total spending on batteries
across all applications is set to increase to USD 800 billion by 2030, an increase of almost
400% compared with 2023 (Figure 2.30). This means doubling the share of batteries in overallclean energy investment within seven years. In the STEPS, the increase in spending is lesssteep, but nevertheless battery investment rises to almost USD 500 billion by 2030.

IEA. CC BY 4.0.

In the NZE Scenario, there is a shift in the share of the investment that goes to emerging
market and developing countries outside China, with annual spending in these countries
expanding to more than USD 110 billion for EV batteries and USD 30 billion for battery
storage by 2030. This means that for every USD 1 invested in batteries in advanced
economies and China, almost USD 0.20 – compared to USD 0.02 today – will be invested inbatteries in emerging market and developing economies outside China by 2030, rising further
to USD 0.40 by 2050.
The fact that spending on batteries in other emerging market and developing economies
grows faster in relative terms than in advanced economies and China underlines theimportance of battery storage and EV batteries in helping to meet increasing electricity andmobility demand in these countries in a way that is in line with climate and energy accessgoals. Battery storage is critical to the integration of large amounts of variable renewables
and to achieving universal access to electricity by 2030, while EV batteries are the key to theelectrification of road transport.

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International Energy Agency | Batteries and Secure Energy Transitions

Billion USD (2023, MER)

Figure 2.30 ⊳ Investment in batteries by type, region and scenario, 2021-2030
800

600

EV batteries

5xBattery storage

200
150

400

100

200

50

2021 2022 2023

STEPS NZE
2030

Advanced economies

2

3.5x

2021 2022 2023
China

STEPS NZE
2030

Other EMDEIEA. CC BY 4.0.

Investment in batteries increases to USD 800 billion in the NZE Scenario
to support electrification in transport and integration of variable renewables
Note: Other EMDE = emerging market and developing economies outside China; MER = market exchange rate.

2.4.2

Risks to scaling batteries investment

IEA. CC BY 4.0.

Achieving the scale of annual investment required to get onto and maintain a 1.5 °Ccompatible pathway will not be easy. There are a range of risks that stand in the way offurther increasing spending on EV batteries and battery storage on the scale required. Thisis especially true for emerging market and developing countries, where country and macro
factors in some cases are a major contributor to the high cost of capital for clean energy
projects (IEA, 2024c). Potential investors harbour concerns about the rule of law and thesanctity of contracts in some countries, and also about high inflation, currency fluctuations
and convertibility. Over the longer term, addressing these concerns requires efforts tostrengthen national institutions, reduce inflation and deepen local capital markets.
However, there are also project- and sector-specific risks that could potentially undermine
investment in battery storage projects and hinder the uptake of EVs (Table 2.2). Regulatory
risk for electric mobility includes the lack of clear policy signals related to emissions and air
pollution reduction targets for the transport sector, and lack of support for the developmentof EV and battery manufacturing. On the battery storage side, regulatory risks include battery
storage not always having equal access to power markets compared with other technologies,
and lack of a strategy to renumerate flexibility services such as frequency regulation, spinningand not-spinning reserves. Regulations need to outline how battery storage operators are to
be remunerated for providing services such as frequency regulation and support in meetingpeak load demand, as well as for their participation in power markets.

Chapter 2 | Outlook for battery demand and supply

111

Table 2.2 ⊳Investment risk related to batteries

Key risk

Applicability

Description

Regulatory

Both

Lack of a clear and stable regulatory environment, including
absence of clear policy signals, manufacturing support, equal
access to power markets for battery storage and a strategy
for the remuneration of services provided.

Financing andaffordability

EV batteries

Ability to afford the high upfront costs of EVs and higher
financing costs due to higher interest rates and limited accessto debt financing, especially in emerging market anddeveloping economies.

Framework
conditions

EV batteries

Absence of adequate EV charging infrastructure and lack ofproven business models.

Renumeration

Battery storage

Delayed payments or under-recovery from distribution
companies for energy storage services provided.

There are also other risks that affect investment in EV batteries. Acquiring an electric car
often has high upfront costs; the average EV purchase price is around USD 10 000 to 15 000
higher than an ICE alternative in many markets apart from China. In some emerging market
and developing economies, this is aggravated by higher financing costs that reflect higher
interest rates and limited availability of affordable debt financing, as well as of service models
such as leasing. Other EV-specific risks relate to the development of adequate charging
infrastructure.

IEA. CC BY 4.0.

Battery storage faces additional risks that could threaten the extent of investment needed.
One is off-taker risk for battery storage, which relates to payments made to battery
operators for the energy storage services they deliver. Operators are dependent on being
quickly and predictably remunerated for the services they provide to the grid, but in many
countries the payments are the responsibility of transmission companies which may be inpoor financial health, and they are sometimes delayed or fail to appear at all. In countries
without wholesale power markets, this risk is compounded by utility-scale battery storage
operators being unable to earn money from energy arbitrage, which is often potentially theirsingle largest source of revenue.

2.5

Battery supply chain

2.5.1

Future plans for battery manufacturing

Battery manufacturing capacity is set to increase nearly fourfold from today to 2030 if allannounced plants are built in full and on time. This would increase capacity to about 9.4 TWh,with over 7.5 TWh from companies that are already certified to serve the EV market(Benchmark Minerals, 2024). This level of battery manufacturing capacity would be sufficient
to meet the battery requirements of the NZE Scenario by 2030 and would be able to produce
8 TWh per year, assuming a global utilisation factor of 85%. Over 70% of this battery
manufacturing capacity is already committed, meaning that plants have reached a final
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International Energy Agency | Batteries and Secure Energy Transitions

investment decision and construction has been initiated or is underway. This underscores
the readiness of the battery industry to produce the necessary volumes of batteries to meet
expected rising demand from now to 2030.
Battery production is also set to diversify in the coming years, though the share of China inlithium-ion battery manufacturing capacity will remain high. It decreases from nearly 85%
today to 67% in 2030 (Figure 2.31). This shift is mainly driven by significant investment inEurope and North America. By 2030, both regions are home to around 15% each of global
battery manufacturing capacity, up from around 6% each today.
Figure 2.31 ⊳ Maximum lithium-ion battery manufacturing capacity by regionTWhand needs in the NZE Scenario, 2023, 2030 and 2050

10

Rest of world
Japan
Korea
United States
EuropeChina

8
6

NZE deployment in 2030

4
2

2023

2025

2030
IEA. CC BY 4.0.

If announcements materialise, battery manufacturing capacity more than triples by 2030
and is sufficient to meet future battery demand in the NZE Scenario
Notes: TWh = terawatt-hours. The analysis assumes a utilisation factor of 85%. Battery manufacturing capacity
refers to battery cells.
Source: IEA analysis based on Benchmark Minerals data.

IEA. CC BY 4.0.

Battery production relies on critical components such as cathodes and anodes. China
currently dominates global manufacturing capacity: nearly 90% of 98% of all cathode andanode active material manufacturing capacity is located in China. Most other cathode active
materials are produced in Korea or Japan. The various battery chemistries in use requiredifferent battery components: LFP is the prevalent battery chemistry in the Chinese market
and NMC in Europe and North America.
In contrast to the case of battery cells, the Chinese dominance of the cathode and anodeactive material manufacturing capacity does not see any significant reduction by 2030
(Figure 2.32). However, manufacturing capacity for cathode and anode active materials in
2030 is about two- times and five-times that of battery cells, which indicates a risk of future
Chapter 2 | Outlook for battery demand and supply

113

2

overcapacity. If this were to materialise, it might result in a more diverse supply chain thanks
to the manufacturing capacity built outside of China. However, nearly 80% of the additional
manufacturing capacity for cathode active materials and over 90% of the additional
manufacturing capacity for anode active materials outside of China is still at theannouncement stage, underscoring the importance of close attention to these componentsof the battery supply chain.
Figure 2.32 ⊳ Maximum output of lithium-ion battery and components byTWhregion, and demand in the NZE Scenario, 2023 and 2030

20

Battery

Cathode

15

30

10

20

5

10

2023 2030

2023 2030

Anode

40

Rest of world
Other Asia PacificNorth America
EuropeChina
Global2030 NZE
deployment
2023 2030
IEA. CC BY 4.0.

Announced plans for manufacturing battery components are sufficient to meet the 1.5 °C
scenario needs but offer less prospect of supply diversification than battery production
Notes: TWh = terawatt-hours. The analysis assumes a utilisation factor of 85%. Battery manufacturing capacity
refers to battery cells. Cathode and anode refer to cathode and anode active materials.
Source: IEA analysis based on Benchmark Minerals and BNEF data.

IEA. CC BY 4.0.

Manufacturing capacity alone does not determine which supplier battery manufacturers will
choose. For manufacturers in China in the coming years, the primary challenge will be toidentify a sufficiently large export market to absorb their considerable current overcapacity
and to improve current low margins. Conversely, manufacturers in regions such as theEuropean Union and the United States must demonstrate their cost competitiveness. The
quality, cost and characteristics of cells and components provided by various suppliers,
alongside local regulatory requirements and environmental, social and governancestandards, will be crucial in determining market winners and losers.
Overcapacity across the battery supply chain is a double-edged sword. While it helps todecrease prices for end-consumers and thus support climate goals, it also results in lower
cash flows and narrower margins for mining, refining and manufacturing companies. For
instance, the decline in battery mineral prices in 2023 led to a nearly 14% decrease in the
114

International Energy Agency | Batteries and Secure Energy Transitions

average battery pack price, but it also posed risks for operating and planned mining projects.
Many of these firms are now struggling to remain solvent, with several announcing cutbacks
in expenditure and job losses in 2024 (IEA, 2024a).
Box 2.6 ⊳Artificial intelligence may improve battery production
by accelerating innovation and sustainability

2

Artificial intelligence (AI) in general and machine learning in particular may influence
battery production by bringing about reductions in development timelines and fostering
innovation.
AI may be able to expedite the discovery and commercialisation of new battery materials,
significantly cutting the typically lengthy R&D phase (Financial Times, 2024). Machinelearning can accelerate the screening of vast chemical combinations to optimise battery
performance, as demonstrated by recent breakthroughs in electrolyte discovery (Science
News, 2024). Generative AI can design novel materials beyond the current spectrum in a
way that is akin to methodologies in drug discovery (MIT Technology Review, 2023).
A number of companies are already innovating in ways that could be relevant to battery
production. Supported by AI and edge computing, the Chinese company CATL has
developed a high-precision quality inspection model capable of achieving nearly 100%detection in seal pin welding processes, improving detection rates of defective parts per
million to defective parts per billion levels (CATL, 2023). Microsoft managed to narrow
down 32 million materials for possible use in a battery to 18 candidates in 80 hours,
showcasing the potential of AI (Financial Times, 2024). This led to the creation of a hybridmaterial, slashing lithium usage by up to 70%, promising improved battery sustainability(NewScientist, 2024). Umicore has now entered an AI platform agreement with Microsoft
in the hope of reducing material research timelines and to advance solid-state materials(Umicore, 2024).
In EV manufacturing, Renault is aiming to streamline vehicle development, to reduce thetypical timeframe from three years to two (Transport Topics, 2023). AI could also
potentially be used to improve the cost effectiveness of EV and battery production lines
as well as to help identify innovative materials.

Technical synergies for battery manufacturing for EVs and storage applications

IEA. CC BY 4.0.

The battery storage market so far has largely been served by products similar to those usedin EVs. This partly because the EV battery market is much larger, with battery storage
applications accounting for around 10% of annual battery volumes in the energy sector in
2023. This relative difference in size is expected to persist in the coming years.
Technical innovation driven by EV batteries has been a significant factor in the rapid decreasein the cost of batteries for storage applications. This cost reduction would not have beenpossible without the exponential growth experienced by EVs in recent years. One of the key
Chapter 2 | Outlook for battery demand and supply115

advantages of lithium-ion batteries, which are widely used in both markets, is theirmodularity. This characteristic allows such batteries to achieve economies of scale, leading
to rapid cost reductions. It also facilitates their use in a variety of applications.
Future growth of the battery storage market has prompted many battery suppliers to begin
developing products specifically for storage applications. While energy density is the primaryconsideration for EV batteries, it is less relevant for battery storage, where low cost and low
degradation over a high number of cycles are more important. As a result, battery storage
mostly uses less expensive LFP batteries rather than the high-nickel chemistries that
dominate the EV battery market.
Looking ahead, a more distinct specialisation between the manufacturing facilities used to
produce batteries for EVs and storage applications seems likely. However, the sharedtechnologies used in both types of batteries will continue to facilitate the transfer oftechnological advances from one product to the other, and it may also be possible to repurpose production lines in response to shifting demand. The cross-fertilisation oftechnology is expected to continue to accelerate innovation and further reduce prices ofbatteries for both EVs and storage applications.

2.5.2

Rising demand of critical minerals for batteries

IEA. CC BY 4.0.

The rapid rise in battery demand for EVs and storage implies a correspondingly significant
increase in demand for the critical minerals used in them. In the APS, battery mineral demandin 2030 increases between 2.5- and six-times from current levels, depending on the individual
mineral concerned (Figure 2.33). Demand for cathode materials such as lithium or nickel rises
by around 4.5-times during this period. Demand for cobalt rises less than for other criticalminerals, up by slightly more than 2.5-fold by 2030: in part this reflects efforts that battery
manufacturers have been making to use less of it in lithium-ion batteries. Manganese sees
the largest growth rate, with demand multiplying sixfold by 2030. While lithium andmanganese demand increases are smaller in absolute terms than those for other criticalminerals – a little over 300 kilotonnes (kt) additional demand for each of the minerals – their
growth rates are two of the largest, reflecting their pivotal roles in cathode active material
production. This is especially the case for lithium, which is used in cathodes for a range ofbattery chemistries. Graphite, the most prominent anode material, also sees particularly
rapid demand growth: demand rises more than fourfold, which translates to 2.8 million
tonnes (Mt) of additional absolute demand.
In the NZE Scenario, demand for critical minerals for batteries is more rapid, ranging from
3.5-times to as much as eight times the current level by 2030. Among cathode materials,
lithium and manganese show the biggest demand growth, six and eight times respectively,
and nickel sees the largest demand addition of more than 1.5 Mt in absolute terms by 2030.
Cobalt, despite having the smallest level of demand growth, still increases 3.5-times
compared with the 2023 level by 2030. Graphite sees additional demand of 4.2 Mt by 2030,
with demand rising by over six times from the current level.
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International Energy Agency | Batteries and Secure Energy Transitions

Figure 2.33 ⊳ Relative increase in demand for critical minerals used in
Index (2023 = 1)

batteries by scenario, 2030 and 2040

30

Lithium

NickelCobaltManganese

Graphite
NZE

25

APS

20
15
10
5
2030 2040

2030 2040

2030 2040

2030 2040

2030 2040
EA. CC BY 4.0.

Demand for critical minerals for EV and storage batteries
is set to surge to 2040
Note: NZE = Net Zero Emissions by 2050 Scenario; APS = Announced Pledges Scenario.

IEA. CC BY 4.0.

Meeting these demands requires a significant ramp up in mining, refining and recycling
activities. While some positive signs in terms of investment in new supply, limited progressso far has been made in diversifying supply sources. In some cases, such as that of nickel, thesituation is getting worse. Our analysis of project pipelines indicates that concentration levels
in 2030 are set to remain high, especially for refining operations, which is where the current
geographical concentration is the strongest (Figure 2.34). LFP batteries – the chemistry ofchoice for most storage battery applications – are not immune to supply chain concerns(Box 2.7). In addition to concerns surrounding geopolitical disruptions, a rise in announced
export control measures from several resource-owning countries in recent years has
highlighted the importance of accelerating progress on supply diversification. For example,
the Indonesian government prohibited exports of nickel ore to direct nickel mining sectors
in 2020 in order to build domestic processing capacity (Nikkei Asia, 2023), and China
strengthened export controls on graphite and began requiring government approval forexports in December 2023 (Reuters, 2023).
Lithium-ion battery recycling offers a secondary supply of materials while creating a moresustainable solution to address waste generated from the massive scale-up in battery
deployment. For bulk materials like aluminium, recycling practices are well established, but
this is not yet the case for many battery minerals such as lithium, nickel, and cobalt.
Recyclable battery feedstock is dominated by scrap from manufacturing processes, but thisis set to change by the end of the decade as the first generation reaches the end of their life.
Nearly 80 GWh of end-of-life batteries will be available for recycling in 2030 in the STEPS
Chapter 2 | Outlook for battery demand and supply

117

2

from EVs (Box 2.2). (This topic will be explored in depth in a forthcoming IEA publication onclean energy technology recycling.)
Figure 2.34 ⊳ Top-three country share of key mineral refining in 2023 and in
2030 based on announced projects

Lithium 2023
chemical 2030

Indonesia
China
Chile

Refinednickel2023

Argentina

2030

RussiaFinlandRefinedcobalt2023

Canada2030

Rest of world
20%

40%

60%

80%

100%
IEA. CC BY 4.0.

Project pipelines indicate that, in most cases, the geographical concentrationof mineral refining operations is likely to remain high to 2030

Box 2.7 ⊳Does the rise of LFP batteries imply a more secure future for global
battery markets?

LFP batteries are rising fast to a position of prominence among the suite of lithium-ion
batteries. They now have a larger share of the market for battery storage than any otherbattery chemistry, and their use is rising rapidly in the EV market, largely due to thepreference for this chemistry in China. While it is unaffected by the supply chain
disruptions stemming from nickel, cobalt and manganese markets, there are otherpotential risks to its supply chain.
One risk stems from its use of phosphorus. As phosphorus is used in large quantities in
fertiliser production, the surge in demand from battery manufacturing could potentiallylead to competition with fertiliser producers and the agriculture sector, unlessproduction increases sufficiently fast to satisfy both areas.

IEA. CC BY 4.0.

Phosphorous also presents the challenge of high geographical concentration. In terms ofextraction, around 70% of phosphate rock reserves are in Morocco and the Western
Sahara region, though exploration of deposits in Canada and Norway could potentially
identify additional reserves. On the processing side, there is only one known refining
method able to produce the high purity phosphorous required for LFP batteries, and only

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International Energy Agency | Batteries and Secure Energy Transitions

four countries have such production capacity: China, the United States, Kazakhstan, andViet Nam.
Another consideration is price. LFP batteries are significantly less expensive than othervariants of lithium-ion batteries. That is one of the key reasons for their current success.
However, in 2022, during a period of extremely high lithium carbonate prices, LFP battery
prices saw a larger relative jump in price than batteries using NCA and NMC chemistries.
While LFP batteries remained cheaper per kilowatt-hour than NCA and NMC batteries
even during this time, future price volatility could have an impact on their affordability.

IEA. CC BY 4.0.

An important concern relates to battery recycling. Once sufficient feedstock from retired
EVs is available for recycling or reuse, the recycling industry will have more financial
incentive to recycle NCA and NMC batteries than is the case for LFP batteries because
they use higher value materials. Adequate volumes of scrapped batteries and expanded
processing lines are essential to make recycling competitive and economically viable.
New regulations may be necessary to ensure that LFP batteries are recycled. LFP recycling
primarily targets lithium because it is the most valuable component of the battery in theabsence of nickel and cobalt. Of the two main process currently used for recycling,
pyrometallurgical processes are not suited for lithium recovery, and hydrometallurgicalprocesses must adjust their flowsheets to enhance recycling efficiency from LFP
batteries. With the anticipated rise in the proportion of LFP batteries in recycling
feedstock, distinct treatment processes for LFP batteries and manufacturing waste arelikely to emerge.

Chapter 2 | Outlook for battery demand and supply

1192

IEA. CC BY 4.0.

Chapter 3
Policy implications and recommendations
Key measures to foster battery deployment
S U M M A R Y• Batteries are an essential building block of the clean energy transition. They can help
to deliver the key energy targets agreed by nearly 200 countries at the COP28 in 2023.
The IEA Net Zero Emissions by 2050 Scenario sets out the pathway. For batteries torealise their potential to contribute, policy makers need to establish effective
frameworks for market access, ensure fair competition among technologies, andrecognise the varied contributions that batteries make to sustainability, security andaffordability of energy.

• Batteries for electric vehicles (EVs) are essential for the clean energy transition in roadtransport. Increasing the uptake of EVs requires accessible and affordable charging
infrastructure as well as reinforced electricity networks. It needs increased focus onaffordable EV models that require smaller batteries. Avoiding the oversizing of
average electric car batteries could save 2 TWh of batteries until 2030, which is similar
to current global EV battery capacity. Promoting smart EV charging is another priority,
unlocking the ability of EVs to contribute to flexibility needs of power systems.

• Battery energy storage facilitates the integration of solar PV and wind while also
providing essential services including grid stability, congestion management andcapacity adequacy. Current regulations and policies in many jurisdictions posesignificant risks that constrain development of battery energy storage which threaten
the global goal of tripling of renewable energy capacity by 2030. In a Low Battery Case,the uptake of solar PV in particular is slowed, prolonging the use of unabated coal andnatural gas in power systems, stalling emissions reductions in the 2030s and putting
the 1.5 °C target out of reach, as well as increasing fossil fuel imports bills.

• To unlock the full potential of battery storage, policy makers and regulators need toensure that regulatory systems recognise the full value of the services that it offers,
enable market access and establish price signals that accurately reflect its various
contributions. To capture the full benefits of behind-the-meter batteries, regulatory
systems need to better align consumer and system benefits through cost-reflective
variable electricity tariffs. Where feasible, they should also allow the aggregation ofbehind-the-meter batteries into virtual power plants that can offer services akin toutility-scale projects.

IEA. CC BY 4.0.

• Growing demand for critical minerals for batteries puts a focus on creating secure,resilient and sustainable supply chains. This requires the development of diversified
international networks, and of environmental, social and governance standards formining and processing. Success depends crucially on international co-operation.
Encouraging innovation through research and development on battery chemistries
and design is needed, as are regulatory frameworks that promote battery recycling.
Chapter 3 | Policy implications and recommendations

121

3.1

Introduction

Batteries have the potential to facilitate higher shares of solar photovoltaics (PV) and windin power generation, support electric vehicle (EV) deployment, and provide access toelectricity for all. This makes major contributions to support the clean energy transition in a
cost-effective way and to enhance energy security. Tapping this potential requires action
from policy makers and regulators to minimise the barriers and bottlenecks for wider battery
deployment.
The gap between battery uptake in 2030 in the Stated Policies Scenario (STEPS) and the
Net Zero Emissions by 2050 (NZE) Scenario illustrates the scale of the task ahead. Global
battery volumes in use across the energy system expand from nearly 2.5 terawatt-hours(TWh) today to 19 TWh in the STEPS by 2030. The NZE Scenario requires a further increase
to nearly 30 TWh in 2030 to meet the targets set at the 28th United Nations Conference of
the Parties (COP28) in December 2023 to triple renewable energy capacity and doubleenergy efficiency progress by 2030 and accelerate the transition away from fossil fuels.
Battery deployment to the NZE Scenario level must be underpinned by significant growth inmanufacturing capacity and critical minerals availability (Figure 3.1). Major increases inbatteries are also needed after 2030. Careful planning is required to ensure that thisambitious transition occurs in an equitable, sustainable and timely manner.
Figure 3.1 ⊳30

Closing gaps across the battery ecosystem between the STEPS
and NZE Scenario, 2030

Battery volumes
in EVs (TWh)

1.5

Battery storage
in power (TW)9

Manufacturingneeds (TWh)

12

20

1.0

6

8

10

0.5

3

4

STEPS
STEPS
NZE
Advanced economies

NZE
China

STEPS NZE
Other EMDE

Critical minerals(Mt)

STEPS NZE
GlobalIEA. CC BY 4.0.

IEA. CC BY 4.0.

Emerging market and developing economies other than China play a pivotal role to close
the gap in battery volumes between the two scenarios for EV and energy storage
Note: TWh = terawatt-hours; TW = terawatt; Mt = million tonnes; STEPS = Stated Policies Scenario; NZE = Net
Zero Emissions by 2050 Scenario; Other EMDE = emerging market and developing economies excluding China.

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International Energy Agency | Batteries and Secure Energy Transitions

The battery volumes in use gap that needs to be to be filled requires action in both thetransport and power sectors and throughout the battery supply chain. In road transport, theelectric vehicle fleet in the NZE Scenario in 2030 is 50% bigger than in the STEPS, requiring
steep increases in the volumes of batteries in use in advanced economies (+80%), China(+10%) and other emerging market and developing economies (+170%). Battery storage inthe power sector needs to increase significantly beyond the STEPS in all regions: installedcapacity rises to 1 200 gigawatt (GW) by 2030 in the NZE Scenario, requiring a 170% increasein annual capacity additions by 2030 compared to the STEPS.

3.2

Electric vehicles

EVs equipped with batteries play a crucial role to decarbonise road transport, contribute toenergy efficiency goals, cut air pollution and reduce oil demand. Today EV uptake isconcentrated in a few key markets – China, the European Union and United States. The
accelerated EV deployment projected in the NZE Scenario depends on taking timely action
to address the factors that hinder EV penetration in a number of emerging markets anddeveloping economies beyond China. This includes scarce availability of low cost EV models
and charging infrastructure, and absent or weak fuel economy standards.

3.2.1

Expanding EV adoption beyond key markets

Affordability is a crucial determinant of demand for EVs. The average retail price of EVs inthe United States and Europe has increased since 2021 and hampered EV uptake (JATO,
2023). Yet, in China the EV price trend is downward, and today the least expensive new carson the market are electric. These affordable electric car models, supported by no or low
vehicle registration taxes, are boosting China’s road transport electrification efforts anddriving global battery demand. The increasing availability of affordable models is likely toincrease EV sales, particularly in other emerging market and developing economies.

IEA. CC BY 4.0.

Insufficient grid infrastructure is an important barrier to advancing electromobility,
especially in emerging market and developing economies other than China. Ensuring viable
and equitable charging infrastructure often requires expansion of the electricity grid,
especially in rural areas. Even in advanced economies like Australia, where urban grids canhandle EV penetration levels of up to 80% without upgrades, already overloaded rural grids
cannot support any additional load from EVs (IEA, 2023a). Large-scale adoption of EVs
requires the roll-out of charging infrastructure with grid connectivity. In addition toconventional grid enhancements, renewables-based decentralised grids in combination withvehicle-to-grid technology could help to address the charging hurdle.
To sustain increased penetration of EVs in mature markets, policies that stimulate demandshould transition to targeted measures that focus on production and purchase incentives forsmall EVs to enhance affordability for more consumers while also reducing material demand.
Environmental standards, weight-based taxation and parking charges are measures that can
incentivise both producers and consumers in this direction.
Chapter 3 | Policy implications and recommendations

123

3

On the other hand, emerging market and developing economies other than China require
broad policy support and demand-side incentives to accelerate EV uptake. These countries
are home to approximately 65% of the world’s population, but today account for only 8% of
the global EV fleet. However, they are key players in the outlook for increased battery
demand. In the STEPS, total battery volumes in use in EV fleets increase nearly twenty-foldin emerging market and developing economies other than China by 2030. In the
NZE Scenario, they increase more than fifty-fold. This highlights the significant role that
accelerated EV deployment in emerging market and developing economies other than China
has to advance the clean energy transition.
Trends in battery pack size for EVs will influence the magnitude of additional demand forbatteries. Appropriately sized batteries for personal transport, well planned charging
infrastructure and electrification of mass transit will foster development of a sustainableroad transport sector. Charging infrastructure that is perceived as inadequate, for example,
contributes to range anxiety and to customers opting for larger batteries than actuallyneeded. Optimising the use of EV batteries is important to decarbonise transport. For
example, large batteries for electric buses, which are sized at around 200 kilowatt-hours,
provide more energy service demand per kilometre than a private car (see Chapter 1). Having
a widespread public charging network and implementing policies designed to encourage
smaller cars are effective steps to reduce EV battery size and to manage critical mineralavailability.

3.2.2

Impact of average battery pack size on future demand

The number of electric car models available globally surged by 15% to almost 600 in 2023.
Two-thirds of these models were large cars, sport utility vehicles (SUVs) or pick-up trucks,
accounting for 50% of all electric car sales in China, 60% in Europe and 75% in the UnitedStates in 2023, compared with around 20-25% five years earlier. New EVs also tend to belarger than their internal combustion engine (ICE) vehicle counterparts. In Europe, forexample, large EVs have over twice the market share of ICE vehicles in the same category. In
China, new models focus more on SUVs and large vehicles than on small and medium-size
electric models.

IEA. CC BY 4.0.

Preferences for large EVs are driving up demand for large batteries, which in turn puts
additional pressure on critical mineral supplies. In 2023, the sales-weighted average electric
SUV in Europe featured a battery almost twice the size of that in the average small electriccar, significantly increasing critical mineral requirements. Promoting small EVs can curb
demand for the critical minerals that go into batteries. There is significant potential todownsize batteries even in small EVs, as indicated in China where the average battery size insmall EVs sold in 2022 was less than half the size of similar models sold in the United States.
The Downsized Case explores a case where the global average size of batteries in new battery
electric cars is reduced by less than 30% by 2030. This would yield substantial benefits, saving
a cumulative 2 TWh of batteries between today and 2030 when compared to the STEPS –124

International Energy Agency | Batteries and Secure Energy Transitions

almost equal to the total battery capacity of the global EV fleet today (Figure 3.2). To put it
another way, it would avoid the use of around 1.6 million tonnes of graphite, 700 kilotonnes(kt) of nickel, 200 kt of lithium and 100 kt of cobalt. For these battery minerals, thiscumulative amount is equivalent to more than half of the total demand in 2030 for all clean
energy technologies. It would also save nearly 160 kt of manganese, equivalent to around
85% of clean-energy related manganese demand today.

TWh

Figure 3.2 ⊳Global battery volumes used in battery electric car fleets in
the STEPS and Downsized Case, 2020-2030

3

14
STEPS

12

Downsized Case

10
8
6
4
2
2020

2025

2030
IEA. CC BY 4.0.

Reducing the average size of batteries in new battery electric cars by less than 30%
by 2030 lowers cumulative battery needs by nearly 2 TWh
Note: TWh = terawatt-hours.

3.2.3

Electric vehicles and power systems

IEA. CC BY 4.0.

As the adoption of EVs accelerates, policy makers need to ensure co-ordination across theentire value chain. Key elements include EV owners, grid operators, charging stations,charging management software providers and energy management systems. For instance,
optimal charging practices depend on effective communication between charging stations
and EV drivers.
Policy makers need to make certain that regulatory frameworks are fit for purpose. Amongother elements, regulatory frameworks need to ensure that grid connections and behindthe-meter electrical infrastructure in new buildings are adequately equipped toaccommodate the expanding fleet of EVs. Also, that they promote inter-operability via open
protocols for data sharing in order to help create a secure and scalable system that addresses
the evolving cybersecurity and connectivity requirements of both hardware and software
components. Dynamic tariffs and flexible pricing models should be widely implemented to
Chapter 3 | Policy implications and recommendations

125

incentivise efficient resource allocation and drive sustainable growth to maximise benefits
for both consumers and system operators.

3.3

Power

Batteries provide essential services to power systems, improving their flexibility through theprovision of bulk energy shifting, ancillary services and capacity adequacy. They also increase
the resilience of grids and can be tapped to manage grid congestion, thereby minimising theneed for transmission or distribution capacity expansion or upgrades. However, there is arisk that current policies and regulations will not enable battery storage to scale up at thepace that is necessary to support ambitious clean energy transitions. In order to reduce thisrisk, we recommend making changes as necessary to policy and regulatory frameworks toensure that batteries are eligible to provide the services they can offer and that theircontribution is properly valued.

3.3.1

Risks of delayed battery storage expansion

If the right conditions are not in place to scale up battery storage in the power sector at thepace envisioned in the NZE Scenario, there is a significant risk that this will put a brake on
clean energy transitions. A lack of battery storage would have implications for the uptake ofrenewables, and as a result for the transition away from fossil fuels and the reduction ofcarbon dioxide (CO2) emissions.
Battery storage is particularly critical to the scaling up of solar PV, the most important
technology to achieve the goal of tripling of global renewables by 2030. Our analysis indicatesthat successfully integrating new solar PV becomes increasingly strongly linked to theavailability of energy storage as the share of solar PV in electricity generation rises, and thatmuch of this storage is best delivered by batteries, which are ideally suited to provide theflexibility over periods of several hours that solar PV needs. At a share of around 20%, theanalysis finds that energy storage becomes critical to enable further increases in solar PV
penetration. In the Announced Pledges Scenario, several countries cross this threshold
before 2030 – Australia, Chile, United States and China – while several others see a solar PV
share of over 15% by 2030, including India, Korea, Japan and several African countries, suchas South Africa and Nigeria. In the NZE Scenario, more countries cross the 20% threshold
before 2030, and more approach that threshold. Wind power also calls for enhanced powersystem flexibility. But our analysis indicates that batteries are less well suited to provide thisthan other forms of storage and sources of flexibility because wind power calls for flexibility
over longer periods of time, up to and including whole seasons.

IEA. CC BY 4.0.

To better understand the risks of delayed development of battery storage, we explore a “Low
Battery Case”, where a 20% share of solar PV in electricity generation becomes a limitation.
This is an indicative threshold based our detailed hourly analysis of multiple power systems

126

International Energy Agency | Batteries and Secure Energy Transitions

around the world. 1 In such a case, we find that close to 500 GW of solar PV deployed by 2030
would be at risk. This represents 20% of the additional renewable energy capacity needed tobridge the gap between the renewables capacity in 2030 projected under current policies,
laws and market forces in the STEPS, and the capacity needed to reach the global target of
tripling renewables (Figure 3.3). This is equivalent to nearly the total renewables capacity
installed in 2023. If the limitation were to persist long term, it would put at risk over
6 000 GW of solar PV in 2050, which is over 40% of the solar PV envisaged in the NZE Scenario
in that year.
Figure 3.3 ⊳Solar PV share of electricity generationin the NZE Scenario
Battery
enabled

GW

40%

Solar PV share of electricity generation in the NZE Scenario (left)
and the gap of renewable energy capacity by source between
the STEPS and the NZE Scenario in 2030 (right)

China
Other EMDE

30%

Advanced
economies

20%
10%

2020

1 600

Gap of renewable capacity by source
between STEPS and NZE in 2030
Solar PV at risk
with less battery
storage

1 200
800
400

2030

2040

2050

Solar PV

Wind

Hydro

Other

IEA. CC BY 4.0.

Failure to scale up battery storage would put at risk up to 500 GW of thesolar PV needed to triple renewable capacity by 2030
Note: Other EMDE = emerging market and developing economies other than China; GW = gigawatt.

In the Low Battery Case, the lost output from the limited level of solar PV would amount toover 10 000 TWh globally in 2050 and represent an enormous risk to internationally agreed
emissions reduction goals if it were replaced by unabated coal or natural gas power
generation. The volume of electricity generation affected would be modest in the near term
but would become significant by 2035 and continue rising afterwards. In the Low Battery
Case, we find that global electricity generation from coal would be cut by only half by 2050

IEA. CC BY 4.0.

1 This indicative threshold is applied to quantify the risks that might be associated with failing to scale up

battery storage in a timely manner. However, there is no precise value for the share of solar PV that accurately
represents a limitation for all power systems. Each system, with its own unique set of electricity demand
patterns, resource and technology mix, interconnections, grid infrastructure and regulations will face
integration challenges at different shares of solar PV.

Chapter 3 | Policy implications and recommendations

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3

compared with today, whereas it reaches zero in 2040 in the NZE Scenario. This is despite
the fact that some of the lost output from solar PV would not need to be replaced due to themodest levels of curtailment found to be cost optimal in the NZE Scenario. While efforts
could be made to step up deployment of other low-emissions technologies in place of thelost solar PV, this would be difficult as high ambitions across the board are already includedin the NZE Scenario.
The balance of unabated fossil fuels in the Low Battery Case varies across regions based on
their policy commitments, resource availability and power plant fleets. In those advanced
economies with firm commitments to phase out unabated coal, there is risk of a continued
need for natural gas in place of the lost solar PV. In these countries, natural gas-fired
generation would be over three-times higher in 2035 in the Low Battery Case than in the
NZE Scenario, and only 40% lower than in the STEPS (Figure 3.4). In China, coal-fired power
would be used in place of most of the lost solar PV output in the Low Battery Case: it would
add some 1 200 TWh in 2035, which would mean coal use two-times higher than in the
NZE Scenario. In other emerging market and developing economies, a mix of coal and natural
gas would be used to replace the lost solar PV output. In such regions, including India,
Southeast Asia, Africa and much of Latin America, the increased need for both natural gas
and coal would be larger than elsewhere, indicating the critical importance of solar PV andbattery storage for their energy transitions.

TWhFigure 3.4 ⊳6 000

Difference in electricity generation by source and region in the
NZE Scenario and Low Battery Case, 2035 and 2050

Advanced economies

Other EMDE

China
Natural gas
Coal
Solar PV

4 000
2 000
0

-2 000-4 000-6 000

2035

2050

2035

2050

2035

2050
IEA. CC BY 4.0.

Lost output from solar PV in the Low Battery Case risks substantially increasing
the use of unabated coal and natural gas in the power sector

IEA. CC BY 4.0.

Note: TWh = terawatt-hours; Other EMDE = emerging market and developing economies other than China.

128

International Energy Agency | Batteries and Secure Energy Transitions

Clean energy transitions in the power sector could easily stall in the Low Battery Case. As aresult of increased use of unabated coal and natural gas that it projects, emissions reductionsin the power sector could slow in the 2030s and stall at around 5 gigatonnes (Gt) through to2050, rather than reducing steeply throughout the 2030s as envisioned in the NZE Scenario(Figure 3.5). Cumulative power sector emissions are 83 Gt higher over the period to 2050,
equivalent to the cumulative emissions of the global power sector over the last six years, andenough to raise the median global average temperature increase to 2100 to well above
1.5 °C. This represents a serious risk for clean energy transitions, especially since the power
sector is the largest CO2 emitting sector and clean electrification plays a vital role in cutting
emissions in other sectors.

Gt CO2

Figure 3.5 ⊳Global power sector CO2 emissions in the NZE Scenario
and Low Battery Case, 2022-2050

16
14
12
10
8
6

Low Battery Case

4
2
0
-2
2022

NZE
2030

2040

2050
IEA. CC BY 4.0.

More unabated coal and natural gas use in the Low Battery Case causes CO2 emissions
reductions from the power sector to plateau in the 2030s, stalling clean energy transitions
Note: Gt CO2 = gigatonnes of carbon dioxide.

IEA. CC BY 4.0.

The additional use of natural gas and coal in the Low Battery Case would have implications
for trade in energy and as well as for energy security. Fossil fuel import bills in importing
countries are on average USD 12.5 billion higher per year from 2030 to 2050 in the Low
Battery Case than in the NZE Scenario. Additional natural gas imports would increase themost, costing importing nations USD 7 billion per year extra, with most of the additional gas
for use in the European Union and Korea (Figure 3.6). In India, the additional need for coal
imports alongside increases in domestic production would raise coal import bills by
USD 5 billion per year from 2030 to 2050, with the high cost reflecting its heavy reliance on
solar PV and battery storage to transition away from fossil fuels.

Chapter 3 | Policy implications and recommendations

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3

Figure 3.6 ⊳Additional annual average fossil fuel imports in selected
countries in the Low Battery Case relative to the NZE Scenario,
2030-2050

Billion USD (2022, MER)

6Natural gas
Coal

5
4
3
2
1
India

European Union

Korea
IEA. CC BY 4.0.

In a Low Battery Case, average annual fossil fuel import bills could be USD 12.5 billion
higher in key markets from 2030 to 2050
Note: MER = market exchange rate.

3.3.2

Utility-scale battery storage

IEA. CC BY 4.0.

In liberalised electricity markets, the deployment of battery storage is often hampered byregulatory and other barriers (see Chapter 1). Market access restrictions can prevent battery
storage systems from participating in energy markets, including short-term electricity
markets, capacity mechanisms, and markets for balancing and congestion management.
Restrictions on market participation and providing services may also prevent value stacking
across various revenue streams, thereby reducing potential profitability of battery storage
projects. These restrictions should be lifted to allow full market participation by battery
storage systems.
There are other issues too. The unique nature of battery storage as both generation and load
can lead to double taxation, putting it at a systemic disadvantage compared with othersources of flexibility and capacity adequacy. This could be addressed through adjustments totariff structures that take account of the dual character of storage and reflect the value
storage assets can provide to the electricity grid. Moreover, battery storage may not receive
the right price signals to incentivise optimal deployment and operation. This could be
addressed by ensuring that clear signals are provided about where grid congestion ishappening, incentivising renewable integration through more frequent dispatch andsettlement periods in wholesale markets (sub-hourly intervals), and applying adequate
carbon pricing.
130International Energy Agency | Batteries and Secure Energy Transitions

For some services that can be provided by batteries, such as the provision of black startcapability or inertia, remuneration opportunities are not yet in place or are only being tested
in pilot projects, as traditionally these services were provided at no cost by conventional
power plants, which are progressively disappearing from the scene in many markets.
Reforms that allow battery storage systems to provide a wider range of products and services
would help overcome this barrier. In systems that are transitioning from regulated toliberalised markets, batteries are often not able to participate fully in the competitive
procurement of system services and energy arbitrage opportunities in wholesale markets. It
is essential that the benefits batteries can provide to power systems are recognised and thatpower market reforms establish electricity and ancillary service markets that send theappropriate signals and adequately value their contribution.
Long-term power system planning helps to set priorities for all power system actors,
including in competitive markets. Although market mechanisms and investment signals areof central importance, clarity from policy makers about the long-term role of various
technologies, including sources of electricity, battery storage and other forms of flexibility,
can provide valuable guidance for companies and investors, and set the stage for innovation.
It can also help grid operators with long-term planning. To make the most of the potential
for batteries to facilitate deferral of new investment in transmission and distribution, theyneed to be considered in grid planning exercises, and their capabilities and costs need to bereflected in the associated modelling. In addition, remuneration mechanisms fortransmission and distribution system operators need to be updated to incentivise network
investment deferral using batteries or other non-wire alternatives to grid reinforcement andexpansion.

IEA. CC BY 4.0.

A related issue where clarity is needed concerns the question of who can own and operatebattery storage systems. This can be an issue when transmission or distribution system
operators seek to make use of storage to minimise the need for new grid investment. Clear
rules for ownership, system-optimising operation and services procurement are necessary
to stimulate investment in these assets. In jurisdictions with strict unbundling between
transmission/distribution and generation, such as the European Union, enabling andincentivising system operators to procure grid services from third parties, such as throughbilateral contracts or on local flexibility markets, could be a potential solution. A good
example is local flexibility markets in the United Kingdom, in which distribution system
operators now routinely procure flexibility services to manage grid congestion. For
developers of storage, this approach could open an additional revenue stream to supplement
renumeration from commercial operations on wholesale electricity and ancillary service
markets. However, regulatory frameworks need to be adjusted carefully to minimise the riskof storage assets receiving regulated payments and undercutting the competitive power
market.
In regulated, vertically integrated power systems – the model in many emerging market anddeveloping economies – it is essential to have integrated planning that recognises themultiple benefits battery storage can provide to power systems alongside other options such
Chapter 3 | Policy implications and recommendations1313

as demand-side response, power plant retrofits, smart grid measures and other technologies
that boost flexibility. If done well, integrated planning can ensure that the scaling up ofbattery storage is aligned with the broader evolution of an electricity system, in particular
the increase in renewables capacity and the phase-out of coal. Integrated planning also helps
to set targets for battery storage and provide a roadmap for its deployment to mobilise thenecessary investment.

3.3.3

Behind-the-meter battery storage

Behind-the-meter battery storage is quickly gaining momentum, with 30 GW installedworldwide already. However, its competitiveness is highly dependent on elements such as
tariff structure, proper policy and regulatory frameworks, which are vital to their continued
deployment. Tariff structures should incentivise optimal behind-the-meter deployment andprovide fair remuneration that reflects the value of its contributions to the electricity system.
In competitive markets, this remuneration should be based on the market value of theservices provided.
Wherever possible, the use of behind-the-meter battery storage should align consumer
preferences and system benefits so as to make the most of investment and physical assets.
This includes expanding access to virtual power plant participation for consumers andensuring that they are remunerated in proportion to the system value of the services,
thereby providing income to consumers while also promoting system flexibility. Tariff
regimes should also account for the local grid structure and incentivise behind-the-meterstorage deployment that is useful to the needs of the specific grid. It is imperative that
support measures for behind-the-meter storage avoid or limit cost shifting from households
that reduce their reliance on the power grid to those that remain wholly reliant on grid
service. Continued progress on grid digitalisation, which will allow higher visibility of realtime system needs, is crucial to garner maximum benefit from the system flexibilities thatbehind-the-meter batteries can provide.

3.3.4

Energy access

IEA. CC BY 4.0.

The vast majority of people projected to gain access to electricity via off-grid options by 2030
live in Africa. Deploying batteries at the required volumes demands significant battery
manufacturing and assembly, maintenance, recycling and disposal capacity on the continent.
Much needs to be done for this to happen: at present developers have a web of import duties
on battery cells and pack to navigate, local expertise for maintenance is insufficient andbattery recycling and disposal services have not yet been sufficiently developed. The
development of local capacity in Africa spanning manufacturing, operations andmaintenance will be key to achieving access goals by 2030 and stimulate local economies.
Some deployment practices can hinder rather than help: today, for instance, developers
focus on capital expenditure and make inadequate provision for maintenance. This
contributes to the unnecessarily large number of off-grid systems that fail prematurely and132

International Energy Agency | Batteries and Secure Energy Transitions

permanently. For a variety of reasons, batteries are often the root cause of these failures.
Battery lifespans are generally shorter than those of other system components, and also
more sensitive to field conditions, such as amount of cycling, depth of discharge andtemperature. Battery management systems, which are embedded components to optimise
battery charging and discharging, can improve lifespans but must be robust in order to doso. Some developers report system failures originating in the battery management systems
themselves, and these are particularly difficult to debug and fix in the field, especially in ruraland remote areas. Plus, there is a lack of consensus around what should be expected in termsof the performance and lifespan of newer battery chemistries, including lithium-ion
batteries, in actual on-the-ground conditions. More realistic testing and the sharing ofexperiences should help developers make better investment and operational decisions
regarding batteries.
Battery recycling and disposal capabilities and incentives are nascent in Africa. The challenge
is especially acute for very small and very large lithium-ion batteries. Lithium-ion is especiallydifficult to recycle because opening the batteries safely requires specific expertise andadherence to strict safety protocols. Small lithium-ion batteries, such as those used in solar
lighting, are practically and financially challenging to gather and process. For these technicaland logistical reasons, currently there is no lithium-ion battery recycling on the African
continent.
The NZE Scenario projects that over time most people that gain first electricity accessthrough off-grid systems eventually will benefit from a grid connection. This presents bothchallenges and opportunities for decentralised access projects. Transparency in grid
extension plans, effective grid-integration regulations and partnerships with utilities can help
to deliver technical and economic benefits for all parties, including consumers (seeChapter 2, Box 2.5). It is also worth noting that subsequent to gaining grid connection, thereis scope for interconnected mini-grids to continue operating in order to enhance local
reliability and provide grid services.

3.4

Investment in batteries

IEA. CC BY 4.0.

Achieving the scale of annual investment in EV batteries and battery storage required to get
on a 1.5 °C-compatible pathway will not be an easy feat. A range of risks stand in the way,
including the high cost of capital, especially in the emerging market and developing
economies, and a variety of regulatory and policy barriers. These risks need to be addressedin order to help scale up investment in batteries. Doing this successfully requires several key
issues to be adequately addressed.
Establish clear and stable regulatory frameworks that define the role of EVs and battery
storage in the energy transition. This involves clarifying the role over time of thesetechnologies in the context of clean energy transition plans and emissions reduction targets.
For EVs, it includes creating an integrated transport sector decarbonisation strategy within anational transport plan (IEA, 2023b), accompanied by supportive policies and measures for
Chapter 3 | Policy implications and recommendations

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3

the emerging second-hand EV market and forward-looking infrastructure planning for EV
charging infrastructure. For battery storage, it includes granting non-discriminatory accessto electricity markets and provision of services, and defining permissible use cases so as tofacilitate planning by investors and operators and to make it easier for them to assess likely
revenues. Where feasible, it would also mean reforming power markets to establish
wholesale markets that help deliver cost-effective short- and medium-term flexibility, andcan be a significant revenue driver for battery storage projects, especially where variable
renewables account for a large share of power generation.
Develop the battery market for EV and energy storage through fiscal incentives andprocurement programmes, including concessional support in emerging market anddeveloping economies where necessary. Fiscal incentives can speed up the transition fromICE vehicles to EVs by bringing forward the break-even point between the two technologies,
especially if combined with carefully managed reductions in fossil fuel subsidies. Suchincentives could be accompanied by electric bus public transportation procurement
programmes with government support and, where necessary, concessional finance fromdevelopment finance institutions. They could also be paired with competitive capacity
auctions that provide capacity payments at a fixed rate. These would help to minimise thecost of such payments, while also enabling battery storage services to significantly improvetheir financial viability, especially if combined with concessional debt in very immaturebattery storage markets.
Expand consumer access to EVs and mitigate off-taker risk. The purchase price of an EV is a
substantial expense for most households around the world, and low cost EV models remain
scarce outside China. Focusing incentives on the construction and sale of small and lessexpensive EV models and expanding access to low cost and standardised financing andleasing models could go a long way to increase affordability of EVs. For battery storage
operators, lowering the risk of delayed payments or failure to pay for services provided totransmission networks would help to provide a more secure investment environment, which
could be done by expanding off-taker guarantee and credit enhancement mechanisms.

3.5

Manufacturing and supply chains

Building secure, resilient and sustainable battery supply chains necessitates a comprehensive
approach that encompasses all stages of the supply chain. This includes raw material
extraction, refining, manufacturing, end-of-life product management and recycling.

IEA. CC BY 4.0.

3.5.1

Developing resilient, sustainable and affordable supply chains

Establishing a secure supply chain for EVs and battery storage demands a multifaceted
strategy. Today a number of stages in the battery supply chain, from material mining andrefining to battery component and cell manufacturing, are heavily concentrated in a few
regions, notably in Asia. This concentration remains a concern as it can make the entire
supply chain vulnerable to individual country policy choices, company decisions, natural
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International Energy Agency | Batteries and Secure Energy Transitions

disasters or technical failures. Mitigating this risk entails diversifying all facets of battery
production to build a more robust and resilient supply chain. Diversification encompasses
not only manufacturing but also knowledge and skills. Currently most of the expertiseneeded to produce high quality lithium-ion batteries at scale is concentrated in China, Korea
and Japan.
Diversification should be pursued in ways that seek to avoid the geoeconomic fragmentationof the battery supply chain. There is a need to recognise the value of open trade in enabling
cost reductions and promoting efficiency. It is not realistic or efficient for most countries toseek to compete in all parts of all supply chains. Identifying relative strengths and seeking
complementary partnerships should be at the heart of the development of diversified andresilient battery supply chains.
Recycling is increasingly important and will become much more so in the coming years,
especially after 2030 as battery volumes swell. Rapid and continuing expansion of the EV
market underscores the need for effective recycling strategies to manage end-of-lifebatteries and to recover valuable materials. Recycling fosters a more sustainable and circular
economy and mitigates potential supply constraints for critical minerals. The case of leadacid batteries demonstrates that battery recycling rates close to 100% can be achieved withappropriate market incentives and regulations. This highlights the importance of
implementing effective frameworks to incentivise recycling.

3.5.2

Ensuring secure, reliable and resilient critical minerals supplies

IEA. CC BY 4.0.

All scenarios point to rising demand for the critical minerals needed for batteries. Concerted
efforts are needed to increase sustainable and reliable mineral supplies by bringing new
projects online across diverse geographical regions, facilitating cross-investment
opportunities between producer and consumer countries, and introducing financial tools to
de-risk investment.
In recent years, governments have introduced policy measures to diversify and strengthen
critical mineral supply chains. For example, the US Inflation Reduction Act of 2022 offers a
tax credit of USD 3 750 for EVs that meet specified criteria related to domestic critical mineral
extraction or processing, or are sourced from a country with which the United States has afree trade agreement. This tax credit, which includes critical minerals that are recycled in
North America, is in addition to a USD 3 750 credit for a certain proportion of the EV battery
components that have been produced or manufactured in North America. The European
Union Critical Raw Materials Act aims by 2030 to reach the point where its member states
extract 10%, process 40% and recycle 25% of annual consumption of critical minerals
deemed strategic by the EU. It also aims to limit its imports of any of these minerals to a
maximum of 65% of the Union’s annual consumption from a single exporting country.
Canada’s Critical Minerals Strategy aims to boost the supply of responsibly sourced criticalminerals and to develop domestic value chains. It is backed by CAD 3.8 billion (USD
2.8 billion) in federal funding: one support measure is a 30% Critical Minerals Exploration Tax
Chapter 3 | Policy implications and recommendations

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3

Credit. Major producer countries have introduced mining policies to boost domestic
production, expand into the downstream value chain and improve environmental and social
performance. The IEA Critical Minerals Policy Tracker has identified nearly 450 policies andregulations in more than 35 countries to help governments explore existing and new criticalmineral policies (IEA, 2023c).
Balanced markets do not just depend on supply. There is also significant scope for action on
the demand side to ease potential strains through recycling, technology innovation, andbehavioural change, e.g. choosing smaller cars with smaller batteries. Investment in facilities
to recycle minerals extracted from end-of-life batteries to battery-grade quality will be
crucial, as will investment to recycle scrap materials from battery production.
Recycling alone will not eliminate the necessity for additional investment in primary supply,
especially as it is likely to take at least several years to obtain adequate levels of feedstock
to scale up recycled volumes. Nevertheless, the very large volumes of end-of-life batteries
that will become available in the years ahead mean that the market for producing recycled
minerals in the next decade is poised for significant expansion, paralleling the growth of the
EV and battery storage markets. End-of-life lithium-ion battery management is essential for
proper collection and recycling. For example, in the European Union extended producer
responsibility scheme, battery manufacturers and EV manufacturers must ensure compliant
end-of-life battery handling, which is expected to incentivise creation of battery collection
centres for consumers and stakeholders.
The reuse of end-of-life EV batteries for storage applications could further enhance theeffectiveness of circular economy strategies. In addition, secondary battery material
production supported by recycling of manufacturing scrap and of end-of-life batteries could
result in a further drop in demand for primary supply of critical minerals from mining in 2030.
Battery recycling offers significant potential as a secondary source of critical minerals that ismore sustainable and reliable, and less geographically concentrated than primary minedresources. Targeted policies such as minimum recycled content requirements and tradeable
recycling credits could help to foster secondary battery production in the short term.

IEA. CC BY 4.0.

Changes in consumer behaviour can also play a part to reduce battery demand. For example,
in 2022 – for the first time ever – electric SUVs accounted for more than half of global electric
car sales and for 16% of total SUV sales (IEA, 2023d). Today’s consumer preference for SUVs
with their large batteries contributes to increased demand for critical minerals. A shift awayfrom SUVs and other large vehicles significantly reduces demand for critical minerals used inbatteries. Measures to promote smaller electric cars lead to a more than 10% reduction inbattery mineral demand by 2030 projected in the NZE Scenario, compared to a
counterfactual case where SUV demand continues to grow (Figure 3.7).
Battery chemistries could also make a difference. Nickel-manganese-cobalt (NMC) batteries
are still dominant in the market, but other battery chemistries have potential to increase
wider adoption. A sensitivity case assuming wider and accelerated adoption of lithium iron

136

International Energy Agency | Batteries and Secure Energy Transitions

phosphate (LFP) cathodes and sodium-ion batteries could reduce critical mineral demand forbatteries by 13% in 2030 and nearly 18% in 2050, compared with the NZE Scenario.
In the case of lithium, the combination of smaller EV battery sizes, alternative chemistries aswell as recycling could reduce demand for lithium chemicals by 25% in 2030, saving anamount similar to today’s supply of these chemicals.
Figure 3.7 ⊳5%Mineral demand reduction potential for EV batteries and battery
storage, 2030

Demand reduction

0%
-5%
-10%
-15%

800
CopperSiliconNickel
600
Lithium
Manganese
Graphite 400
CobaltCase of lithium (kt)-25%

Smallerbattery size
Technology
changeRecycling

200

Smaller
Technology
battery sizechangeSupplyin 2023NZE demandin 2030
IEA. CC BY 4.0.

Demand for minerals used in batteries can be reduced through many pathways:
using smaller batteries, increasing use of LFP and sodium-ion batteries, and recycling
Note: LFP = lithium-iron phosphate.

IEA. CC BY 4.0.

Rising demand for critical minerals highlights the importance of addressing the negativeenvironmental and social impacts of mining operations. There is growing recognition thatsustainable and responsible mining and refining processes are needed in the interest of asustainable and equitable clean energy transition. Critical mineral supply chains cannot be
truly secure, reliable and resilient unless they are also sustainable and responsible. Policy
makers must continue to actively assess the impacts of mining on water, greenhouse gas
emissions, biodiversity, human rights, local communities, and corruption. The IEA has
developed detailed guidance for policy makers to ensure sustainable and responsible mineral
supplies (IEA, 2023e). Recommendations include ensuring robust regulatory regimes are put
in place, promoting the development of best practices, strengthening the collection andtracking of granular data to enable progress tracking, and supporting supply chain
traceability.

Chapter 3 | Policy implications and recommendations

137

3

IEA. CC BY 4.0.

ANNEXESAnnex A
Definitions
This annex provides general information on terminology used throughout this report
including: units and general conversion factors; definitions of fuels, processes and sectors;
regional and country groupings; and abbreviations and acronyms.

IEA. CC BY 4.0.

Units
Batteries

Wh/kg

watt hours per kilogrammeDistancekm

kilometre

Emissionst CO2
Gt CO2-eq
kg CO2-eq
g CO2/km
g CO2/kWhkg CO2/kWh

tonnes of carbon dioxide
gigatonnes of carbon-dioxide equivalent (using 100-year
global warming potentials for different greenhouse gases)
kilogrammes of carbon-dioxide equivalent
grammes of carbon dioxide per kilometre
grammes of carbon dioxide per kilowatt-hourkilogrammes of carbon dioxide per kilowatt-hour

Energy

kWh
MWh
GWh
TWh

kilowatt-hour
megawatt-hour
gigawatt-hour
terawatt-hour

Mass

kg
t
kt
Mt
Gt

kilogrammetonne (1 tonne = 1 000 kg)
kilotonnes (1 tonne x 103)
million tonnes (1 tonne x 106)
gigatonne (1 tonne x 109)

Monetary

USD million
USD billion
USD trillion
USD/t CO2

1 US dollar x 106
1 US dollar x 109
1 US dollar x 1012
US dollars per tonne of carbon dioxide

Oilbarrelkb/dmb/d

one barrel of crude oil
thousand barrels per day
million barrels per day

Power

W
kW
MW
GW
TW

watt (1 joule per second)kilowatt (1 watt x 103)
megawatt (1 watt x 106)
gigawatt (1 watt x 109)
terawatt (1 watt x 1012)

Annex A | Definitions

141

General conversion factors for energy

Convert from:

Multiplier to convert to:
EJ

Gcal

Mtoe

MBtu

bcme

GWh

EJ

1

2.388 x 108

23.88

9.478 x 108

27.78

2.778 x 105

Gcal

4.1868 x 10-9

1

10-7

3.968

1.163 x 10-7

1.163 x 10-3

Mtoe

4.1868 x 10-2

107

1

3.968 x 107

1.163

11 630MBtu

1.0551 x 10-90.252

2.52 x 10-8

12.932 x 10-8

2.931 x 10-4

bcme

0.036

8.60 x 106

0.86

3.41 x 107

1

9 999

GWh

3.6 x 10-6860

8.6 x 10-5

3 412

1 x 10-41

Note: There is no generally accepted definition of barrel of oil equivalent (boe); typically the conversion factors
used vary from 7.15 to 7.40 boe per tonne of oil equivalent. Natural gas is attributed a low heating value of
1 MJ per 44.1 kg. Conversions to and from billion cubic metres of natural gas equivalent (bcme) are given as
representative multipliers but may differ from the average values obtained by converting natural gas volumes
between IEA balances due to the use of country-specific energy densities. Lower heating values (LHV) are usedthroughout.

Definitions
Agriculture: Includes all energy used on farms, in forestry and for fishing.
Ammonia (NH3): Is a compound of nitrogen and hydrogen. It can be used as a feedstock inthe chemical sector, as a fuel in direct combustion processes in fuel cells, and as a hydrogen
carrier. To be considered a low-emissions fuel, ammonia must be produced from hydrogenin which the electricity used to produce the hydrogen is generated from low-emissions
generation sources. Produced in such a way, ammonia is considered a low-emissionshydrogen-based liquid fuel.
Aviation: This transport mode includes both domestic and international flights and their useof aviation fuels. Domestic aviation covers flights that depart and land in the same country;
flights for military purposes are included. International aviation includes flights that land ina country other than the departure location.
Back-up generation capacity: Households and businesses connected to a main power grid
may also have a source of back-up power generation capacity that, in the event of disruption,
can provide electricity. Back-up generators are typically fuelled with diesel or gasoline.
Capacity can be as little as a few kilowatts. Such capacity is distinct from mini-grid and offgrid systems that are not connected to a main power grid.

IEA. CC BY 4.0.

Battery storage: Energy storage technology that uses reversible chemical reactions to absorb
and release electricity on demand.
Behind-the-meter battery storage: Batteries installed at residential, commercial orindustrial end-user locations, generally without a dedicated connection to the grid. They areusually, but not always, significantly smaller than utility-scale batteries.

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International Energy Agency | Batteries and Secure Energy Transitions

Buildings: The buildings sector includes energy used in residential and services buildings.
Services buildings include commercial and institutional buildings and other non-specified
buildings. Building energy use includes space heating and cooling, water heating, lighting,appliances and cooking equipment.
Capacity credit: Proportion of the electricity network capacity that can be reliably expected
to generate electricity during times of peak demand in the grid to which it is connected.
Carbon capture, utilisation and storage (CCUS): The process of capturing carbon dioxide
emissions from fuel combustion, industrial processes or directly from the atmosphere.
Captured CO2 emissions can be stored in underground geological formations, onshore or
offshore, or used as an input or feedstock in manufacturing.
Carbon dioxide (CO2): A gas consisting of one part carbon and two parts oxygen. It is an
important greenhouse (heat-trapping) gas.
Clean energy: In power, clean energy includes: renewable energy sources, nuclear power,
fossil fuels fitted with CCUS, hydrogen and ammonia; battery storage; and electricity grids.
In efficiency, clean energy includes energy efficiency in buildings, industry and transport,
excluding aviation bunkers and domestic navigation. In end-use applications, clean energy
includes: direct use of renewables; electric vehicles; electrification in buildings, industry andinternational marine transport; CCUS in industry and direct air capture. In fuel supply, clean
energy includes low-emissions fuels, and measures to reduce the emissions intensity of fossil
fuel production.
Coal: Includes both primary coal, i.e. lignite, coking and steam coal, and derived fuels, e.g.
patent fuel, brown-coal briquettes, coke-oven coke, gas coke, gas works gas, coke-oven gas,
blast furnace gas and oxygen steel furnace gas. Peat is also included.
Critical minerals: A wide range of minerals and metals that are essential in clean energy
technologies and other modern technologies and have supply chains that are vulnerable todisruption. Although the exact definition and criteria differ among countries, critical minerals
for clean energy technologies typically include chromium, cobalt, copper, graphite, lithium,manganese, molybdenum, nickel, platinum group metals, zinc, rare earth elements and othercommodities. See the Annex in the IEA special report on the Role of Critical Minerals in Clean
Energy Transitions available at: https://www.iea.org/reports/the-role-of-critical-minerals-inclean-energy-transitions.
Decentralised systems: Refers to off-grid connections.
Electric vehicles (EVs): Electric vehicles comprise of battery electric vehicles (BEV) and plugin hybrid vehicles.

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Electricity demand: Defined as total gross electricity generation less own use generation,plus net trade (imports less exports), less transmission and distribution losses.

Annex A | Definitions

143

AElectricity generation: Defined as the total amount of electricity generated by power only or
combined heat and power plants including generation required for own use. This is also
referred to as gross generation.
End-use sectors: Include industry, transport, buildings and other, i.e., agriculture and othernon-energy use.
Energy-related and industrial process CO2 emissions: Carbon dioxide emissions from fuelcombustion, industrial processes, and fugitive and flaring CO2 from fossil fuel extraction.
Unless otherwise stated, CO2 emissions in this report refer to energy-related and industrial
process CO2 emissions.
Energy sector greenhouse gas (GHG) emissions: Energy-related and industrial process CO2
emissions plus fugitive and vented methane (CH4) and nitrous dioxide (N2O) emissions fromthe energy and industry sectors.
Energy services: See useful energy.
E-waste: Electrical or electronic equipment that’s been discarded.
Fossil fuels: Include coal, natural gas and oil.
Front-of-the-meter: Assets connected directly to the transmission or distribution networks.
Geothermal: Geothermal energy is heat from the sub-surface of the earth. Water and/or
steam carry the geothermal energy to the surface. Depending on its characteristics,
geothermal energy can be used for heating and cooling purposes or be harnessed togenerate clean electricity if the temperature is adequate.
Heat (end-use): Can be obtained from the combustion of fossil or renewable fuels, direct
geothermal or solar heat systems, exothermic chemical processes and electricity (throughresistance heating or heat pumps which can extract it from ambient air and liquids). This
category refers to the wide range of end-uses, including space and water heating, andcooking in buildings, desalination and process applications in industry. It does not include
cooling applications.
Heat (supply): Obtained from the combustion of fuels, nuclear reactors, large-scaleheat pumps, geothermal or solar resources. It may be used for heating or cooling or
converted into mechanical energy for transport or electricity generation. Commercial heatsold is reported under total final consumption with the fuel inputs allocated under power
generation.

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Heavy-duty vehicles (HDVs): Include both medium freight trucks (gross weight 3.5 to
15 tonnes) and heavy freight trucks (gross weight >15 tonnes).
Hydrogen: Hydrogen is used in the energy system as an energy carrier, as an industrial raw
material, or is combined with other inputs to produce hydrogen-based fuels. Unlessotherwise stated, hydrogen in this report refers to low-emissions hydrogen.

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International Energy Agency | Batteries and Secure Energy Transitions

Hydrogen-based fuels: See low-emissions hydrogen-based fuels.
Hydropower: Refers to the electricity produced in hydropower projects, with the assumptionof 100% efficiency. It excludes output from pumped storage and marine (tide and wave)
plants.
Industry: The sector includes fuel used within the manufacturing and construction industries.
Key industry branches include iron and steel, chemical and petrochemical, cement,
aluminium, and pulp and paper. Use by industries for the transformation of energy intoanother form or for the production of fuels is excluded and reported separately under otherenergy sector. There is an exception for fuel transformation in blast furnaces and coke ovens,which are reported within iron and steel. Consumption of fuels for the transport of goods isreported as part of the transport sector, while consumption by off-road vehicles is reported
under industry.
Investment: Investment is capital expenditure for energy supply, infrastructure, end-use andefficiency. Fuel supply investment includes the production, transformation and transport ofoil, gas, coal and low-emissions fuels. Power sector investment includes new construction
and refurbishment of generation, electricity grids (transmission, distribution and public
electric vehicle chargers), and battery storage. Energy efficiency investment includes
efficiency improvements in buildings, industry and transport. Other end-use investment
includes the purchase of equipment for the direct use of renewables, electric vehicles,
electrification in buildings, industry and international marine transport, equipment for theuse of low-emissions fuels, and CCUS in industry and direct air capture. Data and projections
reflect spending over the lifetime of projects and are presented in real terms in year-2023
US dollars converted at market exchange rates unless otherwise stated. Total investment
reported for a year reflects the amount spent in that year.
Levelised cost of electricity (LCOE): LCOE combines into a single metric all the cost elements
directly associated with a given power technology, including construction, financing, fuel,maintenance and costs associated with a carbon price. It does not include network
integration or other indirect costs.
Light-duty vehicles (LDVs): Include passenger cars and light commercial vehicles (grossvehicle weight < 3.5 tonnes).
Low-emissions electricity: Includes output from renewable energy technologies, nuclear
power, fossil fuels fitted with CCUS, hydrogen and ammonia.
Low-emissions fuels: Include modern bioenergy, low-emissions hydrogen and low-emissionshydrogen-based fuels.

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Mini-grids: Small electric power systems, connected or not connected to main electricity
networks, linking a number of households and/or other consumers.
Modern energy access: Includes household access to a minimum level of electricity (basic
bundle equivalent to range of 50-75 kWh per household per year); household access to lessAnnex A | Definitions

145

A

harmful and more sustainable cooking and heating fuels, and improved/advanced stoves;access that enables productive economic activity; and access for public services.
Natural gas: Includes gas occurring in deposits, whether liquefied or gaseous, consisting
mainly of methane. It includes both non-associated gas originating from fields producing
hydrocarbons only in gaseous form, and associated gas produced in association with crude
oil production as well as methane recovered from coal mines (colliery gas). Natural gas
liquids, manufactured gas (produced from municipal or industrial waste, or sewage) andquantities vented or flared are not included. Gas data in cubic metres are expressed on agross calorific value basis and are measured at 15 °C and at 760 mm Hg (Standard
Conditions). Gas data expressed in exajoules are on a net calorific basis. The difference
between the net and the gross calorific value is the latent heat of vaporisation of the water
vapour produced during combustion of the fuel (for gas the net calorific value is 10% lower
than the gross calorific value).
Nuclear power: Refers to the electricity produced by a nuclear reactor, assuming an average
conversion efficiency of 33%.
Off-grid systems: Mini-grids and stand-alone systems for individual households or groups ofconsumers not connected to a main grid.
Offshore wind: Refers to electricity produced by wind turbines that are installed in open
water, usually in the ocean.
Oil: Includes both conventional and unconventional oil production. Petroleum products
include refinery gas, ethane, liquid petroleum gas, aviation gasoline, motor gasoline, jet
fuels, kerosene, gas/diesel oil, heavy fuel oil, naphtha, white spirits, lubricants, bitumen,paraffin, waxes and petroleum coke.
Passenger car: A road motor vehicle, other than a moped or a motorcycle, intended totransport passengers. It includes vans designed and used primarily to transport passengers.
Excluded are light commercial vehicles, motor coaches, urban buses and mini-buses/minicoaches.
PayGo model: Contracts or subscriptions for off-grid solar systems that aim to reduce theinitial upfront cost for solar energy access by allowing customers to make instalment
payments to purchase units for using solar electricity instead of paying upfront for solar
home systems. (Also referred to as Pay-as-you-go model.)IEA. CC BY 4.0.

Power generation: Refers to electricity generation and heat production from all sources ofelectricity, including electricity-only power plants, heat plants, and combined heat andpower plants. Both main activity producer plants and small plants that produce fuel for theirown use (auto-producers) are included.
Rare earth elements (REEs): A group of seventeen chemical elements in the periodic table,
specifically the fifteen lanthanides plus scandium and yttrium. REEs are key components in

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International Energy Agency | Batteries and Secure Energy Transitions

some clean energy technologies, including wind turbines, electric vehicle motors andelectrolysers.
Renewables: Include bioenergy, geothermal, hydropower, solar photovoltaics (PV),concentrating solar power (CSP), wind and marine (tide and wave) energy for electricity andheat generation.
Residential: Energy used by households including space heating and cooling, water heating,lighting, appliances, electronic devices and cooking.
Road transport: Includes all road vehicle types (passenger cars, two/three-wheelers, lightcommercial vehicles, buses and medium and heavy freight trucks).
Services: A component of the buildings sector. It represents energy used in commercial
facilities, e.g. offices, shops, hotels, restaurants, and in institutional buildings, e.g. schools,
hospitals, public offices. Energy use in services includes space heating and cooling, water
heating, lighting, appliances, cooking and desalination.
Shipping/navigation: This transport mode includes both domestic and internationalnavigation and their use of marine fuels. Domestic navigation covers the transport of goods
or people on inland waterways and for national sea voyages (starts and ends in the same
country without any intermediate foreign port). International navigation includes quantities
of fuels delivered to merchant ships (including passenger ships) of any nationality for
consumption during international voyages transporting goods or passengers.
Solar: Includes both solar photovoltaics and concentrating solar power.
Solar home systems (SHS): Small-scale photovoltaic and battery stand-alone systems, i.e.
with capacity equal to or higher than 10 watt peak (Wp) supplying electricity for single
households or small businesses. They are most often used off-grid, but also where grid supply
is not reliable. Access to electricity in the IEA definition of access to electricity considers SHSof 10 Wp and above as providing access to electricity.
Solar multi-light systems: Solar PV-based lighting systems of 3 Wp to 9 Wp that provide morethan one lighting point and mobile phone charging.
Solar photovoltaics (PV): Electricity produced from solar photovoltaic cells including utilityscale and small-scale installations.

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Stand-alone systems: Small-scale autonomous electricity supply for households or small
businesses. They are generally used off-grid, but also where grid supply is not reliable. Standalone systems include solar home systems, small wind or hydro generators, diesel or gasoline
generators. The difference compared with mini-grids is in scale and that stand-alone systems
do not have a distribution network serving multiple costumers.
Total energy supply (TES): Represents domestic demand only and is broken down into
electricity and heat generation, other energy sector and total final consumption.

Annex A | Definitions

147

A

Total final consumption (TFC): Is the sum of consumption by the various end-use sectors.
TFC is broken down into energy demand in the following sectors: industry (including
manufacturing, mining, chemicals production, blast furnaces and coke ovens); transport;
buildings (including residential and services); and other (including agriculture and other nonenergy use). It excludes international marine and aviation bunkers, except at world level
where it is included in the transport sector.
Total final energy consumption (TFEC): Is a variable defined primarily for tracking progress
towards target 7.2 of the United Nations Sustainable Development Goals (SDG). It
incorporates total final consumption by end-use sectors, but excludes non-energy use. It
excludes international marine and aviation bunkers, except at world level. Typically this isused in the context of calculating the renewable energy share in total final energy
consumption (indicator SDG 7.2.1), where TFEC is the denominator.
Transport: Fuels and electricity used in the transport of goods or people within the national
territory irrespective of the economic sector within which the activity occurs. This includes:
fuel and electricity delivered to vehicles using public roads or for use in rail vehicles; fueldelivered to vessels for domestic navigation; fuel delivered to aircraft for domestic aviation;and energy consumed in the delivery of fuels through pipelines. Fuel delivered tointernational marine and aviation bunkers is presented only at the world level and is
excluded from the transport sector at a domestic level.
Trucks: Includes all size categories of commercial vehicles: light trucks (gross vehicle weight< 3.5 tonnes); medium freight trucks (gross vehicle weight 3.5-15 tonnes); and heavy freighttrucks (gross vehicle weight >15 tonnes).
Unabated fossil fuel use: Consumption of fossil fuels in facilities without CCUS.
Utility-scale battery storage: Large battery applications connected directly to transmission
or distribution networks (front-of-the-meter), typically ranging from several hundred
kilowatt-hours to multiple gigawatt-hours in size.
Value-adjusted levelised cost of electricity (VALCOE): Incorporates information on bothcosts and the value provided to the electricity system. Based on the LCOE, estimates ofenergy, capacity and flexibility value are incorporated to provide a more complete metric ofcompetitiveness for power generation technologies.
Variable renewable energy (VRE): Refers to technologies whose maximum output at any
time depends on the availability of fluctuating renewable energy resources. VRE includes abroad array of technologies such as wind power, solar PV, run-of-river hydro, concentrating
solar power (where no thermal storage is included) and marine (tidal and wave).

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Zero emissions vehicles (ZEVs): Vehicles that are capable of operating without tailpipe CO2
emissions (battery electric and fuel cell vehicles).

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International Energy Agency | Batteries and Secure Energy Transitions

Regional and country groupings
Advanced economies: OECD regional grouping and Bulgaria, Croatia, Cyprus,1,2 Malta andRomania.
Africa: North Africa and sub-Saharan Africa regional groupings.
Asia Pacific: Southeast Asia regional grouping and Australia, Bangladesh, Democratic
People’s Republic of Korea (North Korea), India, Japan, Korea, Mongolia, Nepal, New Zealand,
Pakistan, The People’s Republic of China (China), Sri Lanka, Chinese Taipei, and other Asia
Pacific countries and territories.3
Caspian: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan andUzbekistan.
Central and South America: Argentina, Plurinational State of Bolivia (Bolivia), Bolivarian
Republic of Venezuela (Venezuela), Brazil, Chile, Colombia, Costa Rica, Cuba, Curaçao,
Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica,
Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and otherCentral and South American countries and territories.4
China: Includes (The People's Republic of) China and Hong Kong, China.
Developing Asia: Asia Pacific regional grouping excluding Australia, Japan, Korea and
New Zealand.
Emerging market and developing economies: All other countries not included in theadvanced economies regional grouping.
Eurasia: Caspian regional grouping and the Russian Federation (Russia).

IEA. CC BY 4.0.

Figure A.1 ⊳Main country groupings

A
Note: This map is without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.

Annex A | Definitions

149

Europe: European Union regional grouping and Albania, Belarus, Bosnia and Herzegovina,
Gibraltar, Iceland, Israel5, Kosovo, Montenegro, North Macedonia, Norway, Republic ofMoldova, Serbia, Switzerland, Türkiye, Ukraine and United Kingdom.
European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus1,2, Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia,
Spain and Sweden.
IEA (International Energy Agency): OECD regional grouping excluding Chile, Colombia, Costa
Rica, Iceland, Israel, Latvia and Slovenia.
Latin America and the Caribbean (LAC): Central and South America regional grouping and
Mexico.
Middle East: Bahrain, Islamic Republic of Iran (Iran), Iraq, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Syrian Arab Republic (Syria), United Arab Emirates and Yemen.
Non-OECD: All other countries not included in the OECD regional grouping.
Non-OPEC: All other countries not included in the OPEC regional grouping.
North Africa: Algeria, Egypt, Libya, Morocco and Tunisia.
North America: Canada, Mexico and United States.
OECD (Organisation for Economic Co-operation and Development): Australia, Austria,
Belgium, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia,
Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal,
Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Türkiye, United Kingdom and UnitedStates.
Southeast Asia: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic(Lao PDR), Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam. These
countries are all members of the Association of Southeast Asian Nations (ASEAN).
Sub-Saharan Africa: Angola, Benin, Botswana, Cameroon, Côte d’Ivoire, Democratic Republicof the Congo, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Ghana, Kenya, Kingdom ofEswatini, Madagascar, Mauritius, Mozambique, Namibia, Niger, Nigeria, Republic of theCongo (Congo), Rwanda, Senegal, South Africa, South Sudan, Sudan, United Republic of
Tanzania (Tanzania), Togo, Uganda, Zambia, Zimbabwe and other African countries andterritories.6

Country notes

IEA. CC BY 4.0.

1 Note by Republic of Türkiye: The information in this document with reference to “Cyprus” relates to thesouthern part of the island. There is no single authority representing both Turkish and Greek Cypriot people
on the island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable
solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the“Cyprus issue”.

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International Energy Agency | Batteries and Secure Energy Transitions

2 Note by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus

is recognised by all members of the United Nations with the exception of Türkiye. The information in thisdocument relates to the area under the effective control of the Government of the Republic of Cyprus.

3 Individual data are not available and are estimated in aggregate for: Afghanistan, Bhutan, Cook Islands, Fiji,

French Polynesia, Kiribati, Macau (China), Maldives, New Caledonia, Palau, Papua New Guinea, Samoa,
Solomon Islands, Timor-Leste, Tonga and Vanuatu.
4 Individual data are not available and are estimated in aggregate for: Anguilla, Antigua and Barbuda, Aruba,
Bahamas, Barbados, Belize, Bermuda, Bonaire, Sint Eustatius and Saba, British Virgin Islands, Cayman Islands,
Dominica, Falkland Islands (Malvinas), Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Pierre andMiquelon, Saint Vincent and Grenadines, Saint Maarten (Dutch part), Turks and Caicos Islands.

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities.
The use of such data by the OECD and/or the IEA is without prejudice to the status of the Golan Heights, East
Jerusalem and Israeli settlements in the West Bank under the terms of international law.

5

Individual data are not available and are estimated in aggregate for: Burkina Faso, Burundi, Cabo Verde,Central African Republic, Chad, Comoros, Djibouti, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Malawi,
Mali, Mauritania, Sao Tome and Principe, Seychelles, Sierra Leone and Somalia.
6

IEA. CC BY 4.0.

Abbreviations and acronyms
AI
APS
AUD
BEV
BMS
BSS
BTM
CCGT
CCUS
Co
COP
CO2
CO2-eq
CTP
DRC
EMDE
EU
EV
FID
FiT
GEC
GT
GHG
Gr
HDV
ICE
IEA

artificial intelligence
Announced Pledges Scenario
Australian dollar
battery electric vehicle
battery management systembattery swapping station
behind-the-meter
combined-cycle gas turbine
carbon capture, utilisation and storage
cobaltConference of the Parties (UNFCCC)
carbon dioxidecarbon dioxide equivalentcell-to-pack
Democratic Republic of the Congoemerging market and developing economies
European Union
electric vehicle
final investment decision
feed-in tariff
Global Energy and Climate (model)
gas turbine
greenhouse gases
graphiteheavy-duty vehicle
internal combustion engine
International Energy Agency

Annex A | Definitions

A151

IEA. CC BY 4.0.

IRA
LCO
LCOE
LDV
LFMP
LFP
Li
LIB
LME
LMO
MDV
MER
NCA
Ni
NMC
NZE
OECD
OEM
OPEX
pkm
PLDV
PPP
PV
R&D
SHS
SSB
STEPS
SUV
US
USD
V2B
V2G
VALCOE
VC
VPP
WEO
ZEV

152

Inflation Reduction Act (United States)
lithium-cobalt oxidelevelised cost of electricity
light-duty vehiclelithium-manganese-iron phosphatelithium-iron phosphatelithiumlithium-ion battery
London Metals Exchangelithium-manganese oxide
medium-duty vehicle
market exchange rate
nickel-cobalt-aluminium
nickelnickel-manganese-cobalt
Net Zero Emissions by 2050 Scenario
Organisation for Economic Co-operation and Development
original equipment manufacturer
operating expenditure
passenger-kilometre
passenger light-duty vehicle
purchasing power parity
photovoltaics
research and development
solar home systems
solid-state battery
Stated Policy Scenario
sport utility vehicle
United States
United States dollar
vehicle-to-building
vehicle-to-gridvalue-adjusted levelised cost of electricity
venture capitalvirtual power plant
World Energy Outlook
zero emissions vehicle

International Energy Agency | Batteries and Secure Energy Transitions

Annex B
References
Chapter 1: Battery demand and supply
Argonne National Laboratory (2022). GREET. https://www.anl.gov/topic/greet
Benchmark Minerals (2024). Lithium ion Battery Cell Price Assessment (database), accessed
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Bloomberg (2023). China's CATL Leads $1.4 Billion Lithium Investment in Bolivia.
https://www.bloomberg.com/news/articles/2023-06-20/china-s-catl-leads-1-4-billionlithium-investment-in-bolivia
BNEF (Bloomberg New Energy Finance) (2023a). Lithium-Ion Battery Pack Prices Hit Record
Low of $139/kWh.
https://about.bnef.com/blog/lithium-ion-battery-pack-prices-hit-record-low-of-139-kwh/
BNEF (2023b). 2H 2023 Energy Storage Market Outlook, Policies Translating to Projects.
https://about.bnef.com/blog/2h-2023-energy-storage-market-outlook/
Dai, Q. et al. (2019). Life cycle Analysis of Lithium-ion Batteries for Automotive applications.
https://www.mdpi.com/2313-0105/5/2/48
Degen, F. et al. (2023). Energy Consumption of Current and Future Production of Lithiumion and Post Lithium-ion Battery Cells.
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International Energy Agency (IEA)
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Cover design: IEA
Photo credits: © ShutterstockBatteries and Secure Energy Transitions
World Energy Outlook Special Report
Batteries are an important part of the global energy system
today and are poised to play a critical role in secure clean
energy transitions. In the transport sector, they are theessential component in the millions of electric vehicles
sold each year. In the power sector, battery storage is thefastest growing clean energy technology on the market.
The versatile nature of batteries means they can serve
utility-scale projects, behind-the-meter storage forhouseholds and businesses and provide access toelectricity in decentralised solutions like mini-grids andsolar home systems. Moreover, falling costs for batteries
are fast improving the competitiveness of electric vehicles
and storage applications in the power sector.
The IEA’s Special Report on Batteries and Secure Energy
Transitions highlights the key role batteries will play infulfilling the recent 2030 commitments made by nearly
200 countries at COP28 to put the global energy systemon the path to net zero emissions. These include tripling
global renewable energy capacity, doubling the pace ofenergy efficiency improvements and transitioning awayfrom fossil fuels.
This special report brings together the latest data andinformation on batteries from around the world, including
recent market developments and technological advances.
It also offers insights and analysis on leading markets andkey barriers to growth. By looking at the entire battery
ecosystem, from critical minerals and manufacturing touse and recycling, it identifies synergies and potential
bottlenecks across different sectors. The report also
highlights areas that call for greater attention from policy
makers and industry.