A new report from Wood Mackenzie identifies five key trends that will define the energy storage industry by 2026, including supply chain restructuring and the rise of non-lithium batteries.
The global energy storage market reached a major milestone in 2025, with annual installations exceeding 100 GW for the first time. The growth comes despite major policy changes in the world’s two largest markets, China and the United States.
China has withdrawn its mandate to link storage to new renewable energy projects. The country is moving towards market-based mechanisms. This creates uncertainty about future income.
Fiscal stimulus measures remain in place in the United States. However, new supply chain restrictions make it difficult to use Chinese battery modules.
Wood Mackenzie’s latest report, ‘What to Watch for in 2026: Global Storage’ outlines five trends that will shape the coming year.
1. Supply chain restructuring
Chinese manufacturers are changing the way they do business in the United States. To maintain market access, Chinese companies are expected to announce new ownership structures in 2026. Many will reduce their ownership stake to below 25%, the report said. This step is intended to comply with Foreign Enty of Concern (FEOC) requirements.
Supply remains tight, says Wood Mackenzie. The shortages that started in late 2025 are likely to continue until mid-2026. The shortage of certified batteries from top suppliers is acute, the report said. Wood Mackenzie expects system prices to stabilize in the second half of 2026.
Chinese suppliers are also looking beyond the United States and China, shifting their investments to South and Southeast Asia, Europe and the Middle East. The goal is to gain market share, even if it means lower profits in the short term, the report said.
2. Grid forming technology
Grid-forming storage is moving from a voluntary option to a requirement in many markets, the report said. Grid-forming systems use inverters that can stabilize the voltage and frequency on the grid. This is critical as more coal and gas power plants retire and intermittent renewables grow.
The European Commission is expected to adopt a harmonized framework for networking requirements in 2026. Previously, these systems cost 10% to 15% more than standard storage, but that price difference is disappearing, the report said. Manufacturers are now building these features into their standard products at little to no additional cost.
3. Non-lithium batteries are getting bigger
Lithium-ion is the dominant technology, but alternatives are gaining ground. Sodium ion, flow batteries and iron-air systems are becoming increasingly larger. These technologies are becoming cost-competitive for specific applications.
Sodium ion shows significant activity. Peak Energy is working on a 4.75 GWh supply agreement with Jupiter Power in the United States. The first phase of 720 MWh is part of this growth. CATL also plans to launch sodium-ion batteries specifically for energy storage in 2026.
In Europe, new policy support helps long-term storage. The United Kingdom and Italy use “cap and floor” mechanisms. These help make non-lithium projects more profitable for investors.
4. Data centers drive demand
Large data centers are turning to batteries to bypass power grid bottlenecks. The electrical grid often cannot keep up with the power needs of generative AI. Data center developers are unifying storage to secure faster utility connections.
Batteries in data centers can handle ‘training loads’. These loads can jump from 10% to 90% capacity in milliseconds. Storage provides the necessary flexibility. While gas turbines remain the first choice for on-site power, storage is now the second most common choice in the data center pipeline.
5. The rise of hybrid projects
Developers are increasingly combining storage with solar and wind energy. Hybrid systems help manage containment when renewable energy is wasted because the electricity grid cannot receive the generation.
In Australia and India, more than half of storage projects announced in 2025 were hybrid. The trend is also growing in Europe. Some regions now experience more than 500 hours of negative energy prices per year, the report said. These market conditions make standalone solar energy less profitable. Developers are using hybrid power purchase agreements (PPAs) to protect their revenues.
Regional outlook
The US market is facing a temporary slowdown as Wood Mackenzie expects a dip in 2026 and 2027. The US market attributes the slowdown to tariff changes and the time needed to restructure supply chains. Growth is expected to recover by 2028, the report said.
Europe was highlighted as a bright spot. The number of installations in Europe will grow by 160% by 2025. Germany is the leader in small-scale, distributed storage, while Britain is the leader in large utility-scale projects.
In Latin America, 2026 will be a year of new auctions. Brazil plans a national storage tender for early 2026. Chile is also updating its rules to better pay for storage to provide network services.
The global transition is moving forward. Energy storage is no longer just a backup, but becomes the most important tool for the reliability of the electricity grid.
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