2026 Sustainable Investing Trends

Why Is Battery Storage Gaining Momentum in 2026?

Battery storage is emerging as a broad investment theme, supported by improving economics and rising demand. Costs are falling, deployment is accelerating and capital is flowing toward credible returns.

Battery storage increases financial returns from renewable energy and supports decarbonization by solving renewable energy’s fundamental problem: intermittency. By capturing excess clean power when it is cheap to produce and releasing it when renewable power is unavailable, batteries combine economic returns with sustainability benefits. Because solar panels often generate more electricity than a building or the grid can use at midday, batteries capture this excess, turning lost potential into usable, zero-emission power.

This reduces costs for businesses and utilities that can buy electricity when prices are low, often during peak solar hours, and store it to use or sell back to the grid when prices rise later in the early evening (a “power arbitrage”). It also shortens the payback period for a renewable installation and helps avoid costly physical upgrades to transformers or local grid connection hardware. Furthermore, batteries provide instantaneous backup power during blackouts, eliminating the need for diesel backup generators and reducing fuel and maintenance costs as well as emissions.

Global Battery Storage Growth by the Numbers

Global battery storage additions reached 108 gigawatts (GW) in 2025, up 40% from 2024. Installed capacity is now 11 times higher than in 2021. The International Energy Agency calls battery storage the fastest-growing power technology today.

The U.S. market is keeping pace. Operating capacity reached 37.4 GW in October 2025, up 32% year over year. The Solar Energy Industries Association projects U.S. deployments will reach 70 GW in 2026, supported by an estimated $25.2 billion in capital investment. Cumulative utility-scale capacity is expected to exceed 500 GW by 2030.

How Lower Battery Costs Are Changing the Market

Solar, onshore wind and offshore wind power all became more expensive last year due to supply constraints and a shifting market in China. Battery storage moved in the opposite direction. In contrast, data from BloombergNEF shows that the global benchmark cost of a four-hour battery storage project dropped 27% year over year to $78 per megawatt-hour (MWh) in 2025, a record low since tracking began in 2009.

Battery cell prices confirm the trend. The cost of lithium iron phosphate cells fell from $115 per kilowatt-hour (/kWh) in early 2023 to $84/kWh in early 2026, a 27% decline over three years. Leading Chinese suppliers now transact bulk orders at $75 to $78/kWh, and BloombergNEF projects this will drop to $70/kWh by the end of 2027, two years ahead of the original forecast.

Cell costs account for 40% to 55% of total system costs, so this significant trend toward lower prices directly boosts project returns. A $10/kWh swing on a 200-MW utility-scale project shifts capital expenditures (CapEx) by $2 million and the internal rate of return (IRR) by about half a percentage point.

Why Is Interest in Energy Storage Growing?

A survey of more than 800 energy executives conducted in early 2026 found that, among transition technologies, energy storage presents one of the strongest business cases for the next decade, alongside transition materials and advanced nuclear. Low-carbon hydrogen, synthetic fuels and direct air capture ranked well behind. Capital seeks out projects with credible return paths, and battery storage is passing that test.

Storage is also lifting returns on adjacent assets. Developers added 87 GW of combined solar-plus-storage capacity in 2025, delivering power at an average of $57/MWh, significantly cheaper than standalone offshore wind at $100/MWh and competitive with gas turbines, whose costs rose 16% to $102/MWh amid data center demand.

A Structural Demand Driver: Data Centers

Data centers are becoming a primary driver of battery storage demand, rather than merely a secondary beneficiary of the renewables buildout. Battery-based backup power for data centers grew by 30% to 45 GW in 2025. J.P. Morgan projects that stationary storage shipments will grow 43% in 2026, following 50% growth in 2025. Battery storage's share of global lithium demand is set to rise from 23% in 2025 to 31% in 2026, and this demand driver is measured in years, not quarters.

Exploring the Battery Storage Value Chain

We believe developments in this area are worth following and examining within the broader investment landscape. Examples include:

• A leading lithium-ion battery supplier that holds roughly 46% of China's electric vehicle (EV) battery market. Its net profit increased 48.5% in the first quarter of 2026, supported in part by expansion into grid storage and long-duration technologies.

• A producer of zinc-based batteries designed to deliver greater energy density and a longer cycle life than lead-acid batteries at a lower cost, potentially supporting growing stationary storage demand.

• A major Australian integrated electricity generator that has committed $1.7 billion to battery storage projects at two sites, with planned capacities of 700 MW and 2,800 MW. The larger project would rank among the world’s largest battery systems.

Key Risks and Developments to Monitor

Supply chains are shifting. Non-lithium chemistries, including sodium-ion, flow batteries and iron-air systems, are gaining ground as lithium supply grows more complex, especially in the U.S. under new rules regarding foreign entities of concern. Chinese manufacturers are restructuring ownership to maintain access to the U.S. market. We expect near-term price and sourcing noise, even as the long-term cost curve continues to bend downward.

Of course, the success of the investment case depends on effective execution. Greater capacity could narrow power arbitrage spreads and reduce ancillary service revenues, while grid-connection delays, permitting and fire-safety requirements could raise costs or slow projects. Data center demand must also be interpreted carefully. Much of the recent growth reflects demand for short-duration backup systems rather than grid-scale storage, although rising power needs could support both over time.

Battery Storage’s Role in Sustainable Investing

We believe that battery storage presents a unique and attractive combination of declining costs, increasing deployment and a lasting global demand driven by AI infrastructure development.