Sodium-ion batteries enter energy storage market

The world’s first rechargeable lithium-ion battery was developed and manufactured in the US, by Exxon in the 1970s. But the US gave up on the development of the technology, and ceded control of the industry. Today, China dominates the lithium-ion battery value chain.

The first sodium-ion batteries were also developed in the US, by Ford. That technology is also dominated by Chinese companies today. But these false starts open up possibilities for developing new battery supply chains outside China.

Peak Energy, a US battery start-up based in California and Colorado, this week announced a contract to supply up to 4.75 gigawatt hours (GWh) of sodium-ion batteries to storage developer Jupiter Power. Peak said the first tranche under that contract, for 720 megawatt hours (MWh), would be the largest single deployment of sodium-ion batteries announced so far.

Landon Mossburg, Peak’s co-founder and CEO, said the deal proved that sodium-ion battery chemistries were ready for today, and would “dominate the future”.

There are drawbacks to sodium-ion battery chemistries, notably their lower energy density. The first lithium-ion batteries used in electric vehicles, like the smaller versions in laptops and phones, employed nickel and cobalt-based chemistries. Lithium ferrophosphate (LFP) batteries are lower-cost and safer, but have lower energy density. Sodium-ion batteries are a step down again.

However, energy density is often not the decisive factor, especially for stationary storage systems. Peak says its sodium-ion battery systems have lower lifetime degradation, and lower operations and maintenance costs than their lithium-ion rivals.

Sodium-ion chemistries also offer the prospect of building new supply chains that are less reliant on China, which currently manufactures about 80% of the world’s lithium-ion batteries. China’s control of the supply chain is near-total: it produces about 64% of the global supply of refined lithium, almost 90% of the cathode materials and almost all the battery-grade graphite.

Sodium-ion batteries bypass all of those supply chains. Yet China also dominates the – much smaller – sodium-ion battery industry, accounting for almost all the world’s manufacturing today. Sodium, however, is globally widespread. The sixth-most common element in the earth’s crust, it is about 1,000 times more abundant than lithium, making alternative supply chains easier to build.

Today, sodium-ion chemistries account for less than 1% of global battery production for EVs and energy storage. But they could have a growing role to play in the fast-changing energy storage market.

The Wood Mackenzie view

Wood Mackenzie data show that, on average, sodium-ion batteries still cost more than lithium-ion for an equivalent storage capacity. For 2025, we estimate an average cost for LFP batteries of US$52 per kilowatt hour (KWh), and an average cost for sodium-ion batteries of US$59/KWh. We think the cost of sodium-ion batteries is on a slightly faster downward trajectory than that of lithium-ion, but we do not expect them to reach parity with LFP until around 2035.

Peak Energy says the operational cost advantages of its technology mean that sodium-ion batteries are already competitive today against LFP systems.

But sodium-ion’s chances of carving out a significant slice of the market will also depend on buyers’ interest in finding alternatives to lithium-ion chemistries.

In the US, government policy will be a crucial factor. The budget legislation passed in July, informally known as the “one big beautiful bill”, included new restrictions on eligibility for tax credits based on the involvement of foreign entities of concern.

The legislation prevents projects claiming energy tax credits if they are linked to any of four countries: China, Russia, Iran and North Korea. The Treasury has yet to publish the law’s implementation details, so some uncertainty remains over exactly how businesses will be affected.

But it is clear that the rules will be a significant issue for battery storage projects, given China’s dominance of the lithium-ion supply chain.

Even so, a huge expansion of battery manufacturing capacity is under way in the US. Wood Mackenzie is forecasting that US lithium-ion battery production will double in two years, from 96 GWh in 2024 to 196 GWh in 2026.

As federal tax credits and regulatory support for EVs have been cut back, US battery manufacturers have been shifting their focus towards the stationary storage market. LG Energy Solution, for example, has expanded capacity for LFP battery manufacturing at its Holland, Michigan, plant, starting production for energy storage systems in August.

But even amidst that ramp-up, there could still be room for other US battery manufacturers to grow. Sodium-ion batteries can be a hedge against risks of supply chain disruption and cost inflation for lithium-ion technologies, says Allison Weis, Wood Mackenzie’s global head of storage.

Jupiter Power’s deal with Peak could ultimately supply the batteries for its entire current development portfolio, as shown on Wood Mackenzie’s Lens Power platform. That represents a substantial vote of confidence in sodium-ion technology, Weis says.

With China’s dominance of the lithium supply chain continuing to grow, alternative battery chemistries may become increasingly attractive choices.

In brief

The COP30 climate talks in Belem, Brazil, dragged on into the weekend as nations argued over issues including climate finance, carbon markets and whether to pledge to transition away from fossil fuels. Look out for a full breakdown of all the key developments from the conference, coming soon on WoodMac.com.

The world’s largest nuclear plant, Kashiwazaki-Kariwa in Japan, has been given a green light to restart for the first time since being shut down following the Fukushima disaster in 2011. The governor of the Niigata region, where the plant is located, gave approval for a partial restart. Japan’s chief government spokesman said the restart was “extremely important from the point of view of lowering electricity prices and securing decarbonised sources of power”.

MP Materials, the US Department of War and Maaden, Saudi Arabia’s leading mining company, have finalised an agreement to develop a new rare earths refinery in the kingdom. MP, a US rare earths producer, described the move as “a pivotal step toward rebalancing the global rare earth supply chain”, which is currently dominated by China.

The refinery will be designed to process rare earths sourced from Saudi Arabia and other countries around the world. It will supply products for the manufacturing and defence sectors of the US, Saudi Arabia and other allied nations. China’s control of global rare earths supply chains was highlighted by the new export controls it announced last month as leverage in its trade dispute with the US.

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Quote of the week

"The cost-effectiveness of AI in space will be overwhelmingly better than AI on the ground. Long before you exhaust potential energy sources on Earth, I think even perhaps in the four- or five-year timeframe, the lowest cost way to do AI compute will be with solar-powered AI satellites.”

Elon Musk, speaking at the US-Saudi Investment Forum, explained why he thought the case for locating data centres in orbit was “incredibly compelling”.

Chart of the week

This comes from a presentation given by Xizhou Zhou, Wood Mackenzie’s head of power and renewables, at our inaugural European Power Investment Summit in London earlier this month. It shows the learning curves driving cost reductions, over the past five years and for the next 35 years, for solar, wind, batteries and small modular reactors. Zhou argues that efficiency improvements will continue to drive long-term cost reductions, especially for renewables.

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