US$ 1.2 trillion in battery storage investments needed to support global renewable buildout

Investments of US$1.2 trillion in battery energy storage systems (BESS) will be required to support the installation of over 5,900 GW (Gigawatt) of new wind and solar capacity globally through 2034, according to Wood Mackenzie. The deployment of grid-forming technology (GFM) needs to accelerate over the next decade to facilitate the projected $5 trillion global expansion of renewable energy. 

Unlike traditional grid-following systems that simply respond to grid conditions, grid-forming battery energy storage systems can actively create and maintain grid stability. This capability becomes essential as renewable energy becomes the dominant source of power generation globally. 

“Grid-forming battery energy storage systems represent a critical breakthrough for renewable energy integration,” said Robert Liew, research director at Wood Mackenzie. “As global power demand is projected to surge 55% by 2034, with variable renewable energy comprising over 80% of new capacity additions, GFM BESS provides the technological bridge between renewable abundance and grid stability requirements.” 

Global battery storage annual-added capacity, 2024-2034 

Source: Wood Mackenzie Lens Storage 

Critical capacity gap emerges amid growing renewable penetration 

According to a recent Wood Mackenzie report, the global power sector faces a capacity gap of 1,400 GW for additional battery energy storage installations utilising GFM for grid stability between 2024 to 2034. Several Asia-Pacific markets are already operating with variable renewable energy from wind and solar power contributing 46% to 90% of peak load conditions. This represents an enormous market opportunity as grid-forming capabilities become the preferred solution for markets with increasing renewable energy penetration. 

While global momentum around renewable integration continues to accelerate, recent grid instability events highlight the urgency of advancing storage and grid technologies in parallel. The 2025 Spanish blackout, for instance, illustrates the growing risk of high renewable energy penetration without adequate grid-forming capabilities or advanced storage infrastructure to support system reliability. 

Grid-forming BESS provides multiple critical functions for stability including independent voltage source capabilities, high current transient support during disturbances, inertia response similar to conventional power plants, and black start functions for complete system recovery following outages. 

Critical grid capabilities, and comparison between grid-following and grid-forming energy storage technologies 

Source: Wood Mackenzie Lens Storage 
Note: Using traditional power system as a benchmark

“The Red Sea Project is a great example of what's possible with grid-forming technology at scale,” said Liew. “As the world's largest off-grid renewable energy project, it showcases how a utility-scale power system can operate continuously on 100% renewable energy for almost two years.” 

Higher costs are offset by falling battery prices 

While grid-forming capabilities add an estimated 15% to overall system costs largely due to upgraded inverters, controls, and software, these cost hurdles are becoming more manageable as average battery energy storage prices have declined between 10% and 40% across global markets in the past year, according to Wood Mackenzie. 

The economic case for new advanced battery storage systems continues to strengthen across global markets. Hybrid utility solar installations combined with battery energy storage are already competing directly with onshore wind costs worldwide, while projections indicate that utility-scale battery systems will undercut coal and gas power generation costs by 2040 in markets outside the United States. 

Regulatory momentum building amid market uncertainty 

Regulatory support for grid-forming battery technology is accelerating, with major markets such as China, the United States, and Australia introducing comprehensive technical guidelines that support the deployment of grid-forming batteries. These guidelines reflect growing recognition of the technology's role in stabilising grids as solar, wind, and storage systems contribute a rising share of power generation. While international standards are still under development, early regulatory signals point toward a preference for advanced grid-forming capabilities.

Across the Asia-Pacific region, markets including China, India, Japan, and Vietnam are already managing renewable energy penetrations between 46% and 92% of peak demand. This high variability has led to growing curtailment, highlighting the need for technologies that can manage grid stability while optimising renewable energy output. 

With global electricity demand forecast to grow at a compound annual rate of 3% through 2040, according to Wood Mackenzie, grid-forming batteries are emerging as a practical replacement for conventional synchronous generators. Their ability to provide voltage and frequency stability is positioning them as a foundational technology for high-renewable power systems. 

“We’re seeing a convergence of key factors, declining battery costs, stronger clean energy targets, supportive policy developments, and proven pilot projects, that are accelerating the adoption of grid-forming technology,” said Liew. “With global battery capacity expected to triple by 2035, grid-forming capabilities will likely become a baseline requirement for new storage deployments. This will be essential not only for grid reliability, but also for unlocking the full value of renewable energy investments at scale.”