Battery storage in Asia Pacific: 5 things to know

A deep-dive into the supply-demand, cost, supply chain, tech and policy trends for battery storage

4 minute read

Battery storage delivers the flexibility renewables desperately need, giving it the potential to transform power markets. So, what does the future hold for the development of the battery storage market in APAC? 

We recently presented a webinar which drew on expertise from our Energy Storage research team to explore the unique commercial and technological opportunities driving demand for battery energy storage, with a particular focus on the APAC region. Fill out the form at the top of the page to download the slide show and view the webinar replay, or read on for a quick overview. 

1. Supply-demand: Short-term oversupply could eventually give way to a raw material deficit 

Batteries with a total capacity of one terawatt hour (TWh) were manufactured in 2023 for use across EVs, energy storage and consumer electronics, with three-quarters of these made in China. However, demand actually slowed down, and utilisation in manufacturing was 10% lower than in 2022. With inventories high and capacity expanding rapidly, the short-term story is one of intense oversupply.  

In the long term, however, global battery demand will rise significantly. We estimate annual demand will surpass 4 TWh by 2032. The vast majority (84%) of that will come from EVs, with only 9% coming from energy storage. Overall global supply should be more than sufficient to meet demand, although in the bear case, slower raw material supply could cause an issue after 2029 (see chart below). 

2. Costs: Import and labour costs will limit the benefits of cheaper batteries  

Reduced demand for EVs has led to a dramatic decline in prices for lithium battery chemicals, which are now around one third of what they were at the start of 2023. We expect prices will continue to stay low through the next 18 months as the market remains oversupplied and suppliers look to destock. 

Lower raw material pricing, tech improvements and economies of scale will make battery storage modules 35-40% cheaper globally by the end of the decade. However, import price premiums and higher equipment and wage rates mean Australia isn’t well positioned to benefit from lower overall battery energy storage system costs. By comparison, system costs in China are already 40% lower than in Australia and are expected to halve again by 2032.  

3. Supply chain: Expect increasing vertical integration   

Going forward, the energy storage supply chain will become increasingly divorced from the EV supply chain. We expect global manufacturing capacity dedicated to battery cells for energy storage to exceed 700 gigawatt hours (GWh) by 2032. China will continue to lead this production, with North America and Europe trailing well behind. 

The wider energy storage value chain has three key segments: storage infrastructure; software for managing systems; and added services which include system integration, operation and maintenance and providing energy trading platforms. Storage system integrators aim for vertical integration across this value chain to improve margins. However, their market share is increasingly being squeezed by both upstream and downstream participants, including battery  manufacturers, engineering, procurement and construction (EPC) firms and project developers.  

4. Technology: Sodium-ion batteries show promise but face headwinds 

Record high lithium prices in 2022 prompted industries to explore the potential of lower-cost sodium-ion battery technology. Abundant raw materials, along with better safety and performance in low temperatures compared to lithium-ion, make sodium-ion an appealing option for energy storage. However, the performance of current sodium-ion batteries falls short of lithium-ion batteries in key areas, particularly energy density and cycle life. This limits their appeal for energy storage applications. 

With the supply chain still in its early stages and lithium prices falling, it’s likely to take some years before sodium-ion technology is widely adopted. We expect 28 GWh of sodium-ion batteries to be manufactured in 2024 compared to just 2 GWh in 2022, while by 2032 manufacturing capacity should reach 330 GWh. However, that pales in comparison to the predicted 4 TWh worth of lithium-ion batteries expected to be manufactured by then. Again, production will be heavily dominated by China. 

5. Policy: Long-term policy support for localisation will be vital 

Key countries and regions are aiming to build greater self-sufficiency in the energy storage supply chain through policy support. The Inflation Reduction Act (IRA) in the United States offers various tax credits for energy storage projects, including incentives for the use of domestic content. Meanwhile, the European Union plans a ‘battery passport’ system, which will require all batteries to carry information including their material composition, carbon footprint, the source of their raw materials, and recycled and renewable content. Elsewhere, similar long-term policy support for localisation will be key, since it takes time to build and scale up an effective local battery storage supply chain. 

Learn more 

Don’t forget to fill out the form at the top of the page to download the full slide deck and watch the video replay of the presentation. 

About Wood Mackenzie’s Asia Pacific Power Service 

Wood Mackenzie’s Asia Pacific Power Service provides data and insight on the full power and renewables value chain, focusing on the critical intersections of technologies, policies and actors reshaping the sector. Our research covers wind, solar, storage, electric vehicles and grid edge, integrating this with our views on the wider energy landscape, including fossil fuels and the raw materials vital to the energy transition.