AI Data Centers Fuel Global Energy Storage Race
UBS Securities predicts a significant surge in the global energy storage industry over the next five years, driven by the substantial increase in electricity demand from AI data centers in the United States. The company explained that this growing demand will create what it termed a "boom cycle" in the energy storage sector, with an increasing need for storage solutions capable of balancing the fluctuations in energy production from wind and solar sources.
Anticipated Energy Storage Boom
Analyst Yan Yishu from UBS's Hong Kong office stated during a press conference that global demand for energy storage systems could rise by as much as 40% year-on-year by 2026. She added, "Demand from AI data centers in the US is extremely strong, but electricity remains the biggest obstacle to this rapid growth."
Yishu pointed out that renewable energy is the only sector in the US electricity market expected to experience significant growth in the coming years. Given the intermittent nature of its production, power grids need more batteries to store surplus electricity and release it when needed, ensuring a stable supply.
She emphasized that the US market is one of the most important for Chinese energy storage system manufacturers, who hold a market share of approximately 20%, due to its high profitability. However, she explained that emerging markets in the Middle East, Latin America, Africa, and Southeast Asia are poised for the fastest growth rates, ranging from 30% to 50% or more in the coming period.
Yishu warned that the biggest risk facing Chinese exports to the US lies in the "foreign entities of concern" requirements included in the US bill known as the "One Big Beautiful Bill," which imposes restrictions on the participation of Chinese-owned or controlled companies in the US energy sector.
Chinese manufacturers are targeting emerging markets.
In contrast, she said that implementing a market-based pricing system for renewable energy in China would provide an additional boost to energy storage projects, as these projects profit from buying electricity when prices are low and selling it when prices are high.
She added that the price differential between peak and off-peak electricity of 0.4 yuan (about $0.06) per kilowatt-hour is sufficient to make standalone storage projects economically viable.
UPS expects Chinese provinces to begin implementing what are known as capacity payments, a mechanism that gives battery owners financial incentives for their readiness to provide electricity when needed, which will boost investment in the energy storage sector and support its long-term stability.