Powering Ahead: The Rise of Energy Storage Systems

In February 2021, the state of Texas was plunged into a deep freeze. The cold weather caused dozens of gas plants to reduce production or shut down entirely. Meanwhile, energy demand skyrocketed as hundreds of millions of residents turned up their heaters. Between rolling blackouts and eventual grid overload, more than two thirds of Texas residents lost power for roughly two days in the freezing temperatures.

We’re now regularly hearing stories like this about the impact of the growing energy crisis, from planned power outages in California to prevent wildfires or grid failure to strict new heating and cooling limits in public buildings in European Union countries. Population growth coupled with accelerating climate change has made the need for energy storage systems (ESS) greater than ever.

The International Energy Agency (IEA) estimates that the world will need 18% more energy by 2030 to support our increasingly connected, electrified lifestyles. Renewable sources of energy like solar and wind are making up more and more of the power that we use on a daily basis. Energy storage systems are central to any renewables strategy, as an ESS turns an intermittent power source into a dispatchable asset.

Saving renewable energy through storage systems is convenient, more efficient, and, in the long term, cheaper than relying on traditional fossil fuels. There are various types of ESS solutions, including thermal (increasingly common for industrial purposes), mechanical (like flywheel storage, which harnesses energy to create electricity), and pumped hydropower (reservoirs). Although pumped hydro is the historic leader in energy storage, battery-powered energy storage systems are currently the most common for new installations and are expected to remain the leader for years to come.

In a February 2023 report, the research firm Research and Markets said the global battery energy storage system market grew 27% from 2022 to 2023. By 2027, they anticipate the market will be worth more than $13 billion, marking approximately 150% growth between 2023 and 2027.

The current pace of ESS installations appears to bear those projections out. According to BloombergNEF’s 1H2023 Energy Storage Market Outlook forecast, 16 gigawatts (GW)/35 gigawatt hours (GWh) of new energy storage were added globally in 2022, a 68% increase from 2021. By 2030, annual installations are expected to reach 88 GW/279 GWh per year to reach a cumulative 508 GW/1,432 GWh of energy storage installed worldwide by the end of that year.

Why Energy Storage Systems Are Poised for Massive Growth

There are a few explanations for this massive rise in ESS demand that tie into larger trends we see throughout the energy and industrial market. In Jabil’s 2023 Energy Storage Trends Survey, we polled 204 industry decision-makers to learn more about the factors driving the development and deployment of their energy storage solutions.

Download the full Energy Storage Trends Survey

1. Support the growth of renewable energy

As energy demand increases, nations, states, and utility companies are accelerating their shift away from fossil fuels. The IEA estimates that renewable energy will make up 50% of electricity generation worldwide by 2030.

In turn, 87% of respondents in the Jabil survey say supporting the demand for renewable energy is the biggest factor driving the development of their energy storage solutions.

The expansion of ESS and renewables are heavily interdependent on one another. Solar and wind energy developments need ESS to store and manage the energy they collect, so ESS and renewable installations — particularly solar photovoltaic (PV) — often happen in tandem.

For example, 63% of the battery storage systems set to come online in the U.S. between 2021 and 2024 have been or will be co-located with solar power. Another 9% is co-located with wind power. As the U.S. Energy Information Administration explains, “solar generators in particular can effectively pair with battery storage because of their relatively regular daily generation patterns. This predictability works well with battery systems because battery systems are limited in how long they can discharge their power capacity before needing to recharge.”

This dual expansion of renewables and ESS is necessary not only to prevent or mitigate a potential energy crisis but also to support clean energy initiatives like electric vehicles (EVs). Most major nations have issued mandates to at least partially end the production and sale of internal combustion engine (ICE) vehicles starting in 2030, accelerating the demand for EV charging solutions and storage systems to keep those chargers constantly functioning.

Enabling clean energy solutions like solar, wind, and EVs will require more than just systems that store, deploy, and direct electricity. The shift to renewable energy also calls for solutions at the grid level.

2. Enhancing grid resilience

To deploy and manage renewable energy, older electrical grids need greater resiliency and better load management, both of which are already top priorities for the industry: 56% of survey respondents said increasing grid resiliency is driving the development of their ESS solutions.


By its nature, renewable energy is less stable than energy derived from fossil fuels. For example, too many solar panels or wind turbines in a concentrated area can affect how the grid operates and may cause grid instability and imbalance. If one home connects to the grid through solar, there is little to no impact on the electricity grid. But if an entire subdivision gets connected through solar, the resulting electricity flow back to the grid could lead to localized grid imbalances in voltage and frequency.

Additionally, the world needs a massive charging infrastructure to support the number of EVs hitting the road over the next decade-plus — something to the effect of replacing all existing gas pumps with chargers. This won’t be feasible with our current global grid capacity.

Decentralized energy storage systems counteract these imbalances and fill the gaps in energy needs — smoothing out the peaks and valleys in demand and deploying energy even when the sun isn’t shining or the wind isn’t blowing. As the penetration of renewables on our grid continues to rise, we will need to store energy longer, which may be accomplished by using long-duration energy storage solutions (LDES) which will need to become more prevalent in the future. LDES systems can discharge for roughly 10 to 100 hours. Generally, larger systems are meant to store energy for monthly, seasonal, or emergency use, while smaller systems with shorter discharger times are meant to store energy to meet daily needs.

Grid-scale ESS is currently the largest and still growing, segment of the energy storage market. One quarter (25%) of respondents in the Jabil survey said they are currently developing grid-scale ESS, while another quarter are considering expanding their offerings to include grid-scale solutions within the next three to five years.

Although grid is the largest market, more respondents are working on developing solutions like commercial/industrial (88%) and residential (33%) energy storage. These smaller battery storage systems still help balance and stabilize the grid on a localized level. They also lessen the chances of electricity loss in homes and critical buildings like hospitals due to grid issues caused by power outages, hurricanes, and snowstorms.

Greater grid stability not only ensures continuity in energy delivery but also can decrease the overall cost of energy in the long term.

3. Reducing energy costs over time

While ESS and renewables still require significant upfront investments like any grid asset, they can lead to savings over time, particularly around energy costs. Three quarters (75%) of respondents in Jabil’s energy storage survey are motivated by lower long-term energy costs when developing ESS solutions.

Energy storage is especially useful for saving money in times of high energy demand. Demand charges make up, on average, 30–70% of a commercial customer’s energy bill.

With a technique called peak shaving (sometimes referred to as load shedding), a customer can charge their ESS battery and rely on energy from the grid during times of normal demand. Then, their automated control software detects when the grid is peaking and switches to exclusively battery power until demand returns to normal — but all operations can continue as normal. This strategy can be preferrable for industrial customers to load shifting, which requires turning off high-powered equipment completely during times of high demand.

Adoption of battery ESS can also help reduce the reliance on fossil fuels in regions where gas is expensive or difficult to access — such as island regions like Hawaii or areas in Europe hard-hit by the ban on fuel imports from Russia. Similarly, in developing countries, ESS paired with renewables can help accelerate economic growth without placing additional stress on the grid or environment.

The upfront costs for ESS installation are largely driven by the price of lithium-ion batteries. According to an analysis by MIT professors Micah Ziegler and Jessika Trancik, using energy storage combined with a mix of wind and solar power to meet 100% of the baseload energy demand would have to cost roughly $20 per kilowatt hour (kWh) to compete with electricity provided by a nuclear power plant. However, if other sources of energy covered just 5% of the baseload demand (95% renewable penetration), the cost of an ESS could be $150 per kWh to be competitive.

That is much closer to the level we see now. The average price of a lithium-ion battery pack has dropped steadily over the past decade, from a high of $732 in 2013 to a low of $141 in 2021. Though costs rose slightly to $151 in 2022, this overall decline has helped bring the cost of ESS more in line with traditional power sources and can allow companies that install ESS to see savings sooner.

We’re also seeing governments step in to make ESS more accessible and affordable. In September 2021, the U.S. Department of Energy launched the Long Duration Storage Shot. This program is meant to lower the cost of grid-scale ESS solutions that deliver 10-plus hours of energy within a decade and is backed by a $1.16 billion investment. In China, the government is investing $7 trillion through 2040 to complete the country’s clean energy transition, with hundreds of millions earmarked for energy storage.

These investments could not just help fast-track cost reductions but also accelerate the innovation we’re seeing in battery and storage technologies.

4. Increasing innovations in battery and energy storage technologies

New developments in the capabilities and chemistries of batteries and other technologies used to store energy and deploy power within ESS will help support growth of storage systems overall — particularly long-duration energy storage systems.

As previously mentioned, lithium-ion batteries are far and away the most popular storage technology. Nine in 10 Jabil survey participants said they currently use lithium-ion batteries in their ESS, while 75% plan to use lithium-ion batteries in their future solutions. The price, performance, and availability of these batteries continues to improve, contributing to their widespread (and growing) adoption.

However, some ESS manufacturers are leveraging other battery types and plan to explore new, non-battery technologies. About a fifth of respondents (21%) are using lead acid batteries, while 19% are using flow batteries in their solutions. Over the next five to 10 years, one fifth of respondents said they will explore hydrogen fuel cells. Thermal energy storage (19%), supercapacitors (13%), mechanical storage (9%), and compressed-air energy storage (7%) will also continue to support their respective niche applications for the foreseeable future.

With battery and storage technology advancing faster and faster, modular design is of the utmost importance for ESS providers creating new solutions. The last thing you want is to have to take apart an entire storage system to replace a component or two when the latest generation rolls out. Modular design allows for simple manufacturing and product technology updates with minimal disruption to the system as a whole. Respondents in Jabil’s survey said they prioritized modularity, rating it an average of 4.5 in importance to the overall design of their energy storage system.

Challenges to Energy Storage System Growth

While it’s clear they recognize the importance of the task ahead, Jabil's survey respondents reported challenges in ramping up deployment for energy storage systems — specifically scaling to meet the demand for renewable energy (59% of respondents). This is indicative of the complex nature of these solutions, which are heavily dependent on advanced technology, expertise, and infrastructure. Though many of the opportunities ESS offers center around costs and battery technologies, those two factors also drive some of the biggest hurdles OEMs must overcome in the development of energy storage.

1. Managing development costs

The size and weight of these systems contribute significantly to their high development costs. A full ESS can be as large as a semi-truck, consisting of individual 8-feet-by-10-feet steel cubes. To mitigate the cost vast quantities of steel, most OEMs prefer to procure and build the steel frame in Asia — where the material is significantly cheaper than in end-markets like Europe and the U.S.

However, OEMs increasingly face incentives or even mandates to localize at least part of their ESS manufacturing or materials procurement, which can drive up production costs. To adhere to these rules, some OEMs have tried new processes like keeping enclosure manufacturing in Asia and completing electronics and final manufacturing in North America. But shipping empty steel enclosures overseas means you're mostly transporting air — an ineffective use of money, time, and fuel. 

Considering these new challenges, nearly three quarters (74%) of ESS survey respondents said increasing material costs is their top supply chain issue. Some (44%) also reported that sourcing materials far from their end markets is driving up their supply chain costs. OEMs are now searching for more efficient shipping methods and more cost-effective sources of steel in markets like North America.


When we’re dealing with products this large, the “cost” goes beyond the financial. In addition to pure dollars and cents, OEMs must also consider the sustainability and carbon footprint of the manufacturing and transportation process for their systems.

2. Finding sustainable sources of energy storage

Lithium-ion batteries may not be the most sustainable solution to support growing demand for energy and energy storage. Their production requires the mining of lithium, nickel, cobalt, and other natural resources. This is a water-intensive process and often happens in regions with scarce water to begin with. The battery manufacturing process is carbon-intensive, working against the carbon-reduction goals many companies have implemented.

As lithium-ion battery production scales and becomes even less sustainable, this poses a problem for meeting global energy needs. It also raises a question: Can we develop energy storage solutions that are cost effective and less impactful to the environment?

There will be no replacement for the lithium-ion battery in the immediate term — that is for certain. But the energy industry is already working to discover what's possible. Participants in Jabil’s ESS survey indicated that they are looking to reuse batteries from their storage systems in new solutions or other products at the end of their life (75%) or recycle through methods like smelting (64%).


Some OEMs are exploring hydrogen as a renewable energy source, while others are researching small-scale nuclear fusion. Energy players who have achieved net-zero power are even working on net-positive power generation. Advancements in these areas could significantly influence the future of renewable power and energy storage options.

The ESS market is rife with possibility and growth. As we look ahead to an all-renewable future, we will need to embrace long-duration energy storage solutions and store energy for days and weeks, not hours. We’ll also need to focus more clearly on sustainability in the decades ahead, as the systems being installed now eventually need to be decommissioned in an environmentally conscious, cost-effective way. Perhaps most importantly, the future of energy storage systems will need to be accessible and affordable.

Download the 2023 Energy Storage Trends Survey

What is the current state and future of energy storage? What challenges do OEMs face in manufacturing and scaling their solutions? Get insights from 200+ energy storage and battery solutions decision-makers about these questions and more.