- Global long duration energy storage installations surpassed 15 GWh in 2025, rising 49% year on year.
- China accounted for 93% of global deployment, supported by strong national policy frameworks.
- Venture capital investment in the sector fell 72% as lithium ion batteries continue to dominate the market.
Global installations of long duration energy storage exceeded 15 GWh in 2025, marking a 49% year on year increase. Despite the strong growth, the sector faces mounting financial pressure as investment declines and competition from lithium ion batteries intensifies, according to the latest Long Duration Energy Storage Trends report from Wood Mackenzie.
Compressed air energy storage represented 45% of installations in 2025, followed by thermal energy storage at 33% and vanadium redox flow batteries at 21%. China continues to dominate global deployment with a 93% share of cumulative installed capacity, supported by strong policy backing including provincial mandates and the national Special Action Plan for Development of New Energy Storage covering 2025 to 2027.
Jiayue Zheng, managing consultant for energy storage at Wood Mackenzie, said that despite the installation growth, long duration technologies are facing increasing market pressure.
Lithium ion batteries have captured the economically critical four to eight hour storage segment due to their cost advantages and well established supply chains. At the same time long duration technologies still lack sufficient demand signals and pricing mechanisms to reach commercial viability.
Energy storage duration must expand to meet net zero targets
Under the net zero scenarios modelled by Wood Mackenzie, the global average energy storage duration would need to increase from about 2.5 hours today to roughly 20 hours in the future.
As countries including Germany, Australia and Denmark push to exceed 50% variable renewable energy penetration by 2030, wider deployment of long duration storage will become increasingly important to maintain grid reliability.
Despite this need, long duration technologies accounted for only 6% of global energy storage installations in 2025. Lithium ion battery projects typically provide about two hours of storage, while vanadium redox flow batteries and compressed air systems average around four hours and thermal storage projects average about eight hours.
The report notes that revenue certainty for long duration storage is strongest in the United Kingdom, Italy, the United States and Australia. Technology specific procurement programmes are also emerging in markets such as Spain, Ireland and Germany. However most electricity markets still lack adequate capacity mechanisms and multi day price arbitrage alone is insufficient to support project investment.
Investment drought threatens sector expansion
Global funding for long duration energy storage declined 30% year on year in 2025, excluding a US$1.76 billion commitment from the United States Department of Energy to support projects from Hydrostor. Venture capital investment fell even more sharply, declining by 72%.
Between 2021 and 2025 only three companies, Hydrostor, Eos Energy Enterprises and Form Energy, raised more than US$1 billion each, collectively securing over US$4 billion in funding. Even these better capitalised firms continue to face financial challenges as projects move toward commercial deployment.
The report attributes the difficult investment climate to several factors. Persistently high interest rates are making long payback projects less attractive, while rapidly expanding artificial intelligence data centres and grid infrastructure projects are competing for capital. At the same time falling lithium ion battery prices continue to narrow the economic advantage of long duration storage technologies.
Cost gap with lithium ion remains significant
Cost competitiveness remains a major barrier for long duration storage. In China, four hour lithium ion battery projects cost about US$107 per kWh. By comparison thermal energy storage costs around US$190 per kWh and compressed air energy storage costs about US$201 per kWh, representing cost premiums of 78% and 88% respectively.
Priya Shrivastava, research manager for the energy storage supply chain at Wood Mackenzie, said that while vanadium redox flow battery costs are expected to fall by more than 30% by 2034, they will still remain significantly higher than lithium iron phosphate battery systems for four hour applications.
Lithium ion batteries achieved dramatic cost reductions over the past decade and emerging long duration technologies are unlikely to replicate that scale of decline.
Market outlook to 2034
According to Wood Mackenzie, lithium ion batteries are expected to maintain an 85% share of the global energy storage market through 2034. Vanadium redox flow batteries and compressed air systems are forecast to capture around 5% and 3% of the market respectively.
Lithium ion manufacturers are also expanding into longer duration products and are increasingly targeting the four to eight hour storage segment. Their cost competitiveness and established supply chains, which exceed 1,000 GWh of capacity, are expected to reinforce their dominance.
Demand for multi day storage remains limited because two to eight hour systems already meet around 90% of storage requirements in most regions. Multi day discharge events typically occur fewer than 10 days per year.
Several large scale demonstration projects are currently under development. These include a 50 MW 300 MWh liquid air energy storage project from Highview Power in the United Kingdom, a 20 MW 200 MWh carbon dioxide battery project from Energy Dome in Italy, and multiple gigawatt hour scale compressed air and thermal storage projects across China.
However analysts say the transition from demonstration projects to large scale commercial deployment will remain challenging without significant market design reforms that create stronger revenue certainty for long duration storage technologies.
Author: Bryan Groenendaal
