One of the most significant drivers for the growth of the energy storage sector is the dramatic decline in battery prices. From Q1 2023 to Q1 2024, grid-scale battery energy storage system (BESS) costs fell by an astounding 39%, driven by increased lithium battery production and intense market competition. This decline is pushing both small-scale residential systems and large grid-scale installations, making energy storage more accessible for various market players.

A February report from Goldman Sachs attributes the accelerated price declines partly to a slight slowdown in electric vehicle adoption, leading to lower commodity prices. The finance group revised its global battery demand growth projection to 29% for 2024, down from the previous estimate of 35%, with a 31% growth expected in 2023.Goldman also forecasts a 40% reduction in battery pack prices over 2023 and 2024, followed by a continued decline to reach a total 50% reduction by 2025-2026. Goldman predicts that these price reductions will make electric vehicles as affordable as gasoline-powered vehicles, leading to increased demand.

In the US, where grid-scale installations have traditionally dominated, distributed energy storage is now gaining momentum. The country saw a 48% year-on-year increase in residential battery storage installations, driven by falling export tariffs on rooftop solar power. Meanwhile, Europe, which leads in the residential sector, is also pushing forward with large-scale energy storage deployments

However, while price drops are benefiting the sector, challenges remain, particularly in project timelines. Lengthy permitting and interconnection processes in the US are causing delays for grid-scale installations, which may flatten growth projections slightly in the coming years.

Looking back thirty or forty years, the costs of both batteries and solar panels have decreased by 99% or more for their base units.