Energy storage expansion reshapes battery metal demand, and the EV supply chain faces a new round of transformation.

Introduction

The global energy transition is giving rise to a brand-new source of battery demand—energy storage. With the exponential growth of wind and solar installed capacity, the grid's need for flexible resources is becoming increasingly urgent, and energy storage systems have thus become key infrastructure for balancing the intermittency of renewable energy. For the electric vehicle industry, this trend is not an isolated event: energy storage and electric vehicles share the lithium battery supply chain, and the rapid expansion of the storage market will directly reshape the demand landscape for battery materials, thereby affecting battery costs, capacity allocation, and supply chain strategies of vehicle manufacturers.

Industry Background: Energy Storage and EVs Share the Same Battery Ecosystem

The core function of energy storage systems is to absorb and release electricity to smooth out fluctuations in wind and solar output. Data from China's National Energy Administration show that in the first three quarters of 2025, China's solar installed capacity reached 1.13 TW, a year-on-year increase of 45.7%; wind installed capacity reached 580 GW, up 21.3% year-on-year. A higher share of renewable energy means that demand for supporting storage capacity is rising sharply.

More notably, storage batteries and EV power batteries overlap heavily in cathode materials, electrolytes, separators, and other segments. More than 90% of global storage battery production capacity is concentrated in China, which is also the world's largest producer of EV power batteries. This means that every bit of growth in the storage market will be directly transmitted to upstream metal material markets such as lithium, cobalt, nickel, copper, and aluminum, which will compete with EVs over the same supply pool.

Key Developments: Storage Installations and Metal Demand Rise in Tandem

China: 100 GW New Addition Target and 180 GW Total Capacity Expectation

According to a government action plan cited by Argus Media, China will add 100 GW of storage capacity from 2025 to 2027, with total installed capacity reaching 180 GW by the end of 2027—more than doubling from 2024. This policy signal not only shows that storage has become a core component of China's energy strategy, but also means that battery material demand will receive sustained policy support over the next three years.

United States: Record Quarterly Installation Growth

The U.S. storage market is also performing strongly. In the second quarter of 2025, new battery storage installations set a historical single-quarter record, driven mainly by grid connection of large-scale projects. At the current pace, U.S. storage installations in 2025 are expected to reach approximately 19 GW/52.5 GWh, up 53% and 45% year-on-year, respectively. The synchronized growth across the Atlantic marks energy storage as a mainstream direction in global energy infrastructure investment.

Cost Decline: LFP Material Cost Down 83% from 2022 Peak

Continuous improvements in lithium-ion battery technology efficiency, combined with the retreat of lithium prices from historical highs, are making large-scale storage projects increasingly economically viable. Argus assessment data show that the cost of lithium iron phosphate (LFP) cathode materials has fallen to US$11.12/kWh, down 83% from the historical peak in November 2022. The sharp cost decline not only stimulates storage installation demand, but also provides a reference for EVs to further reduce battery costs.### Lithium Demand Structure Shift: Energy Storage Rises to Second-Largest Demand Source

Energy storage now accounts for 12%–13% of global lithium demand, making it the second-largest lithium consumption sector after electric vehicles. Argus Consulting forecasts that by 2035, lithium demand from energy storage systems will reach 340,000 tonnes of lithium carbonate equivalent (LCE). This means that even if EV sales growth slows, energy storage will continue to support long-term growth in lithium demand.

Copper and Aluminum Demand Also Boosted

Energy storage system construction is also driving demand for copper used in power transmission and aluminum used in structural components and thermal management. Argus estimates that copper demand from China's EV and energy transition sectors will reach 3 million tonnes in 2025, an 18% increase from 2024. This multi-metal linkage effect is turning energy storage into a systemic variable in the metals market.

Diversification of Technology Routes: Vanadium Redox Flow Batteries and Sodium-Ion Batteries Accelerate Commercialization

Beyond lithium batteries, alternative technologies are also being deployed faster. Market participants estimate that around 5 GWh of vanadium redox flow batteries (VRFB) will be installed globally in 2025, consuming approximately 35,000 tonnes of vanadium in vanadium pentoxide equivalent. Meanwhile, the commercialization of sodium-ion batteries is also advancing, potentially offering differentiated options for energy storage in terms of resource abundance and cost structure.

Industry Impact: Battery Supply Chain Competes and Synergizes with EVs

The rise of the energy storage market brings both synergies and potential competition to the EV industry.

From a synergy perspective, energy storage and EVs jointly drive battery economies of scale, accelerate supply chain investment in metals such as lithium and copper, and help reduce costs across the industry. According to data from the China Industrial Association of Power Sources, China added 142.2 GWh of lithium-ion energy storage battery production capacity in the first half of 2025, with another 752.5 GWh under construction. This capacity will be released over the coming years, potentially providing a more abundant upstream supply for power batteries.

From a competition perspective, the rivalry between energy storage and EVs for battery production capacity and lithium resources will intensify. Energy storage batteries typically have lower requirements for energy density but are more sensitive to cycle life and cost, prompting battery companies to build dedicated production lines rather than simply sharing them with power battery lines. For companies such as Tesla, BYD, and CATL, balancing capacity allocation between these two major demand engines will become a key strategic issue.

Challenges and Risks: Oversupply, Volatility, and Geopolitics

Despite broad growth prospects, the energy storage industry still faces multiple challenges.

Risk of capacity oversupply: Currently, capacity utilization of China's energy storage battery production is relatively low, and a large number of newly built energy storage power stations have not yet been put into operation. If installation speed fails to keep pace with capacity expansion, price wars and industry consolidation will be inevitable.

Metal price volatility: The high volatility of prices for metals such as lithium, copper, and vanadium makes it difficult for manufacturers to control costs. The sharp surge in lithium prices in 2022 and the subsequent sharp decline have already provided a profound lesson for the industry.Geopolitics and Trade Barriers: The United States' higher tariffs on Chinese energy storage batteries directly constrain the global expansion of Chinese energy storage batteries. China accounted for more than 90% of global energy storage battery shipments in 2024, while U.S. domestic capacity build-out has been slow. This imbalance is becoming a significant pain point in the global energy storage supply chain.

Immature Market Mechanisms: The core profitability model of China's energy storage power stations relies on peak-valley electricity price arbitrage, but the current peak-valley price spread is narrow and lacks real-time price signals, limiting the revenue potential of energy storage assets. This requires further deepening of electricity market reform to unlock the true value of energy storage.

Future Outlook: Technology Diversification and Supply Chain Localization in Parallel

The story of energy storage metals demand is far from over, but the path will become more complex. On the one hand, new technologies such as vanadium redox flow batteries and sodium-ion batteries will gradually divert the single reliance on lithium, forming a landscape where multiple metals and multiple technology routes coexist. On the other hand, the United States and Europe are attempting to reduce their dependence on China's battery supply chain through localization policies, which may push the global battery metals supply chain toward regionalization and fragmentation. For the electric vehicle industry, this means that the availability and price of battery materials in the future will no longer be determined solely by the single EV market, but will be jointly shaped by energy storage, electric vehicles, and national industrial policies.

Conclusion

Energy storage and electric vehicles are jointly weaving a brand-new network of battery metal demand. As China advances energy storage deployment with a 100GW-level target, as the United States sets quarterly installation records, and as LFP material costs fall to historic lows, the demand curves for metals such as lithium, copper, vanadium, and aluminum are being structurally lifted. This change is not only about the energy storage industry itself, but also profoundly affects the cost logic, capacity layout, and technology choices of the EV supply chain. In the long-term process of global transportation electrification and energy transition, the synergy and competition between energy storage and electric vehicles will become the core force determining the direction of clean energy supply chain reshaping. Whether all parties in the supply chain can find a balance among metal resource competition, technology route divergence, and trade barriers will determine the ultimate cost and speed of this transformation.