Energy Storage Industry Report

The multi-billion-dollar Energy storage industry is expected to grow from around $22B in 2023 to about $134B by 2031, with a projected CAGR of 22.1% over this period. While oil, coal, and natural gas still dominate the global energy sourcing in terms of terawatt-hour yield, renewables are rapidly expanding with over twice the investment size of fossil fuels.

Key Market Trends & Drivers 

The global energy industry is increasingly being defined by renewable sources of electricity as technological and economic development increases. The main challenges of this pivot have been the effective storing and deployment of energy from diverse renewable sources compared to easily storable and retrievable fossil fuels. Wind and Solar, for example, have relatively low operational costs but cannot provide a steady stream of energy, increasing the demand for storage solutions that capture energy during peak production times and release it during periods of high demand. Because of such challenges, grid-style electricity storage infrastructure is diversifying from mostly pump-storage hydroelectric systems (which have geographic limitations in terms of scalability) to lithium-based stacked battery systems. 90GWh of industrial battery storage capacity was installed globally in 2023 alone (double the 2022 figure). This is the equivalent of charging 1.8 million EVs. Furthermore, more efficiently engineered batteries, coupled with improvements in lithium extraction technologies, are significantly lowering prices as inventories grow.

This has caused a discrepancy in supply-and-demand dynamics within the intermediary lithium market, consequently resulting in an industry-wide readjustment along the expanding supply chain. The electric vehicle and renewable energy storage markets are the largest consumers of Lithium, as it is their main intermediary input. As both these markets are cyclical and face challenges maintaining demand growth and stabilizing prices, they increase volatility within the Lithium mining and production industry. The massive surge in Lithium availability has led to higher inventory costs as the expanding market’s ability to absorb excess supply has been below most price forecasts. This has created an industry trend of producers prioritizing higher profit, streamlining operations, and focusing less on capturing market shares. This, coupled with the large public investment in the energy sector inspired by interstate competition, has further empowered the private sector to find innovative ways to gain a competitive edge.

The Asia Pacific leads the Lithium market with a 66.2% market share in 2022, but other regions are rapidly expanding their operations across the lithium value-added chain as EVs and electric transportation and industries become increasingly automated and electrified. The expanding digital economy and AI arms race are also significant determinants, as larger database infrastructures will need more immediate access to a diversified grid-scale energy supply.

Additionally, alternative energy storage technologies are also emerging as viable options. Examples include:

• Molten salt energy storage for power generation (a highly efficient thermal option with real industrial applications in Denmark)
• Mechanical energy storage solutions such as flywheel technology
• Chemical energy storage, such as Hydrogen Fuel Cells, are versatile and have a lower carbon footprint during their operational life cycle, although there is very high fossil fuel consumption during the sourcing and manufacturing process). It operates differently from the traditional battery platform based on lithium, lead, cadmium, nickel, and zinc8.

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Despite the technical feasibility of these alternatives, the economic and logistical challenges presented by each still make Lithium battery storage the most dominant option by a wide margin.

Market Segmentation 

The energy storage industry is segmented into:

• Technology
• Traditional Battery Platforms
• Other Energy Storage System Technologies
• Inverter Phase
• Single-Phase: simple, lower capital investment, lower output, and stability. Suitable for residential needs
• Three-Phase: complex, capital-intensive, higher output, efficiency, and stability. Suitable for high-use industrial applications.
• End User
• Residential: lower grid capacity, lower output demand, and less access to highly skilled installation and safety standards
• Commercial and Industrial: higher grid capacity, high energy output demand, and greater access to highly skilled installation and safety standards.

M&A 

In Q3 2024 alone, 52 power deals totaled $7.8B in valuation in the energy storage sector. This represented a 246% year-over-year increase in valuation and a 30% increase in deal activity from Q3 2023. Within the material sourcing subsector, price volatility within energy trading markets and sustainability goals are dampening deal activity. The M&A activity within adjacent and complimentary industries such as energy production, utilities, and material resources positively correlates with the M&A deals in energy storage. And ESG priorities continue to play an important role across the value-added supply chain.

As companies look for strategic partnerships to strengthen supply chains and build resilience through friend-shoring (focusing on strategically and politically aligned markets), the need for an M&A-lead restructuring to capitalize on industrial and regulatory changes has become an established rule for firms to remain competitive while fostering human and technological capital in such a dynamic and all-encompassing industry.

Our Recent Success Stories in the Sector 

Some of Benchmark International’s more recent successful deals in the healthcare space include:

• The acquisition of WESCO Chemicals, Inc. by Apex Water and Process Inc.
• Facilitated the Transaction Between Storm Guardian Generators, LP, and Liberty Service Partners
• The acquisition between Wilnat, Inc. (doing business as KGM) and St. Louis-based private equity firm Compass Group Equity Partners
• Facilitated the Transaction Between Absolute Solar and Wind Ltd and RSK Group
• Facilitated the Transaction Between CorEnergy Limited and Sureserve Group plc
• Facilitated the Transaction Between Adkins Electric, Inc. and Pacific Power & Systems, Inc.
• Facilitated the Transaction Between Facit Testing Limited and Phenna Group

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