For BESS Cynics- How Global Agencies Failed To Predict The BESS Boom, And 5 Reasons Why

The Scale of the Surprise: 2020 Projections vs. 2025 Reality

What forecasters expected in 2020 for 2025:

In its 2020 World Energy Outlook, the IEA's STEPS (Stated Policies Scenario) projected roughly 80–100 GWh of annual stationary battery storage additions by 2025, with cumulative installed capacity (excluding pumped hydro) reaching somewhere in the range of 100–150 GWh total. Even the more bullish NZE-precursor scenarios barely contemplated 200 GWh cumulative. BNEF's 2020 forecasts were more aggressive but still put annual additions for 2025 in the range of 15–25 GW. The U.S. DOE's 2020 Energy Storage Market Report projected global Li-ion manufacturing capacity of roughly 1,400 GWh by 2025 (across all uses), which implied stationary storage installations of a small fraction of that.

What actually happened:

Global energy storage installations in 2025 are estimated at 92 GW and 247 GWh (excluding pumped hydro) — more than double the 44 GW installed in 2023 alone, itself a year that had already blown past earlier forecasts. To put the trajectory in perspective: 69 GW of battery storage capacity was installed in 2024 alone, nearly doubling total battery storage capacity, which stood at only 86 GW cumulative in 2023. (Ember data)

So by the most conservative comparison: annual installations in 2025 (~247 GWh) are likely higher than the total cumulative installed base that 2020 forecasters expected to exist by 2025. The market is running roughly 5–10x ahead of the IEA's STEPS projections from that era, and perhaps 3–5x ahead of even BNEF's bullish 2020 views.

A few other structural changes beyond raw volume also weren't anticipated:

• Utility-scale dominance: Around 85% of additions in 2025 are grid-scale systems, whereas 2020 forecasters expected residential and behind-the-meter storage to remain the majority for longer.
• China's overwhelming share: China accounts for over 50% of the annual build in gigawatts , far exceeding what most Western analysts modeled.
• Duration extension: Li-ion is now regularly deployed at 6–8 hour durations, competing with technologies that were supposed to occupy that space by 2025 (flow batteries, compressed air, etc.).
• Geographic breadth: Gigawatt-hour projects have been commissioned or started construction in not only the US and China, but also Saudi Arabia, South Africa, Australia, Netherlands, Chile, India, Canada and the UK  — a global spread 2020 forecasters largely didn't anticipate for this decade.

This explains why top solar manufacturers in India, who had a ringside view of this demand versus supply mismatch over the past few years, have rushed into BESS manufacturing as well now.  For them, it is an opportunity that is still underestimated possibly.

The Top 5 Factors That Drove This

1. Price Drops Far Exceeded Model Assumptions

This is the single biggest driver — and easily the most glaring miss. Lithium-ion battery prices dropped to $115 per kWh in 2024, a 20% reduction in a single year and 84% lower than a decade ago. In 2020, most models assumed prices would fall to the ~$100/kWh range somewhere around 2030. They got there 6+ years early. And in fact  headed to $75 now.

The mechanism: forecasters in 2020 underestimated the interaction between EV scale and stationary storage costs. EV demand created massive manufacturing scale, which drove down cell costs across the board. The shift to LFP chemistry — which eliminates nickel and cobalt — compounded this, cutting costs further than NMC-focused models assumed. The 20% fall in battery pack costs in 2024 marks the largest percentage reduction in a single year since 2017, driven by economies of scale and increased adoption of LFP chemistry. The Wright's Law / learning rate for batteries turned out to be steeper than modeled, particularly in China where factory utilization and competition between dozens of manufacturers like CATL, BYD, and EVE drove costs to levels that would have seemed implausible in 2020 projections.

2. China's Manufacturing and Policy Machine Went Into Overdrive

No 2020 forecast adequately modeled the scale or speed of China's response. Chinese provincial governments introduced mandatory storage co-location requirements for all new wind and solar projects — typically 10–20% of capacity for 2–4 hours. This created an enormous, policy-guaranteed demand signal overnight. Combined with China's industrial policy driving gigafactory buildout at a pace that shocked even optimistic observers, the result was: the total volume of batteries used in the energy sector was over 2,400 GWh in 2023, a fourfold increase from 2020. 

Chinese manufacturers also aggressively exported, providing cheap batteries to markets globally — enabling installations in Australia, the UK, Germany, and emerging markets at costs that made projects viable years ahead of schedule. The interaction between China's domestic demand (creating scale) and its export capacity (spreading low costs globally) was a feedback loop almost no 2020 model captured. Now, it is this very dominance of China, estimated at close to 80% of the BESS market, that is cited as the biggest structural risk. As BESS manufacturing picks pace elsewhere, the growth impulse will only become stronger.

3. Policy Shocks in Western Markets — Especially the U.S. IRA

The 2022 U.S. Inflation Reduction Act was a genuine discontinuity that no 2020 forecast could incorporate. It created a standalone Investment Tax Credit for battery storage (previously storage had to be paired with solar to qualify), fundamentally changing the economics of grid-scale projects in the world's second-largest market. The IRA was expected to drive roughly 30 GW / 111 GWh of energy storage build from 2022 to 2030. That's effectively 2020's entire 5-year forecast packed into an 8-year policy window — and even that turned out to be an underestimate of its impact.

Europe's REPowerEU plan (triggered by the Russia-Ukraine war) had a similar effect: BNEF more than doubled its energy storage deployment forecasts from 2025 to 2030 across Europe from previous forecasts following this policy shift. These were events that shifted project economics almost overnight. and consequently traejectory of deployments. Interestingly, despite the hits to the IRA act by the US government, BESS deployment has not slowed, and the slack has been taken by faster than expected growth elsewhere in the world.

4. The Renewable Energy Surge Creating Urgent Grid Need

Storage has also boomed because without it, Solar and wind, backed so aggressively in China and recently  in India, would have faltered without it. Their fast growth created grid integration problems that only storage could solve economically. Solar in particular vastly outpaced all forecasts: global solar additions in 2024 reached ~585 GW, roughly 3–4x what the IEA's 2020 STEPS scenario projected for that year. More wind and solar means more curtailment risk, more duck curves, more frequency regulation needs — all of which storage addresses. The relationship is deeply symbiotic and the feedback loop was undermodeled: cheap solar drove storage deployment, which enabled more solar, which drove more storage.

Battery storage additions increased 136% from 2022 to 2023, in part due to declining costs and increased efficiency - that kind of increase is characteristic of a market where a forcing function (renewable integration need) met rapidly falling costs simultaneously.

Additionally, the AI data center buildout since 2022–23 has created a new demand signal for grid reliability that 2020 models had no way of anticipating. Hyperscalers need firm, reliable power, making batteries attractive both for grid operators and for behind-the-meter corporate deployments.

5. LFP Chemistry's Emergence as a Mass-Market Standard

In 2020, most Western analysts and forecasters modeled battery storage around NMC (nickel-manganese-cobalt) chemistry — the chemistry dominant in EVs at the time. LFP was seen as a niche, lower-energy-density option suitable mainly for Chinese buses and stationary applications. What actually happened was the opposite of what was expected.

LFP turned out to be near-ideal for stationary storage: it doesn't need nickel or cobalt (dramatically cheaper inputs), it has far superior cycle life (critical for a battery that charges and discharges daily for 15+ years), and it's thermally much more stable (lower fire risk). As Chinese manufacturers scaled LFP for both EVs and stationary use, it became the global standard faster than almost anyone forecast. Today LFP dominates the stationary market with around 90%+ share, and this chemistry shift is arguably responsible for 30–50% of the cost reduction trajectory beyond what generic learning-curve models predicted.

Lithium iron phosphate (LFP) remains the prevalent lithium-ion battery chemistry in the stationary energy storage market, with Chinese battery makers that specialize in LFP continuing to benefit from the growth of the domestic market and aggressive overseas expansion.

Why Forecasters Kept Getting It Wrong

It's worth noting this isn't unique to batteries. Agencies like the IEA or BNEF that take the risk of modeling future deployments, have consistently been too conservative about clean energy deployment. In fact, the case for more ambition on solar and BESS remains as strong as ever, considering the market realities, as we at Saurenergy have also repeated ad nauseum.  Solar has beaten IEA STEPS projections for 15 consecutive years. The reasons are systemic: models tend to be backward-looking, they underweight technological learning rates, they don't adequately model policy feedback loops, and they model each technology in isolation rather than capturing co-evolutionary dynamics (cheap solar → storage need → cheap batteries → more solar).

World Energy Outlook (WEO) energy scenarios have significantly underestimated solar PV growth potential, with analysis of scenarios from 1993 to 2022 indicating bias for nuclear and against renewables. Batteries are the latest and most dramatic chapter in that same story.

The practical upshot for 2025: we are living in a world where annual battery storage installations are measured in hundreds of GWh per year, costs are approaching $75-80/kWh for full systems, and the technology is genuinely competing against gas peakers across most of the world — all outcomes that were placed firmly in the 2030s by the consensus forecasting establishment as recently as 2020.