Asia-Pacific ESS Cost Declines to Slow as Lithium Supply Tightens: Wood Mackenzie

Annual cost reductions for utility-scale energy storage projects in the Asia-Pacific (APAC) region are expected to slow sharply as global lithium supply tightens, consultancy Wood Mackenzie said in a new report.

The report, “APAC Utility-Scale Energy Storage Pricing Report 2025,” said the pace of annual cost declines will ease from the current 14% to 6% in the next few years, and to just 1% by 2029.

Chinese battery and system prices have fallen to record lows, driven by rapid technological advances, lower raw material costs, large-scale production, and intense market competition. However, Wood Mackenzie warned that battery prices could rise after 2029 as demand outpaces lithium supply.

“China will remain the cheapest market for utility-scale battery energy storage systems (BESS) in APAC, with costs dropping 35% to $84 per kilowatt-hour by 2034,” said Jiayue Zheng, Senior Research Analyst at Wood Mackenzie.

System costs across the region vary widely due to import restrictions, local content rules, certification standards, and grid requirements, the report added.

China’s Lead to Persist

China is expected to retain its dominance in the global BESS market, supported by heavy technology investments, manufacturing overcapacity, and fierce domestic competition. The resulting price pressure has driven battery module costs to record lows in 2025.

Cost Gaps in Australia and Japan

The analysis covered five key APAC markets – China, Australia, Japan, South Korea, and India – and found that most are shifting toward lithium iron phosphate (LFP) battery chemistry. South Korea remains an exception, relying on nickel manganese cobalt (NMC) technology due to its established domestic industry.

EPC (engineering, procurement, and construction) costs across the region range between $59 and $117 per kWh. Australia and Japan face higher EPC costs due to elevated labour expenses and workforce shortages. While Australia benefits from access to low-cost Chinese batteries, high installation costs offset part of the savings.

In Japan, a preference for domestic products keeps system costs up to three times higher than in China, despite growing competition from international manufacturers.

India’s Cost Reduction Potential

India has the strongest potential for cost reductions, with turnkey costs projected to fall nearly 40% by 2034, supported by government schemes such as Viability Gap Funding and low labour costs.

“The average storage duration for utility-scale projects in APAC is set to rise from 2.4 hours in 2025 to 3.4 hours by 2034,” said Natalie Thompson, Senior Research Analyst at Wood Mackenzie. “Longer-duration systems could cut per-kWh costs by as much as 20% through economies of scale.”

“Lower battery prices have propelled storage investments in Asia Pacific to record levels,” said Alex Whitworth, Vice President at Wood Mackenzie. “We expect a $500 billion market over the next decade, surpassing coal and gas investments. As the region shifts to longer-duration systems and faces supply chain challenges, understanding cost dynamics will be key for developers, investors, and policymakers.”