LDES Grows 49% Globally, But Li-Ion Dominance Clouds Outlook: Wood Mackenzie

Globally, long-duration energy storage (LDES) installations exceeded 15 GWh in 2025, representing a 49% year-on-year increase. However, the sector is currently facing growing challenges due to declining investment and increasing competition from lithium-ion batteries, according to Wood Mackenzie’s latest Long Duration Energy Storage Trends report. So much so that many analysts have dissed the case for LDES at current prices of LFP-based BESS storage, as the economics simply doesn't make sense.    

Wood Mackenzie found that other energy storage sources, such as compressed air energy storage (CAES), thermal storage, and vanadium redox flow batteries (VRFB), accounted for 45%, 33%, and 21% of 2025 installations, respectively. The report also found that China captured 93% of global deployment, driven by strong government policy support, including provincial mandates and the Special Action Plan for Development of New Energy Storage.

“Despite impressive installation growth last year, LDES technologies are caught in a strategic squeeze,” said Jiayue Zheng, managing consultant, energy storage at Wood Mackenzie. “Lithium-ion batteries have captured the economically critical four to eight-hour storage market through superior cost and supply chain advantages, while LDES lacks sufficient demand and pricing mechanisms to achieve commercial viability.”

Global ESS Duration Must Rise From 2.5 Hr to 20 Hr

Drawing a comparison between different energy storage sources, the report found LDES to comprised only 6% of 2025 global energy storage installations.

While lithium-ion battery projects typically average 2 hours of storage, VRFB and CAES average about 4 hours, and thermal storage around 8 hours. Under Wood Mackenzie’s net-zero scenarios, the global average energy storage system (ESS) duration must increase from 2.5 hours to around 20 hours.

This is particularly important as countries like Germany, Australia, and Denmark push for variable renewable energy beyond 50% by 2030. This calls for wider deployment of LDES, which will be critical for grid reliability. The report highlights that revenue certainty is strongest in the UK, Italy, the US, and Australia, with technology-specific procurement also emerging in markets like Spain, Ireland, and Germany. However, most markets lack capacity mechanisms, and multi-day arbitrage alone cannot justify LDES investment.

Investment Drought Threatens Sector Viability

According to the report, global funding for LDES declined by 30% year-on-year in 2025, excluding the United States Department of Energy’s US$1.76 billion commitment to Hydrostor. The revenue from Venture capital investment fell even more sharply, dropping by 72%, placing increasing financial pressure on a growing number of LDES start-ups.

Between 2021 and 2025, only three companies—Hydrostor, EOS Energy, and Form Energy—raised over US$1 billion in funding each, collectively raising over US$4 billion. However, even well-funded companies continue to face significant financial challenges.

The report attributes the difficult investment environment to several factors, including persistently high interest rates that make long-payback LDES projects less attractive, intensifying capital competition from rapidly expanding AI data centres and grid infrastructure investments, and declining lithium-ion battery prices that are narrowing the economic advantage of LDES technologies.

Cost Gaps Persist Despite Technology Advances

In China, four-hour lithium-ion battery projects cost US$107/kWh, while thermal energy storage and CAES, the least expensive LDES options, cost US$190/kWh and US$201/kWh, respectively, representing cost premiums of 78% and 88%. These cost differentials limit LDES competitiveness in shorter-duration markets.

“VRFB project costs are projected to fall by over 30% by 2034, but will still be about 240% higher than lithium iron phosphate battery projects for four-hour duration,” said Priya Shrivastava, research manager, energy storage supply chain at Wood Mackenzie. “The dramatic cost reductions lithium-ion achieved over the past decade will be difficult for emerging LDES technologies to replicate.”

Market Outlook Through 2034

Wood Mackenzie expects lithium-ion batteries to hold an 85% share through 2034, with VRFB and CAES capturing just 5% and 3%, respectively. Meanwhile, the sector faces a critical challenge: lithium-ion manufacturers have expanded into long-duration products, effectively dominating the four to eight-hour storage market through superior cost competitiveness and established supply chain networks exceeding 1,000 GWh of capacity.

Demand for the multi-day storage segment remains limited, as 2–8 hour systems already cover 90% of storage needs, with multi-day discharge events occurring fewer than 10 days per year in most regions.

Most large-scale LDES projects from leading manufacturers are under development globally, including Highview's 50 MW/300 MWh liquid air energy storage project in the UK, Energy Dome's 20 MW/200 MWh CO₂ battery in Italy, and multiple gigawatt-hour scale CAES and thermal projects across China. However, moving from demonstration to commercial-scale deployment will remain challenging without key market design reforms.