Key Challenges Confronting the Energy Storage Industry

The energy storage industry is in a phase of rapid expansion, yet it faces multiple interrelated challenges that span technology, supply chains, markets, regulations, safety, and sustainability, which need to be addressed for healthy and sustainable development.

1. Technological Limitations

• Performance Bottlenecks: Most mainstream lithium - ion batteries struggle with long - duration energy storage (typically under 4 hours), failing to meet the grid's demand for multi - day load balancing. Also, cycle life degradation and capacity fade over time increase long - term operational costs.

• Technology Homogeneity: The industry is dominated by lithium - ion batteries, with insufficient innovation in alternative technologies like sodium - ion and flow batteries. This lack of diversity restricts adaptation to diverse application scenarios.

• System Integration Complexity: Integrating energy storage with renewable energy sources and existing grids demands advanced grid - forming inverters and AI - driven BMS, which many small - and medium - sized enterprises (SMEs) lack the technical capacity to deploy.

2. Supply Chain Vulnerability

• Raw Material Concentration: Over 60% of global lithium refining and nearly 100% of natural graphite anode processing are controlled by a few regions, leading to geopolitical and price volatility risks.

• Component Shortages: There is a tight supply of key components such as LiFePO4 cells. In Q3 2025, the average delivery time for cells extended to 75 days, forcing 38.7% of SMEs to cut production.

• Infrastructure Gaps: Insufficient mining capacity, refining facilities, and recycling technologies hinder the circular economy of batteries.

3. Market & Economic Pressures

• Revenue Cannibalization: A surge in battery energy storage system (BESS) capacity leads to reduced peak - hour prices and falling ancillary service revenues (e.g., from $21/MWh in 2023 to $3/MWh in 2024 in Texas), squeezing profit margins.

• Vicious Price Competition: In the past three years, global energy storage system prices have plummeted by approximately 80%. Some bid prices even drop below the cost threshold (e.g., below $0.06/Wh), resulting in industry - wide losses and insufficient R&D investment.

• Uncertain Profit Models: Underdeveloped capacity markets and volatile time - of - use (TOU) tariffs make it hard to calculate returns, especially for independent storage projects.

4. Regulatory & Grid Barriers

• Policy Inconsistency: Different regions have varying grid codes, interconnection standards, and compensation rules, which increase cross - border project costs and delays.

• Grid Interconnection Delays: Cumbersome approval processes for connecting to the grid often delay project commissioning by 1–2 years, raising capital costs.

• Value Undervaluation: Outdated regulatory frameworks fail to fully recognize the multiple values of energy storage, such as grid stability and carbon reduction, leading to inadequate compensation.

5. Safety & Operational Risks

• Thermal Runaway Hazards: There have been 167 major global energy storage safety incidents as of mid - 2025. Frequent cycling and poor thermal management in large - scale systems heighten the risk of fires and explosions.

• Performance Misrepresentation: Some manufacturers exaggerate cycle life and capacity, which results in "orphaned projects" with shortened lifespans and unaffordable maintenance costs.

• Operational Neglect: Hasty project expansion often leads to insufficient post - deployment monitoring and maintenance, creating long - term safety and reliability risks.

6. Environmental & Sustainability Issues

• Resource Depletion & Pollution: Mining of lithium, cobalt, and nickel causes water scarcity and habitat destruction.

• Recycling Bottlenecks: Less than 5% of lithium - ion batteries are recycled properly globally, and the lack of mature technologies for material recovery leads to resource waste and environmental pollution.

• Carbon Footprint: High energy consumption during battery production undermines the environmental benefits of energy storage when paired with fossil - fuel - dominated grids.