Why battery storage costs fell so fast in 2024 and 2025

Why battery storage costs fell so fast in 2024 and 2025

Anthony Lopopolo

Wed, August 19, 2026 at 9:27 PM GMT+3 5 min read

China flooded the world with cheap solar panels a decade ago, driving Western competitors out of business. It did the same with electric vehicles, prompting tariffs from Washington and Brussels. In 2025, the pattern repeated with batteries. Chinese manufacturers who had built twice as many factories as the world needed slashed prices to keep them running, pushing stationary storage packs down to $70 per kilowatt-hour, 45% cheaper than the year before. The decline was steep enough to reshape what power companies pay for electricity during the most expensive hours of the day.

Chinese overbuilding was the biggest single force behind the price collapse, but it wasn't the only one. A shift toward cheaper battery chemistry, a crash in lithium prices, and a decades-long accumulation of manufacturing improvements all hit at the same time, each amplifying the others. On its own, any one of those forces would have pushed prices down gradually. Their convergence is what turned a steady decline into a collapse.

Cheaper batteries are good news for electricity costs and for the climate. But the conditions that made them possible are unwinding. Lithium prices have already rebounded, and the tariffs designed to counter China's trade practices are adding new costs of their own.

Chinese factory overcapacity and the global price war

Chinese battery manufacturers spent the early 2020s building factories at a pace that assumed electric vehicle demand would keep surging. It worked for a while. By 2024, China produced enough battery cells — the basic units that store electricity and power electric vehicles — for every car sold on the planet that year. But global manufacturing capacity far outstripped what anyone needed. At roughly 2,600 gigawatt-hours, the world's factories could supply every battery the market demanded and still have enough idle capacity to outfit nearly every home in America with its own storage system.

Even as the surplus became apparent, manufacturers kept adding capacity through 2025. The world's battery factories nearly doubled their capacity to more than 4,000 gigawatt-hours of cells a year — more than four times what the market actually bought — with China accounting for more than 80% of the total.

With so much unsold inventory, Chinese companies redirected surplus cells to Europe, undercutting rivals to hold market share. The aggressive pricing squeezed margins across the supply chain and drove European prices down faster than North American ones, in part because U.S. tariffs on Chinese batteries limited how far they could fall.

Evelina Stoikou, who leads BloombergNEF's battery technology team, called the price war "cut-throat competition" that was "making batteries cheaper every year." The International Energy Agency's special report on batteries and energy transitions struck a more cautious note, warning that the overcapacity helping consumers and climate goals also squeezes the cash flows and margins of the mining, refining, and manufacturing companies the supply chain depends on.

The shift to cheaper lithium iron phosphate chemistry

A change in battery chemistry compounded the price pressure from overcapacity. Lithium iron phosphate batteries, known as LFP, contain no cobalt and use cheaper raw materials than the nickel manganese cobalt cells that dominated a decade ago. In 2025, LFP packs averaged $81 per kilowatt-hour across all applications, more than 40% cheaper than the $128 that nickel manganese cobalt packs cost. For grid storage, where operators care about cost per charge-discharge cycle rather than how much energy fits in a given volume, the tradeoff isn't close.

Grid storage operators and EV makers responded to the price gap by adopting LFP overwhelmingly. LFP chemistry captured more than 90% of global stationary storage installations in 2025 and more than half of all EV battery sales. Every percentage point that shifted from nickel manganese cobalt to LFP dragged the global average battery price down, even if nothing else changed about how cells were manufactured or what materials went into them.

Unlike overcapacity, which will eventually correct, or lithium prices, which have already rebounded, the chemistry shift runs in one direction. No manufacturer that has moved to LFP is moving back, and Western automakers are only now beginning to introduce it into entry-level vehicles. Every EV that ships with an LFP pack instead of a nickel-based one costs less to build, and the savings flow to the sticker price. But because LFP cells are overwhelmingly made in China, the chemistry that lowers costs for consumers also deepens the supply chain dependence that tariffs are designed to counter.

The lithium boom and bust behind the cheapest batteries

When EV sales boomed in 2021, miners couldn't dig lithium out of the ground fast enough. Prices surged eightfold in two years. When new supply finally caught up, they crashed by more than 80%. The swing hit battery costs directly: the lithium inside a typical 57-kilowatt-hour battery fell from $67 at the 2022 peak to $15 by early 2025. Graphite and cobalt dropped 10% to 20% alongside it.

Earlier this year, battery-grade lithium carbonate traded between roughly $21,000 and $25,500 per tonne, more than double the mid-2025 trough near $8,000. Cell prices haven't risen yet because long-term supply contracts and hedging strategies locked in lower lithium costs through 2025, insulating pack prices from the spot market rebound, according to BloombergNEF.

Those buffers are temporary. When these contracts expire, higher lithium costs will begin to flow into the price of every EV and every grid storage project, narrowing the advantage that batteries built over gas plants during the collapse. If lithium prices hold at current levels or climb further, the raw material savings that helped power the 2025 price drop won't come back.

But the savings don't need to come back for the collapse to have mattered. In a growing number of markets, building a solar farm with batteries now costs less than running the gas plants that cover peak-hour demand. Utilities have already bought and installed batteries at lower prices, and those batteries don't come off the grid when costs rise. Whatever batteries cost next year, the infrastructure decisions made during the collapse are permanent.