March 12, 2026: Long duration energy storage systems increased by nearly 50% year-on-year in 2025 – exceeding 15GWh, latest industry analysis has shown.
However, according to Wood Mackenzie’s Long Duration Energy Storage (LDES) Trends report* released on March 9, the sector is facing growing challenges due to declining investment and increasing competition from lithium ion batteries.
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 said.
Meanwhile, China continues to dominate, representing 93% of cumulative global deployment, driven by strong national and regional government policy support.
Under Wood Mackenzie’s net zero scenarios, the global average energy storage duration must increase from 2.5 hours to around 20 hours. As countries like Germany, Australia and Denmark push for variable renewable energy beyond 50% by 2030, wider deployment of LDES will be critical for grid reliability.
However, LDES comprises only 6% of 2025 global energy storage installations, while Li ion battery projects typically average for two hours of storage, VRFB and CAES averages about four hours and thermal storage around eight hours, according to the report.
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.
Global funding for LDES, according to the report, fell by 30% year-on-year in 2025, excluding the US Department of Energy’s $1.8 billion commitment to CAES tech developer Hydrostor. Venture capital investment fell even more sharply, dropping by 72% and 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 more than $1 billion in funding each, collectively raising over $4 billion. However, even well-funded companies continue to face significant financial challenges.
“Despite impressive installation growth last year, LDES technologies are caught in a strategic squeeze,” said Jiayue Zheng, senior research analyst 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 the LDES lacks sufficient demand and pricing mechanisms to achieve commercial viability.”
*The full report is available online.
