Pumped hydro's dominance in 2020 reflected decades of large-scale deployment — pumped hydro offers scale, long lifetime and virtually unlimited charge cycles. Its constraint is topological: it can only be built where terrain supports the pumping of large volumes of water to sufficient elevation. Factor in the extended build phase and the capital requirements, and you can see why growth is structurally limited.
Lithium-ion dominated the electrochemical category in 2020. It offered high round-trip efficiency, fast response and the ability to deploy in regions where pumped hydro is not viable. Other legacy electrochemical technologies — lead acid, sodium sulfur — were never serious contenders for growth, given their inferior performance characteristics relative to Li-ion.
What has happened since is one of the most dramatic technology adoption stories in the energy sector. The ratio of pumped hydro to batteries tells it most concisely.
The driver of that ratio flip is the extraordinary pace of battery energy storage system (BESS) deployment over the past five years. What was a single-digit gigawatt market as recently as 2021 has become one of the fastest-growing categories in the entire energy sector.
The numbers are striking in isolation, but the compound effect is the real story. Starting from around 6 GW of annual additions in 2021, the market has grown more than tenfold in five years to a forecast 90+ GW in 2025 — with 2026 projected to push past 120 GW. To put that in perspective: the world is now adding more battery storage capacity every year than the entire global installed base of batteries in 2020.
The economics are the engine behind this. Li-ion battery prices have fallen by over 90% since 2010, and the decline continues. The combination of solar PV and batteries is now cost-competitive with new coal plants in India, and within a few years will be cheaper than new coal in China and gas-fired generation in the United States.3
