Market Snapshot: Battery storage technology is evolving as batteries play a larger role in electricity systems

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Release date: 2026-10-07

Battery energy storage systems, or BESS, store electricity when it is available and discharge it when it is needed. This can help electricity systems manage peak demand, provide fast grid-response services, and integrate more variable renewable generation from wind and solar. With evolving battery technologies, declining costs, and changing electricity systems, BESS deployment has grown rapidly and is expected to continue growing in the years ahead.

BESS can be built in modular units, require relatively little on-site infrastructure, and can often be deployed faster than other forms of energy infrastructureFootnote 1. They can be strategically located to help move electricity more efficiently through the grid and reduce pressure on congested parts of the network. Battery costs have declined substantially over the long term, helping make longer-durationFootnote 2 systems more viable and supporting rapid growth in BESS deployment. While many early utility-scale systems were designed to provide 1 to 2 hours of storage, 4-hour and longer-duration systems are becoming increasingly common, improving the ability of battery storage to support reliability, integrate renewable energyFootnote 3, and shift electricity availability across the dayFootnote 4.

Battery storage deployment is accelerating in Canada and globally

The International Energy Agency (IEA) reported that 108 GW of new battery storage capacity was deployed worldwide in 2025, 40% more than in 2024, and that total installed capacity was 11 times its 2021 level. Around 80% of new battery capacity in 2025 was utility-scale, while the rest was installed behind-the-meter by commercial and residential consumersFootnote 5. The IEA’s World Energy Outlook 2025 (WEO-2025) scenarios indicate that rapid growth in battery storage continues as rising shares of variable renewable generation increase the need for electric system flexibility. In IEA’s Stated Policies Scenario (STEPS), global installed battery storage capacity reaches around 900 GW by 2030 and nearly 1,700 GW by 2035. Growth is also strong in the Current Policies Scenario (CPS), where installed capacity reaches about 1,400 GW by 2035Footnote 6.

Canada’s electricity system is also projected to see significant growth in battery storage. In Canada’s Energy Futures 2026 the CER expects battery storage capacity to increase from 0.4 GW in 2023 to 15-23 GW by 2050, depending on the scenario. Batteries are expected to play an increasingly important role in providing system flexibility and reliability in Canada.

Battery energy storage deployment in Canada remains modest relative to leading jurisdictions, but growth is accelerating. Canada’s installed energy storage capacity more than doubled in 2025 to nearly 1 GWFootnote 7, according to the Canadian Renewable Energy Association. The Hagersville Energy Storage ProjectFootnote 8 in Ontario began commercial operation in February 2026 and is now Canada’s largest operational battery energy storage facility at 300 MW / 1,200 MWh, providing up to four hours of continuous power at full capacity.

Ontario continues to lead BESS deployment in Canada, supported by ongoing procurements through the Independent Electricity System Operator (IESO) and a growing pipeline of projects under development and construction. For example, in 2026, all three projects selected under IESO’s Long-Term 2 capacity stream were battery storage projects, representing 640 MW of maximum contract capacity, intended to support reliability during peak demandFootnote 9. One of the selected projects is Simcoe Battery ProjectFootnote 10, a proposed 150 MW / 1,200 MWh, 8-hour BESS. Ontario said the new battery capacity was 36% lower cost than battery storage procured through the earlier Expedited Long-Term Request for Proposals (E-LT1) processFootnote 11.

Alberta provides a useful example of a different grid application for battery storage. While Ontario's recent procurements have focused largely on securing capacity to meet future peak electricity demand, Alberta is developing ancillary services that could use BESS to provide fast frequency response and support intertie reliability. The Alberta Electric System Operator (AESO) is developing Fast Frequency Response Plus (FFR+), a highly available ancillary service designed to provide near-instantaneous response to frequency declines following an intertie trip. AESO has proposed procuring up to 750 MW of highly available FFR+ through commercial contractsFootnote 12.

Although the approaches differ, both are intended to support system reliability: Ontario by ensuring sufficient capacity is available during periods of high demand, and Alberta by enhancing the system's ability to respond to disturbances and maintain stable operation. These developments demonstrate that battery energy storage is increasingly being considered for system reliability.

Indigenous and community participation is likely to be an important feature of Canadian storage development. The Canada Energy Regulator has reported on the prevalence of Indigenous ownership of Canadian renewable energy projectsFootnote 13, and the Canadian Renewable Energy Association reported that there were 118 Indigenous-owned wind, solar, and energy storage projects operating in Canada in 2025, and that almost every major wind, solar, and storage procurement process in Canada in 2025 included criteria or incentives for Indigenous participation or ownershipFootnote 14.

Among the various battery technologies, lithium iron phosphate dominates storage deployments

Battery technologies

Lead-acid: One of the first battery chemistries used in utility-scale BESS demonstrations, with projects dating from the early 1980s. Lead-acid batteries are mature and relatively low cost, but they are heavy, have lower energy density, and generally have shorter cycle life than newer technologies when used for frequent charge and discharge.

Sodium-sulfur: One of the first battery technologies deployed commercially at multi-megawatt scale for grid storage. Sodium-sulfur batteries became commercially visible in Japan in the early 2000s and can support multi-hour applications such as peak shaving, load levelling, and grid support, but they operate at high temperatures, which adds operating and safety complexity.

Flow batteries: A battery design in which energy is typically stored in liquid electrolytes held in external tanks, allowing power and energy capacity to be scaled more independently than in conventional batteries such as lithium-ion. They are well suited to stationary and long-duration applications, and aqueous flow batteries generally have lower fire risk and are not subject to the same thermal runaway mechanism as lithium-ion batteries. Vanadium redox flow batteries, which are capable of long cycle life, are among the most mature and widely deployed flow battery technologies,, but they have been slower to scale than lithium-ion because of cost, lower energy density, and less mature supply chains.

Lithium-ion: The dominant commercial battery family for modern BESS. Lithium-ion became the leading BESS technology in the 2010s as manufacturing scaled, costs fell, and performance improved. It is well suited to grid applications because it is modular, efficient, and fast responding. However, lithium-ion systems require careful safety management because thermal runaway can propagate between cells and, if not properly managed, may result in battery fires. Retired EV batteries can be repurposed for stationary energy storage, with battery management systems used to monitor and safely manage batteries.

Lithium iron phosphate (LFP): The dominant lithium-ion chemistry for grid-scale BESS today. LFP is typically lower cost than some nickel-based lithium-ion chemistries and does not require nickel or cobalt, reducing supply-chain risks. Its lower energy density compared to nickel-based lithium-ion batteries matters less for stationary storage than for transport, while its lower cost, suitability for frequent-cycling, and greater thermal stability make it well suited to many grid-scale projects.

Nickel-based lithium-ion, including NMCFootnote 15 and NCAFootnote 16: Higher-energy-density lithium-ion chemistries used more heavily in electric vehicles than in stationary BESS. They can store more energy in a smaller and lighter battery, but they often cost more and rely more on nickel and cobalt supply chains. For many grid-scale applications they have become less attractive than LFP unless a project has specific space or performance constraints.

Sodium-ion: An emerging battery chemistry moving toward commercial-scale energy storage that operates on the same principle as lithium-ion batteries but with sodium substituted for lithium. Sodium-ion batteries offer strong cold-climate performance and could reduce exposure to lithium price volatility. Sodium is also more abundant and more geographically diversified than lithium. Sodium-ion's lower energy density compared with current lithium-ion batteries is less of a limitation for stationary storage than for long-range EVs. Sodium-ion batteries are a promising emerging technology with growing commercial potential, but they still face challenges competing with optimized low-cost lithium-ion batteries, especially LFP.

Other long-duration battery chemistries: Zinc-based, iron-based, metal-air, advanced flow, and other long-duration battery designs are being developed for applications where typical 2- to 4-hour lithium-ion BESS may not be enough, such as overnight or multi-day reliability support. These technologies must reach lower costs to be competitive and are not yet mainstream. Lithium-ion is expected to remain dominant in the near term for short-duration applications, but interest in non-conventional battery chemistries is growing as data centres and electricity systems look for longer-duration flexibility.

Most new battery storage projects use lithium-ion batteries, particularly lithium iron phosphate (LFP). The IEA reported that LFP accounted for around 90% of battery storage deployments in 2025Footnote 17. LFP batteries have lower energy density than some other lithium-ion batteries, but they are typically cheaper and well suited for repeated charging and discharging, making them a popular choice for grid-scale energy storage.

Sodium-ion batteries are attracting growing commercial interest as a potential complement to lithium-ion, particularly for stationary energy storage. While global sodium-ion production was still less than 1% of lithium-ion production in 2025, major battery manufacturers are beginning to scale production and commercial deployment, including for grid-scale storageFootnote 18. In 2024, the IEA projected that sodium-ion’s share of annual global battery storage capacity additions could rise to about 10% by 2030 and continue to grow thereafterFootnote 19. Because stationary energy storage, such as grid support services, is generally less constrained by battery size and weight than electric vehicles, sodium-ion could become an attractive option for some BESS applications where lower-cost materials, greater supply-chain diversity, or improved thermal stability are valued over maximum energy density. Sodium-ion batteries also do not require lithium and can perform particularly well at low temperatures, making them attractive for some cold-climate applications.

Battery storage is not a replacement for all forms of dispatchable power, but it is becoming a larger part of the reliability toolkit. Short-duration BESS is especially useful for fast response, peak shaving, frequency support, storing surplus renewable generation, and discharging during peaks. Longer-duration storage, transmission expansion, hydroelectricity, demand response, and other controllable sources of electricity generation will still be needed in many electricity systems. As wind and solar deployment continues to grow, BESS will become increasingly important for reducing curtailment, shifting energy across time periods, and maintaining system reliability. The pace of deployment will depend on continued battery cost reductions, access to grid connections, supportive market and regulatory frameworks, improvements in supply chains, and recycling.

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