ESS, an opportunity for K-batteries
A new current is reshaping the global battery market. In the first half of 2026, global shipments of lithium-ion batteries for energy storage systems (ESS) reached 461 gigawatt-hour (GWh), up 71 percent from 270 GWh in the same period a year earlier, according to SNE Research. This represents a remarkable leap for the ESS market, especially compared with the 20 percent year-on-year growth in global battery demand for electric vehicles (EVs), which reached 609 GWh over the same period.
Key drivers include rising energy demand from artificial intelligence (AI) data centers, where speed and reliability are critical, and growth in renewable power generation, which requires solutions to address its intermittency. The expansion of AI data centers and the transition to renewable energy are powerful trends unlikely to reverse in the short term. As a result, the global ESS market is forecast to reach 1,870 GWh in annual shipments by 2035, roughly twice this year’s level.
The Korean government is also stepping up efforts to develop the domestic ESS industry through a range of policy measures. On the technology front, the Ministry of Trade, Industry and Resources announced its Battery Industry Technology Roadmap on Sept. 22.
The road map’s main elements are to position sodium-ion and solid-state batteries as new growth engines: The government will invest more than 250 billion won in next-generation battery technology development; the country’s three cell manufacturers will collaborate on research and standardization in noncompetitive areas; and the industry as a whole will invest approximately 8 trillion won ($5.97 billion) through 2030 in manufacturing-process innovation and the localization of materials.
On the production front, the government has pledged tax support. On Aug. 3, the Ministry of Finance and Economy announced its 2026 Tax Reform Proposal, which introduced a domestic production tax credit to expand local manufacturing capacity in industries of strategic importance to the green transition and economic security. Rechargeable batteries are among the eligible products.
On the deployment front, the government is expanding the market through auctions under the Central Contract Market. On Sept. 23, the Ministry of Climate, Energy and Environment announced the third ESS Central Contract Market in which it would select ESS project developers with a record-high total capacity of 1,180 megawatts. By the auction, the Korea Power Exchange competitively tenders the ESS capacity needed to stabilize the grid and enters into 15-year contracts with successful bidders. This is an encouraging development, as it creates substantial new demand for a battery market that has slowed amid moderating growth in EV demand.
For K-batteries to build on these policies and strengthen their position, however, they must increase their share of the rapidly expanding global ESS market. This presents both significant challenges and important opportunities. The fact that China has already established a strong lead in the ESS market is a challenge for Korea. The top four companies in the global ESS market in the first half of this year were all Chinese, and together, they accounted for nearly 55 percent of the market.
Korean companies have also recorded strong year-on-year growth, but the gap in absolute volume with China remains substantial. Moreover, with global ESS supply capacity exceeding demand — 900 GWh against the actual demand of 612 GWh at the end of 2025 — price competition is intensifying. Competing with Chinese companies, which have maintained operating margins through economies of scale, can seem like an uphill battle.
At the same time, several factors create opportunities. First, regional imbalances between battery supply and demand mean that key export markets for Korean companies are likely to face shortages. For example, battery supply in China is expected to exceed demand by about 90 percent in 2030, while Europe is projected to face a supply shortfall of 40 percent. North America is also expected to face a shortage from 2035. This presents an opportunity for Korean companies, which have established production bases in Europe and North America, to increase their market share.
Second, in Europe, capacity for facilities combining renewable energy and batteries is expected to rise by more than 450 percent, from 6.3 GW in 2025 to around 35 GW in 2030. In parallel, the region is working to reduce its reliance on battery supply chains from any one country. For example, it is preparing an Industrial Accelerator Act that would encourage greater use of components and batteries manufactured within Europe when awarding public procurement contracts and subsidies. Korean battery companies are well positioned to benefit, as they already have a substantial manufacturing footprint in Europe.
Third, the U.S. market is also opening up significant opportunities for Korean companies. ESS demand is growing rapidly as AI data centers proliferate, while U.S. policies to reduce reliance on Chinese supply chains are being strengthened. The ESS market is expected to grow by an average of 16 percent annually to reach 320 GWh by 2035, while the uninterruptible power supply market for AI data centers is projected to expand at an average annual rate of 47 percent to 135 GWh.
Meanwhile, tariffs on Chinese ESS products are rising under measures such as Washington's Section 301 of the Trade Act and forced labor standards under the environmental, social and governance (ESG) pillars. The Advanced Manufacturing Production Credit and restrictions concerning prohibited foreign entities are also creating additional opportunities for K-battery companies with U.S.-based manufacturing operations.
These global ESS market trends, including rising new demand, local-content requirements, stronger supply-chain security and compliance with ESG standards, offer a clear opportunity for K-batteries, for whom price competition alone is unlikely to be a winning strategy. It is time for both government policy and corporate strategy to look beyond supporting domestic deployment and securing short-term contracts, and to focus on the long-term key performance indicator that matters: global market share.
Kim Sung-woo, head of Environment & Energy Research Institute at Kim & Chang, is a board member of KETEP.