Forget EVs, there's a new driver of lithium demand
Keep an eye on battery energy storage system growth
While electric vehicle sales have been the marker of how the energy transition is progressing, there's now a sector that's growing faster.
Headlines about slowing EV sales have dominated headlines, but Benchmark Mineral Intelligence director of consultancy, Australasia Terry Scarrott, said things weren't so bad, "despite what you read"."
When we look at the underlying data in the market, particularly with respect to the downstream, there is cause for optimism," he told the Benchmark World Tour in Perth last week.
"EV demand is up, albeit not from the highs that we've seen in recent years – there has been a slight deceleration on that growth, but the market is still performing very well. That's just in terms of EV sales."
According to Benchmark subsidiary Rho Motion, EV sales dropped 35% month-on-month in January but were still up 18% year-on-year.
Massive growth area
Scarrott said growth in battery energy storage systems (BESS) was far outperforming any other market.
According to Rho Motion, BESS installations surpassed expectations last year, with the more than 200 gigawatt hours of capacity installed last year marking a staggering 53% growth rate over 2023.
China accounted for over 108GWh of new grid-scale capacity and is set to keep growing, albeit at a slower pace than some other regions.
"If you look across every region, we're talking triple or double-digit compound annual growth, and we expect that trend to continue," Scarrott said.
"We're seeing more products being deployed. They're larger in scale. They're more sophisticated. We're now moving to the realm of getting to five megawatt hours of battery systems.
"We're seeing larger pack sizes being deployed, so you get into about 340 amp hours, which is roughly equivalent to one kilowatt hour.
"Again, that translates to a really massive uptake, and we're going to see that trend continue, so we think it's a very exciting time on the horizon."
Growth accelerating
Benchmark sees triple digit percentage growth in BESS installations this year coming from Europe, the Asia Pacific, Latin America and the Middle East, with significant growth to continue in China and North America.
Rho Motion believes 2025 will be another record year, forecasting 350GWh of installations, a more than 60% year-on-year jump.In its downside scenario, only 289GWh would be deployed, still representing year-on-year growth. Rho Motion warned the risks to the downside were US tariffs and the removal of BESS-supportive policies, project delays and slowdowns and a shortage of raw materials or components.
Rho Motion's upside demand scenario is 438GWh of deployments, which would represent more than 100% growth over 2024 figures.
For that to happen, the 419GWh of projects in the pipeline would have to be completed faster, battery prices would need to remain low, electricity prices would remain high, and policy settings would be supportive.
A continued surge in artificial intelligence demand and the development of data centres would also be a positive.
At the Benchmark World Tour, Neometals managing director Chris Reed delivered a presentation entitled "Why we still love lithium".
Reed said lithium and vanadium were the most positive leveraged commodities to the energy storage thematic.
"It's not cars, it's battery energy storage systems," he said.
Reed pointed out the 27% year-on-year growth in lithium-ion battery demand in 2024.
"Don't worry about the lithium battery megatrend," he said.
"Nothing grows like that."
According to Reed, prices for lithium iron phosphate BESS had fallen to less than US$100 per kilowatt hour, putting the cost at parity with fossil fuels and accelerating the growth.
"The future is battery energy storage systems," he said.
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