Data centres to drive energy storage ‘boom cycle’ in next five years, UBS says

By Colleen Howe

BEIJING (Reuters) -AI data centre-fuelled power demand growth in the U.S. is likely to drive a “boom cycle” for energy storage in the next five years as more storage is needed to smooth out fluctuations from wind and solar generation, according to UBS Securities.

Global energy storage demand could increase 40% globally year-on-year in 2026, Hong Kong-based UBS Securities analyst Yan Yishu told a media briefing on Wednesday.

“The demand for AI data centres in the U.S. is very robust, but electricity is the biggest bottleneck.”

Renewables are the only power-generating segment expected to grow significantly in the next five years in the U.S., and because they produce power intermittently, the grid needs more batteries to store that power.

The U.S. market is key for Chinese energy storage manufacturers, which have a 20% market share in the U.S., because it is one of the highest-margin markets. However, emerging markets in the Middle East, Latin America, Africa, and Southeast Asia could see the fastest growth rates of 30% to 50% or more, Yan said in the briefing.

The biggest risk for Chinese exports to the U.S. is the foreign entity of concern requirements in President Trump’s One Big Beautiful Bill, which place restrictions on participation in the U.S. energy sector by Chinese-owned or controlled companies, Yan said.

In China, a push to implement market-based pricing for renewables will give a further boost to energy storage projects, which profit by charging up when prices are low and selling power when prices are high.

A peak-valley electricity price difference of 0.4 yuan ($0.06) per kilowatt-hour is enough to put independent storage projects, or those that are not combined with a renewable power plant, in the money, Yan said.

UBS anticipates Chinese provinces are likely to introduce so-called capacity payments, which compensate battery owners to be available when needed, to further incentivise energy storage.

($1 = 7.1230 Chinese yuan renminbi)

(Reporting by Colleen Howe; Editing by Christian Schmollinger)