Compressed air energy storage (CAES), thermal storage and vanadium redox flow batteries (VRFB) accounted for 45%, 33% and 21% of 2025 of installations respectively, according to Wood Mackenzie’s Long Duration Energy Storage Trends report.  

Across all three technologies, China continues to dominate, representing 93% of cumulative global deployment, driven by strong government policy support including provincial mandates and the Special Action Plan for Development of New Energy Storage (2025–2027).  

‘Despite impressive installation growth last year, LDES technologies are caught in a strategic squeeze,’ said Jiayue Zheng, Managing Consultant, Wood Mackenzie. ‘Lithium-ion batteries have captured the economically critical four to eight-hour storage market through superior cost and supply chain advantages, while the LDES lacks sufficient demand and pricing mechanisms to achieve commercial viability.’  

Under Wood Mackenzie’s net zero scenarios, the global average energy storage duration must increase from 2.5 hours to around 20 hours. As countries like Germany, Australia and Denmark push for variable renewable energy beyond 50% by 2030, wider deployment of LDES will be critical for grid reliability.  

However, LDES comprises only 6% of 2025 global energy storage installations. While lithium-ion battery projects typically provide an average of two hours of storage, VRFB and CAES average about four hours and thermal storage around eight hours.  

The report highlights that revenue certainty for proposed projects is strongest in the UK, Italy, the US and Australia, with technology-specific procurement also emerging in markets like Spain, Ireland and Germany. However, most markets lack capacity mechanisms, and multi-day arbitrage alone cannot justify LDES investment, say the report’s authors, referring to ways that electricity storage capacity is bought and sold.  

According to the report, global funding for LDES declined by 30% year-on-year in 2025, excluding the US Department of Energy’s $1.76bn loan guarantee to Hydrostor’s Willow Rock Energy Storage Center, a 500 MW CAES project in Rosamond, California. Venture capital investment fell even more sharply, dropping by 72% and placing increasing financial pressure on a growing number of LDES start-ups.  

Between 2021 and 2025, only three companies – Hydrostor, EOS Energy and Form Energy – raised over $1bn in funding each, collectively raising over $4bn. However, even well-funded companies continue to face significant financial challenges.  

The report attributes the difficult investment environment to several factors, including persistently high interest rates that make long-payback LDES projects less attractive, intensifying capital competition from rapidly expanding AI data centres and grid infrastructure investments, and declining lithium-ion battery prices that are reducing the  economic advantage of LDES technologies.  

In China, four-hour lithium-ion battery projects cost $107/kWh, while thermal energy storage and CAES, the least expensive LDES options, cost $190/kWh and $201/kWh respectively, representing cost premiums of 78% and 88%. These cost differentials limit LDES competitiveness in shorter-duration markets, the report found.

‘VRFB project costs are projected to fall by over 30% by 2034 but will still be about 240% higher than lithium iron phosphate battery projects for four-hour duration,’ said Priya Shrivastava, Research Manager, Wood Mackenzie. ‘The dramatic cost reductions lithium-ion achieved over the past decade will be difficult for emerging LDES technologies to replicate.’

Wood Mackenzie expects lithium-ion batteries to hold 85% market share through 2034, with VRFB and CAES capturing just 5% and 3% respectively. Meanwhile, the sector faces a critical challenge: lithium-ion manufacturers have expanded into long-duration products, effectively dominating the four to eight-hour storage market through superior cost competitiveness and established supply chain networks exceeding 1,000 GWh of capacity.  

Demand for the multi-day storage segment remains limited, as two to eight-hour systems already cover 90% of storage needs. Multi-day discharge events occurring fewer than 10 days per year in most regions, according to the report.

Most large-scale LDES projects from leading manufacturers are under development globally, including Highview’s 50 MW/300 MWh liquid air energy storage project in the UK, Energy Dome’s 20 MW/200 MWh CO₂ battery in Italy, and multiple GWh-scale CAES and thermal projects across China. But moving from demonstration to commercial scale deployment will remain challenging without key market design reforms, the report found.

Fig 1: Global annual installation capacity of LDES, 2022–2025

Note: Considering the general duration of existing projects, our installed capacity encompasses all emerging LDES technology projects with all duration while excluding lithium-ion battery and pumped hydro storage

Source: Wood Mackenzie