UBS: Data centres will drive the energy storage boom cycle in the next five years

UBS Securities predicts that the growth of AI-driven data centres in the U.S. will drive a "boom" cycle for energy storage over the next five year as it is necessary to balance out the fluctuations in wind and solar power generation.

Yan Yishu, an analyst at UBS Securities in Hong Kong, told the media on Wednesday that global energy storage demand is expected to increase by 40% year-on-year globally in 2026.

The demand for AI data centers in the U.S. has been very strong, but the main bottleneck is electricity.

The only segment of the U.S. power grid that is expected to grow in the next 5 years will be renewables. Because they produce intermittent power, the grid requires more batteries to store this power.

Because it's one of the most profitable markets, the U.S. is a key market for Chinese energy storage companies. They have a 20 percent market share there. Yan stated that emerging markets such as the Middle East and Latin America, Africa and Southeast Asia, could have the highest growth rates, ranging from 30% to 50%.

Yan explained that the One Big Beautiful Bill of President Trump, which places restrictions on the participation in U.S. Energy Sector by Chinese-owned and controlled companies, poses the biggest risk to Chinese exports.

Energy storage projects will benefit from a Chinese push for market-based pricing of renewable energy. They can charge up at low prices and sell power at high prices.

Yan explained that a peak-valley price difference of only 0.4 yuan per kilowatt hour ($0.06) is enough to make independent storage projects or those not combined with renewable power plants profitable.

UBS predicts that Chinese provinces will introduce capacity payments to encourage energy storage. These are compensations for battery owners who can be there when needed. $1 = 7.1230 Chinese Yuan Renminbi (Reporting and editing by Christian Schmollinger).

(source: Reuters)