Key Takeaways
- The energy storage industry is expected to shift towards longer-duration storage, safer chemistries, and more resilient supply chains in 2026.
- Non-lithium chemistries and recycling are expected to play a larger role in the industry.
- Domestic supply chains and permitting reform will be crucial for the industry’s growth.
- The rise of AI and data centers will drive demand for more advanced and reliable energy storage solutions.
- The industry is expected to move towards greater technology diversity, more stable revenue models, and continued cost declines.
Introduction to the Energy Storage Industry
The energy storage industry has faced a bumpy road in 2025, but as the industry looks towards 2026, there is a growing sense of optimism. Despite the dominance of lithium-ion batteries, there is a growing pressure for longer-duration storage, safer chemistries, and more resilient supply chains. This is driven by a number of factors, including AI-driven load growth, data center demand, wildfire risks, and tightening domestic content rules. As the industry moves forward, it is likely that we will see a shift towards greater technology diversity, more stable revenue models, and continued cost declines.
The Need for Longer-Duration Storage
Longer-duration storage is expected to shift from a niche solution to a strategic necessity in 2026. Industry leaders such as Giovanni Damato, President of CMBlu Energy, Inc., believe that the industry is moving towards greater technology diversity and more stable revenue models, which will make longer-duration battery energy storage an essential pillar of the US energy strategy. Matt Kennedy, Global Head of Client Transformation at IDA Ireland, notes that future market designs must match renewable supply with industrial demand and support longer-duration storage and innovative approaches. This will unlock additional revenue streams such as energy arbitrage, peak shaving, and congestion management.
Safety Concerns and Non-Flammable Chemistries
Safety concerns are also driving the industry towards non-flammable chemistries. Eugene Beh, CEO of Quino Energy, believes that wildfire-prone regions like California will begin to explicitly value non-flammable storage chemistries in procurement or permitting. While 2026 may not be the banner year for non-lithium chemistries, they are on the horizon, with new manufacturing plants in the design stage. Steve Feinberg, President of Bluewater Battery Logistics, notes that the convergence of EV and storage supply chains is creating real momentum for "built-at-home" solutions and non-lithium chemistries.
Recycling and Domestic Processing
Recycling and domestic processing are also becoming increasingly important in the energy storage industry. Joe Adiletta, CEO of Volexion, believes that localized recycling and domestic processing will become non-negotiable if the US wants its battery supply chains to stay domestic. Shipping black mass overseas for processing goes against the logic of domestic manufacturing, and in 2026, the winners will be the ones who can close their loop locally, from materials recovery through finished batteries. Steve Feinberg notes that while it would be great to find a reuse value for end-of-life battery energy projects, the reality of cheaper, smaller, and safer new batteries leaves recycling as the only option for disposal.
The Value of Standalone Storage
The value of standalone storage is also being recognized. Jim Spencer, President and CEO of Exus Renewables, notes that storage is evolving from just being paired with solar for energy arbitrage to becoming a critical infrastructure component that enables data centers to operate on clean energy while maintaining the reliability their operations demand. As data center demand continues to surge, there is growing recognition that longer-duration storage solutions and hybrid configurations are needed to provide sustained backup power and grid stability.
Foreign Entity of Concern (FEOC) Implementation
The implementation of Foreign Entity of Concern (FEOC) regulations is also expected to reshape sourcing strategies more than technology choices. Chris McKissack, CEO of Fullmark Energy, notes that the BESS supply chain is working hard to figure out the industry impact of FEOC regulations, and a variety of options will present themselves over the coming year. However, Michael Thomas, CEO of Cleanview, notes that developers now face dramatically higher construction costs due to the Trump administration’s aggressive tariff policies, and the new FEOC regulations threaten to increase costs and complexity further.
Domestic Supply Chains and Permitting Reform
Domestic supply chains and permitting reform are also crucial for the industry’s growth. Andrew Gilligan, Senior Director of Commercial Strategy at Fluence, notes that supply chain localization will evolve from a competitive advantage to a competitive necessity, as customers seek greater certainty around delivery timelines, domestic content compliance, and end-to-end quality control. Giovanni Damato believes that the companies positioned to win are those that invest now in secure, scalable supply chains and embrace the next generation of chemistries capable of meeting the country’s reliability and AI-era infrastructure needs.
The Role of AI and Data Centers
The rise of AI and data centers is also driving demand for more advanced and reliable energy storage solutions. Andrew Gilligan notes that in 2026, energy storage will be clearly recognized as one of the fastest and most affordable ways to add flexible power and capacity near high-demand areas, especially as the rapid growth of AI data centers outpaces grid capacity and traps customers in multi-year interconnection queues. Eugene Beh believes that the AI boom will drive demand for non-lithium, non-flammable energy storage to match the needs of data centers, which require high-density systems that can reliably execute advanced grid functions.
Conclusion
In conclusion, the energy storage industry is expected to undergo significant changes in 2026, driven by a number of factors including AI-driven load growth, data center demand, wildfire risks, and tightening domestic content rules. The industry is expected to shift towards longer-duration storage, safer chemistries, and more resilient supply chains, with a growing focus on domestic supply chains, permitting reform, and recycling. As the industry moves forward, it is likely that we will see a shift towards greater technology diversity, more stable revenue models, and continued cost declines, ultimately leading to a more sustainable and reliable energy storage industry.