Europe and South America Energy Storage Market

The energy storage markets in Europe and South America are emerging as critical enablers of energy transition, grid modernization, and renewable energy integration, albeit at different stages of maturity. In Europe, the market is driven by aggressive climate targets, renewable deployment, and regulatory frameworks such as the EU’s Green Deal, Fit for 55, and REPowerEU, which emphasize storage for grid balancing, frequency regulation, and backup. Countries like Germany, Spain, and the UK are leading deployment across residential, commercial, and utility-scale segments, supported by a robust ecosystem of manufacturers, digital platforms, and financial incentives. In contrast, South America’s energy storage landscape is still developing, with growth centered around decentralized applications, rural electrification, and solar+storage hybrids in remote or mining-intensive regions. Countries such as Chile and Brazil are pioneering national storage policies and regulatory reforms, while Colombia and Peru are leveraging storage to enhance energy access and system resilience. While Europe focuses on technological diversification and long-duration storage, South America prioritizes cost-effective, modular lithium-ion solutions to bridge energy gaps. Despite differing regulatory maturity, both regions recognize storage as a cornerstone of future energy systems, attracting increasing investment, policy innovation, and cross-border collaboration to meet sustainability and reliability goals. FIGURE 3 EUROPE AND SOUTH AMERICA ENERGY STORAGE MARKET: MARKET GROWTH FACTOR ANALYSIS (2019-2035) Impact Type Impact Analysis Index Market Factors Base (2024) 2019–2022 2023–2024 2025–2035 Growth Inhibiting Factor MICRO FACTORS Growth Promoting Factor Lack of Financial Incentives/Subsidies Growth Steading Factor Growth of Behind-the-Meter Storage Note: Battery Leasing & Pay-as-You-Go Models ➢ The Impact indicated the measure of influence on market growth Industrial & Commercial Sector Push ➢ Each Factor is graded based on historic impact and estimated influence on the MACRO FACTORS market. Renewable Energy expansion Policy & regulatory support High upfront costs Falling battery costs Source: MRFR Analysis Copyright © 2025 Market Research Future 43

4.2.1 RENEWABLE ENERGY E XPANSION Europe In 2024, the European Union achieved a record milestone where 46.9% of its net electricity generation came from renewable energy sources. This transition marks a fundamental shift in the continent's energy landscape. Among EU countries, Denmark led the pack with 88.4% renewable share, heavily reliant on wind energy. Portugal followed at 87.5%, supported by a balanced contribution of wind and hydro, while Croatia reached 73.7%, driven mainly by hydro. At the lower end, Luxembourg (5.1%), Malta (15.1%), and Czechia (15.9%) demonstrate the uneven progress across member states. As renewables contribute nearly half of the EU’s electricity, the intermittency of wind and solar creates urgent grid management challenges. Wind and hydro accounted for a combined 69% of renewable electricity (39.1% wind, 29.9% hydro), while solar contributed 22.4%, reflecting its growing importance. These sources vary in output due to weather and daylight, unlike fossil or nuclear sources. To mitigate curtailment and ensure reliability, energy storage systems (ESS) such as lithium-ion batteries, pumped hydro, and flow batteries are becoming indispensable. As renewables continue their upward trajectory, energy storage becomes the backbone of grid flexibility storing excess electricity and releasing it during demand peaks or supply shortfalls. This 47% renewable threshold is not just a success metric but a trigger point demanding rapid ESS scale-up to avoid grid congestion and maximize clean energy use. FIGURE 4 SHARE OF RENEWABLES IN NET ELECTRICITY GENERATION ACROSS EU COUNTRIES IN 2024 AND BREAKDOWN OF RENEWABLE ENERGY SOURCES IN THE EU ELECTRICITY GENERATION MIX, 2024 Share of Renewables in Net Electricity Generation Across EU Breakdown of Renewable Energy Sources in the EU Countries in 2024 Electricity Generation Mix, 2024 % 100 0.50% 88.4 87.5 8.10% 90 Wind 80 73.7 73 72 70 66 63 70 55 Hydro 60 53 51 39.10% 46.9 49 47 50 44 42 40 40 35 22.40% Solar 30 20 Combustible Fuels - 10 Renewable 0 Geothermal Share of Renewables in Net Electricity Generation (%) 29.90% EU Denmark Portugal Croatia Austria Latvia Sweden Lithuania Estonia Finland Germany Spain Netherlands Greece Romania Italy Ireland Slovenia The above figure depicts the share of renewables in net electricity generation across various EU countries in 2024 and the composition of renewable sources in the EU electricity generation mix. Countries like Denmark (83.4%) and Portugal (77.5%) lead in renewable energy contributions, while the EU average stands at 46.5%. Wind (38.1%), hydro (22.4%), and solar (23.9%) dominate the renewable energy mix. This growing penetration of intermittent renewables such as wind and solar highlights the critical need for energy storage systems (ESS) in Europe. ESS plays a vital role in balancing supply and demand, ensuring grid stability, and enabling efficient use of excess renewable generation. As countries push toward higher shares of clean energy, investment in advanced storage technologies becomes a key driver for the sustainable growth of the European energy market. Europe installed 18.3 GW of new wind power in 2023, with the EU-27 accounting for 16.2 GW its highest ever, yet only half of what’s required to meet 2030 energy targets under REPowerEU. The majority (79%) of the new capacity was onshore, reinforcing the dominance of this cost-effective segment. Offshore installations set a new record of 3.8 GW, pointing to increasing maturity in that space. Wind energy supplied 19% of total EU electricity consumption in 2023, but this share varies dramatically by country. For example, Denmark (56%), Ireland (36%), Germany (31%), and the UK (29%) have become wind-centric grids. This variability introduces storage demand in two ways: (1) temporal, to absorb surpluses during windy periods and release during lulls, and (2) geographic, to move power from windy areas to consumption centers. Countries like Germany added 3.9 GW, with 92% being onshore, reflecting low permitting friction and strong policy. The Neth

4.4.1 FALLING BATTERY COS TS The sharp decline in lithium-ion battery pack prices reaching a record low of $115 per kilowatt-hour in 2024, as reported by BloombergNEF has substantially strengthened the business case for grid-scale energy storage across Europe and South America. This 20% year-on-year price drop, the largest since 2017, was primarily driven by a global oversupply of battery cells, declining input material costs, and broader adoption of lithium-iron-phosphate (LFP) chemistries. With 3.1 TWh of battery-cell manufacturing capacity already commissioned globally more than 2.5 times the annual demand the oversupplied market is forcing prices down and enabling utilities and IPPs (independent power producers) to consider battery energy storage systems (BESS) as a mainstream grid asset. In Europe, this price trajectory has directly impacted the economic viability of energy storage in frequency regulation markets, peak shaving, and renewable firming especially in countries like the UK, Germany, and Spain, where renewable penetration regularly challenges grid stability. FIGURE 13 VOLUME-WEIGHTED AVERAGE LITHIUM-ION BATTERY PRICES BY COMPONENT (2013–2024, REAL 2024 $/KWH) 1800 1600 1400 1200 806 715 1000 800 253 463 600 230 356 400 153 266 97 218 553 189 485 79 165 155 166 200 61 144 310 57 42 34 115 259 36 33 187 157 37 132 123 119 132 111 78 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Cell Price ($/kWh) Pack Price ($/kWh) Total Price ($/kWh) The above figure shows the consistent decline in volume-weighted average lithium-ion battery prices from 2013 to 2024, with both cell and pack costs reducing significantly. Prices fell from $806/kWh in 2013 to $115/kWh in 2024 (real 2024 dollars), driven by technology advancements, economies of scale, and supply chain improvements. In South America, where cost sensitivity has traditionally slowed grid-scale energy storage deployments, this price collapse presents a historic opportunity. Nations such as Chile, Brazil, and Argentina can now integrate storage with large solar and wind installations without heavy reliance on subsidies. In Chile’s Atacama Desert or Brazil’s northeast wind corridor, storage can prevent renewable curtailment and provide reliable backup during low generation windows. Previously, BESS installations in the region were economically justifiable only under pilot programs or donor-backed schemes. Now, with system costs dropping (including inverters and balance-of-system components), developers can present viable business cases with faster ROIs. Additionally, with stationary storage demand accelerating and EV battery growth plateauing, manufacturers are turning their attention to utility-scale projects driving innovation, quality, and competition in favor of buyers in both regions. Copyright © 2025 Market Research Future 55 The $115/kWh global average battery price also redefines the economics of behind-the-meter (BTM) storage, a segment witnessing tremendous growth in Europe and beginning to gain traction in South America. At this price point, residential and commercial storage systems especially those coupled with rooftop solar are becoming accessible to mass-market consumers. In Germany, where retail electricity prices remain high (above €0.30 kWh), residential P -plus-storage systems now achieve payback periods under 7 years, spurring demand. The affordability of lithium-iron-phosphate (LFP) chemistry, with its longer life cycle and lower fire risk, further reduces long-term ownership costs for households and small businesses. Governments in countries like Italy and Austria are also offering tax deductions or rebates to accelerate adoption, amplifying the price impact. In the UK, home energy storage systems have surged by over 80% year-on-year, partly due to volatile electricity tariffs and increased awareness of grid reliability issues. In South America, where residential solar growth is strong (particularly in Brazil, which surpassed 2.5 million distributed solar systems in 2024), falling battery prices open the door to scalable solar-plus-storage adoption. Previously, residential batteries were largely unaffordable or limited to premium users. Now, PAYG (Pay-As-You-Go) solar models are beginning to include storage in their bundles, targeting middle-income and off-grid customers. Moreover, for commercial and industrial users, battery storage is proving essential for energy cost management, especially in countries where demand charges and power outages are common. Mining companies in Chile and Peru are beginning to invest in modular BESS to complement renewable microgrids, while Argentine agribusinesses are exploring containerized storage for irrigation and processing equipment. As the cost of storage declines, distributed systems become a cost-effective tool not just for resilience and autonomy, but also for decarbonization across rural and urban settings alike. The dramatic 2024 price drop has indire

4.3.1 HIGH UPFRONT COSTS High initial capital costs continue to hinder the deployment of energy storage systems, particularly at utility scale. On average, grid- scale lithium-ion battery systems cost between USD 300–500 per kWh installed, depending on project size, location, and technology integration. A 100 MW/400 MWh battery storage facility in Europe can cost between USD 120–180 million, requiring substantial capital investment before a single euro of revenue is generated. Although the cost of lithium-ion batteries fell by over 80% from 2010 to 2022, recent supply chain disruptions and rising demand have led to a temporary uptick in prices by around 7% in 2022, according to BloombergNEF. In South America, the situation is more complex. In countries like Brazil or Chile, capital costs are often inflated by 20–30% due to import duties and currency depreciation. Since energy storage often competes with cheaper alternatives (e.g., fossil-based peaker plants or hydro dams), the cost disadvantage is amplified. Without long-term power purchase agreements (PPAs) or government-backed revenue guarantees, project developers and utilities face severe risks in cost recovery. The high capital burden is driven significantly by the cost of core technologies. As of 2024, lithium iron phosphate (LFP) battery packs cost USD 130–150 per kWh, while newer technologies like vanadium redox flow batteries cost over USD 400–600 per kWh. Moreover, Europe still imports over 80% of its lithium-ion batteries, despite the launch of giga-factory projects in Germany, Hungary, and France. In South America, more than 90% of advanced battery systems are imported, primarily from China. This dependence exposes developers to foreign exchange risk e.g., the Chilean peso lost over 15% of its value in 2023, increasing procurement costs. Balance-of-system (BoS) expenses including inverters, battery management systems (BMS), fire protection, HVAC, and land acquisition can account for 25–40% of total installed cost. Even modest 10–20 MW projects in remote regions may exceed USD 15 million, making them financially unviable without donor or climate finance support. Further, O&M costs estimated at 2–4% of initial CAPEX per year add to the long-term burden, especially in harsh environments or decentralized locations. The high upfront costs are exacerbated by limited access to affordable project financing. According to the International Renewable Energy Agency (IRENA), less than 20% of global energy storage investments in 2023 were in emerging markets, largely due to financing barriers. In South America, commercial interest rates for energy projects often exceed 10–12%, versus 3–5% in developed European markets, making capital-intensive projects cost-prohibitive. Furthermore, energy storage is not consistently recognized as a standalone asset class in many regulatory regimes. For example, Brazil only introduced formal energy storage regulations in late 2022, and even then, monetization of stacked services (like frequency response, spinning reserve, or demand charge reduction) is still not standardized. In Europe, although Germany and the UK offer storage-friendly markets, many EU nations still lack clear guidance on ownership rights for Transmission System Operators (TSOs) or compensation mechanisms for grid services. The absence of bankable revenue models with predictable cash flows from storage operations leads lenders to assign higher risk premiums or reject funding applications altogether. Even large-scale developers like EDF Renewables or Enel X tend to proceed cautiously, favoring joint ventures with technology partners or state-backed funds to de-risk initial capital exposure. 4.3.2 LACK OF FINANCIAL INCENTIVES/SUBSIDIES Despite a growing global emphasis on clean energy and grid flexibility, many governments in Europe and South America continue to prioritize conventional energy systems such as fossil fuels and hydroelectric power over modern energy storage technologies in terms of financial backing. According to the International Energy Agency (IEA), global fossil fuel subsidies reached USD 1.3 trillion in 2022, massively overshadowing support for renewable energy and storage combined. In South America, countries such as Argentina and Venezuela provide direct subsidies to fossil-based electricity producers to maintain low energy tariffs, often resulting in unsustainable fiscal burdens while crowding out investment in emerging technologies like storage. In Brazil, over 50% of electricity subsidies go to large hydro and thermal projects under mechanisms such as Proinfa and Capacity Reserve Auctions. Although Europe has made progress in phasing out coal and reducing emissions, many Eastern and Southern European nations have yet to design storage-specific financial support programs. The consequence is an energy policy misalignment governments Copyright © 2025 Market Research Future 52 continue to fund legacy generation assets, but fail to acknowledge the critical role of storage in integrating renewables, balancing demand, and ensuring grid stability. Storage developers are then forced to enter competitive markets without the backing their fossil-based competitors enjoy, resulting in a structural disadvantage. This leads to delayed investment decisions, underutilization of clean energy, and a fragmented path toward climate goals. One of the most pressing issues facing the energy storage industry is the lack of targeted financial incentives unlike solar or wind energy, which have long benefited from feed-in tariffs (FiTs), tax rebates, and green certificates. As of 2023, only 8 out of 27 EU member states had formal storage-specific incentives, such as grants or low-interest loans. Most European Union-level funding schemes prioritize generation technologies, while storage is treated as an auxiliary service rather than a strategic asset. Even in frontrunner markets like Germany, financial support i