Europe’s share of global lithium-ion battery cell manufacturing is set to grow from 6 percent last year to 35 percent in 2026, new figures show.

Wood Mackenzie Power & Renewables forecasts that the Europe, Middle East and Africa (EMEA) region will account for almost 228 gigawatt-hours of lithium-ion cell manufacturing capacity a year by 2026, out of a total of around 649 gigawatt-hours worldwide.

The EMEA figure, which almost completely relates to capacity in Europe, compares to a forecast of nearly 345 gigawatt-hours of cell manufacturing capacity in Asia-Pacific and less than 66 gigawatt-hours across the entirety of the Americas.

Last year, EMEA had less than 12 gigawatt-hours of lithium-ion cell manufacturing capacity, far behind Asia-Pacific with almost 144 gigawatt-hours, and even behind the Americas, with more than 31 gigawatt-hours.

EMEA’s manufacturing capacity is set to see an average year-over-year growth rate of 72 percent up to 2026, Wood Mackenzie predicts.

EVs drive production

Interest in cell manufacturing is soaring as European automakers such as Jaguar Land Rover lay out ambitious plans for electric vehicles and the region leads the way in phasing out internal combustion engines.

The forecast growth of the cell manufacturing market in Europe may well end up being an underestimate, Rory McCarthy, senior analyst at Wood Mackenzie, told GTM. New initiatives are being announced on a regular basis.

This month, for example, President Macron of France unveiled plans to invest €700 million ($790 million) into French cell manufacturing for Europe’s electric vehicle industry.

McCarthy said the announcement came after Wood Mackenzie issued its forecast, which illustrates how fast the market is moving. Less than four months ago, Wood Mackenzie was expecting European battery manufacturing capacity to hit 90 gigawatt-hours per year by 2025.

The latest projection sees EMEA’s 2025 capacity at almost 218 gigawatt-hours, a more than 142 percent increase. Moves by France to invest in battery manufacturing came after Germany committed €1 billion ($1.1 billion) toward the building of German gigafactories.

The two countries are planning to collaborate on creating European manufacturing capacity, Reuters reported. Along with manufacturing capacity, Europe is also racing ahead in the deployment of batteries for energy storage.

Large utility projects

In terms of power capacity, Europe had the second-highest level of energy storage in the world in 2018. The continent boasted 600 megawatts of battery power in 2018, Wood Mackenzie figures show.

“An impressive [array] of large utility projects has been commissioned in 2018, including a number of approximately 50-megawatt behemoths,” wrote McCarthy in a research note.

Wood Mackenzie expects there to be continued strong growth in installations, despite the fact that conditions in most European markets are still not optimal for energy storage developers.

In the U.K., for example, changes being pondered by the electricity regulator Ofgem could see the removal of a peak demand mitigation scheme that is currently worth up to 45 percent of the behind-the-meter value stack for British battery installations.

And elsewhere, European frequency markets are moving toward shorter-term contracts that improve grid efficiency but could make it harder for developers to secure project funding.

“There is a misalignment here between what the storage market needs — longer, bankable contracts — and what the European Commission believes will result in an efficiently operating market: short-term contracts, closer to real time,” said McCarthy.

Nevertheless, developers are lining up to take part in a frequency market tender in Ireland that will see 140 megawatts of power capacity up for grabs sometime between May and June. The country is expected to tender a further 200 megawatts in the future.

Residential storage

In Germany, meanwhile, the world’s biggest residential energy storage market is expected to see continued strong growth. In 2018, 110,000 German homeowners had installed a total of 385 megawatts of battery power capacity, mainly to capture government subsidies. 

Ireland and Italy have also introduced subsidy schemes, Wood Mackenzie notes.

With feed-in tariffs for PV being phased out across Europe, and the cost of batteries continuing to fall, residential energy storage “will become a no-brainer for those who can afford the upfront capex over the next five years, with the right market conditions,” said McCarthy.


The report, Europe Energy Storage: Five Lessons From 2018 and Five Things to Watch in 2019, is available to subscribers of Wood Mackenzie's Energy Storage Service.