Battery energy storage systems (BESS): from global role to emerging market opportunities

The big picture: why storage matters? 

As renewable energy grows, variability becomes the defining challenge for power systems. Solar and wind depend on weather and time of day, often creating mismatches between supply and demand. The result is grid instability, curtailment, and reliance on fossil peakers (Yoo & Ha, 2023). 

Battery energy storage systems (BESS) are designed to close this gap. They absorb surplus electricity and release it when needed, delivering: 

• smoothing of renewable intermittency 

• ancillary services such as frequency control and black start 

• deferred transmission and distribution upgrades 

• improved power quality and reduced curtailment 

By enabling grids to integrate higher shares of renewables, BESS play a central role in decarbonization strategies worldwide. 

Global market outlook 

Among storage technologies (pumped hydro, compressed air, thermal, supercapacitors), BESS dominate because they combine modularity, scalability, and rapid response with no siting constraints. This explains why BESS capacity is growing faster than any other form of storage. 

According to McKinsey analysis on battery energy storage systems (2023) the global market is projected to expand sharply over the decade, with front-of-the-meter (FTM) utility-scale projects already accounting for most new deployments. By 2030, utility-scale BESS installations could reach 450–620 GWh annually, representing up to 90% of the market. 

Opportunities by segment 

Three major segments illustrate where BESS is creating value: 

Source: McKinsey 

Utility-scale (FTM) 

• Customers: utilities, grid operators, renewable developers 

• Growth: fastest, with ~29% CAGR expected this decade 

• Revenue models: revenue stacking through ancillary services, wholesale arbitrage, and capacity markets 

• Success drivers: scale, cost, project execution, software for grid optimization 

  
  

Commercial and industrial (C&I) 

• Forecast growth: ~13% CAGR, 52–70 GWh annual additions by 2030 

• Subsegments: 

• EV charging infrastructure: batteries at charging stations to avoid costly grid upgrades 

• Critical infrastructure: data centers, hospitals, telecom towers replacing diesel and lead-acid backup 

• Buildings and factories: peak shaving, self-consumption, backup, grid services 

• Harsh environments: mining, oil & gas, construction sites shifting away from gensets 

  
  

Residential 

• Forecast: ~20 GWh by 2030, the smallest but innovation-rich segment 

• Value drivers: bundling with rooftop PV, home EV charging, microgrids 

• Consumer adoption shaped by: price, safety, ease of installation 

Source: McKinsey 

How BESS projects generate value 

The BESS value chain starts with manufacturers of storage components, including battery cells and packs, and of the inverters, housing, and other essential components in the balance of system. By our estimate, the providers in this part of the chain will receive roughly half of the BESS market profit pool. 

Source: McKinsey 

According to McKinsey article on revenue potential of energy storage technologies (2025), the profitability of BESS is shaped as much by local market context as by technology. Revenue streams vary depending on power price spreads, storage-specific incentives, and the balance of renewable and storage build-out.  

In the UK, frequency services underpin early projects; in Italy, capacity auctions have created bankable business models; in Germany, storage value lies in deferring costly grid upgrades. Simulations in southern Europe further highlight this variability, showing that identical assets can yield very different returns under different system evolution scenarios. For investors and operators, advanced market modeling is therefore essential,not just to optimize dispatch strategies, but also to align project design and duration with local conditions.  

Performance also depends on choices around duration, system sizing, and bidding strategy. Top-quartile assets in the same market can outperform averages by 50–60%, highlighting the importance of advanced trading and controls. 

Emerging Markets: A Critical Frontier 

While most installed BESS capacity today is concentrated in developed economies, the next growth frontier lies in emerging markets. These countries face a unique combination of pressures: electricity demand is growing quickly, renewable energy is expanding at unprecedented rates, and grid infrastructure is often fragile or underdeveloped. This makes the case for storage even stronger than in mature systems. 

However, the pathway to commercialization is far from straightforward. A few structural challenges persist: 

• High technical costs: Without domestic manufacturing, equipment is often imported, making projects expensive and vulnerable to currency and logistics risks. 

• Lack of benefit evaluation frameworks: Many energy markets still lack transparent mechanisms to quantify and compensate the system-level benefits of storage, from frequency regulation to deferred grid investments. 

• Incomplete storage regulations: Policies for renewables are common, but few governments have codified how storage participates in wholesale markets, ancillary services, or capacity mechanisms. 

• Dependence on imports: Minimal local production capacity forces developers to rely on global supply chains, which can deter foreign investment and delay deployment. 

  
  

These barriers create a paradox. On one hand, the market potential is enormous—emerging countries could leapfrog directly into renewables-plus-storage systems rather than building out fossil-based grids. On the other, without clear policies, stable revenue models, and local capacity-building, projects remain difficult to finance at scale. 

Vietnam As a Case Study 

According to the research by Yoo, Y., & Ha, Y. (2023), Vietnam illustrates both the promise and the challenges of this frontier. The country has emerged as a regional leader in renewable energy, with variable renewable energy (VRE) generation reaching 28.2 TWh in 2021, 11.5% of total power output, the highest share in Southeast Asia. Supportive policies have helped Vietnam achieve rapid renewable deployment, positioning it as one of the most dynamic clean energy markets in the region. 

Yet the development of storage has not kept pace. Despite its leadership in VRE growth, Vietnam ranks only third among five Southeast Asian peers in installed BESS capacity. This imbalance creates growing risks of grid congestion, curtailment, and instability, undermining the full value of the country’s renewable build-out. 

Unlocking Vietnam’s BESS market will require a deliberate policy and market design push: 

• Codified rules for grid participation, enabling storage to provide ancillary services and be compensated. 

• Capacity auctions or contracts-for-difference (CfDs) to stabilize revenue streams and reduce investor risk. 

• Integration of storage into grid planning, ensuring that storage is considered alongside transmission and distribution investments. 

• Selective localization, not in full-scale manufacturing, but in assembly, EMS software, and lifecycle services that can strengthen the domestic ecosystem. 

  
  

Implications:  A Recipe for Success 

Given these uncertainties, what does it take to succeed? Four principles stand out: 

• Expand along the value chain. In a young industry, integrators can move into packaging, and battery makers into integration and services. Software will become key as value shifts from hardware to control and optimization platforms, making digital capabilities critical for margins. 

• Build resilient supply chains. Cells, inverters, and control systems depend on complex global networks exposed to material shocks and regulation. Winners will diversify sourcing, localize production, and partner with strong EPC firms to deliver reliably at scale, especially for utility projects. 

• Focus on what customers value. System design should follow segment priorities, duration, safety, PV compatibility, and interconnection ease, rather than pure performance. In a price-driven market, differentiation lies in matching technical features with customer needs. 

• Scale decisively. As larger players consolidate, smaller firms must act boldly, via partnerships, IP commercialization, or fast scaling, to stay relevant. 

  
  

There is no universal BESS model. Success depends on adapting to local revenue opportunities while building strengths in supply, technology, and execution. Early movers who combine these will turn storage from a necessity into a sustainable business. 

Battery energy storage has shifted from niche to essential in enabling renewable grids. Value now spans utility, C&I, and residential segments, with business models built on stacked revenues and market context. In emerging markets like Vietnam, policy clarity and market design matter as much as costs. Those investing in scalable, chemistry-flexible systems and strong software will lead the next wave of growth. 

Reference list: 

McKinsey & Company. (2025). Evaluating the revenue potential of energy storage technologies. https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/evaluating-the-revenue-potential-of-energy-storage-technologies 

McKinsey & Company. (2023). Enabling renewable energy with battery energy storage systems. https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems 

Yoo, Y., & Ha, Y. (2023). Market attractiveness analysis of battery energy storage systems in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Renewable and Sustainable Energy Reviews, 191, 114095. https://doi.org/10.1016/j.rser.2023.114095