Commercial and industrial storage capacity surges as utility pairing shifts

Solmar Insights

Global energy storage is entering an era of heightened scale and complexity, with aggregate installed capacity expected to exceed 7 TWh by 2035. Fueled by falling costs and sustained policy support, commercial and industrial (C&I) storage, historically a minor segment, is now identified by Wood Mackenzie as the sector with the highest acceleration potential.

Growth outlook and shifting segments

The energy storage sector is experiencing rapid expansion, with Wood Mackenzie predicting cumulative global capacity will reach more than 7 TWh by 2035. In 2026 alone, demand growth is estimated to approach 30 percent, underscoring intense momentum across utility-scale, residential, and C&I sectors. However, Wood Mackenzie emphasizes that this surge is not merely about total capacity, but about the changing shape of deployment across markets and segments.

This year marks a turning point in market dynamics, with Europe overtaking the United States in annual installed storage capacity for the first time, driven by policy, market signals, and tender-driven utility growth. Meanwhile, Asia, especially China and India, continues to dominate storage growth, while the U.S. market contracts slightly amid tightening tax credit support in the residential sector.

In the utility segment, government-backed tenders have driven over 80 GW of global capacity, with India emerging as the single largest contributor to new installations. Contracted offtake for storage, including power purchase agreements and tolling deals, has passed 130 GW, with these forms of agreement comprising more than three-quarters of all executed contracts tracked by Wood Mackenzie.

Regional leadership changes

The ranking of leading regional markets is shifting more rapidly than headline totals indicate. While China maintains its position as the world’s largest energy storage market by annual additions, Europe’s move into second place highlights the impact of evolving policy frameworks and price signals. Poland exemplifies the effect of market reforms, climbing to the top among emerging storage markets via capacity market auctions and a grid in acute need of flexibility.

Australia has surpassed Germany as the top residential energy storage market, catalyzed by over half a million installations supported through its government’s Cheaper Home Batteries subsidy. By contrast, the U.S. residential market is contracting this year, driven by diminished access to tax credits for installations. In the commercial and industrial sector, the split between commercial and industrial demand reveals substantial regional variations, a trend analyzed by Wood Mackenzie in segmentation of new forecasts.

Europe distinguishes itself as the most standalone-heavy utility market worldwide, but is also positioned for the fastest increase in paired wind and solar-plus-storage installations. As standalone solar economics deteriorate, European developers are shifting quickly toward co-located systems.

Segment definitions and market mechanics

Wood Mackenzie’s reporting now distinguishes among standalone, solar-paired, and wind-paired utility-scale battery storage, rather than aggregating them under a single “utility” category. This segmentation is crucial, as standalone systems still lead globally and are expected to dominate through 2035; however, paired capacity is growing at speed and will represent close to one-third of new storage resources online by the end of the forecast period.

The new breakdown also reveals how widely regional market drivers diverge. In the U.S., utility PPAs and tolling agreements are the preferred mechanisms for storage offtake, with most project revenues underpinned by these long-term contracts. In Europe, emerging market auctions and flexibility shortfalls are shaping installation patterns and storage economics. Australia’s subsidy-driven residential storage boom stands as a model for stimulus linked to distributed battery deployment, while India’s government-led procurement demonstrates how centralized planning accelerates storage roll-out in developing grids.

This increasing specificity in reporting and segmentation will guide developers and investors in identifying addressable opportunities. Strategic project siting, revenue stacking, and optimized pairing with renewables will all depend on the unique drivers in each regional segment.

Implications for U.S. buyers and developers

For U.S. buyers and investors, the outlook signals an increasingly competitive international market, with former U.S. dominance in annual installations eclipsed by European and Asian acceleration. Contracted offtake passing 130 GW confirms robust forward demand, but shifting tax policy and regional tender results will require buyers to re-examine procurement approaches and market-entry timing. The rapid scaling and segmentation of storage, especially between standalone and paired assets, calls for precise risk assessment as economics and policy incentives diverge across submarkets.

Grid operators and energy buyers must consider how utility-scale storage, especially in the commercial and industrial sector, interacts with flexible grid operation, price signals, and local market rules. For U.S. storage developers, keeping pace with the ongoing global expansion and varied maturation of subsidy and auction-driven markets will be critical to remaining competitive in offtake negotiations and project finance. The emergence of industrial-sized C&I demand in several key regions may also influence location strategy and technology selection for storage deployments serving high-load sites or new datacenter clusters.

Reporting via the original publisher