Policy push brings energy storage to the fore of Asia-Pacific’s power transition

Energy storage is moving steadily towards the centre of Asia-Pacific’s energy transition, as governments and industry bodies strengthen policy support and market frameworks that could unlock a new phase of capacity deployment from 2026 onwards. The shift is increasingly being viewed as a catalyst not only for power systems but also for downstream battery and lithium markets.

The region’s starting point, however, remains uneven. Installed energy storage capacity across the Asia-Pacific region stood at 85GW in 2024, according to the Energy Institute, with China alone accounting for 88 per cent of the total. Outside China, deployment is concentrated primarily in Australia and South Korea, leaving much of the region at an early stage of adoption.

However, the imbalance is most likely to ease with the government’s step-up in commitments. While the country is targeting 180GW of energy storage capacity by 2027, more than double current levels, South Korea is making efforts to reach 2.22GW in the next three years. Australia has committed AUD 500mn (USD 337.75million) for the expansion of battery manufacturing, alongside storage deployment. Significant efforts are being made to integrate energy storage with long term power strategies, with Vietnam aiming for up to 16.3GW by 2030 and Malaysia launching its first dedicated 400MW storage auction this year.

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A key feature of recent progress has been the growing use of batteries alongside renewable generation. India and the Philippines awarded integrated renewables-and-storage projects in 2025. Australia is currently auctioning contracts for dispatchable clean power, and Malaysia is expected to introduce a similar mechanism later this year, according to lawmakers.

Despite this momentum, commercial market conditions remain underdeveloped in much of the region. “In Asia-Pacific, while spot markets exist in some jurisdictions, most markets still lack mature price signals and ancillary service frameworks needed for merchant energy storage investment,” EnergyTag’s Asia-Pacific head Shailesh Telang told Argus.

As a result, deployment continues to depend heavily on public support. Tenders, subsidies, regulated tariffs and state-backed procurement still underpin most projects, Telang said, adding that policy intervention remains the dominant driver for now. “Over time, market forces can take over, but today policy remains the primary driver,” he noted.

Alongside government programmes, industry-led coordination is beginning to play a larger role. Regional advocacy group Fessia, launched in September, is focusing its initial efforts on improving policy consistency and project bankability in Vietnam and the Philippines, two markets seen as pivotal for future growth.

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Standard-setting initiatives could also reshape demand patterns. The Greenhouse Gas Protocol is consulting on a proposal to move clean power accounting from annual to hourly matching. Such a shift could increase demand for electricity during night-time hours, strengthening the business case for energy storage. The proposal remains contentious, however, with debate ongoing over flexibility for smaller industries and emerging economies.

South Korea has emerged as a notable testbed for policy-driven storage expansion. The government’s first central contract market auction for energy storage in 2025 drew strong participation, with 51 proposals submitted. Eight operators were selected, securing 563MW of capacity, largely located on the mainland. A second auction round followed later in the year.

This policy momentum is reshaping the country’s battery industry. With the demand of electric vehicle easing, South Korean battery makers are significantly shifting focus towards energy storage with LG Energy Solution set to start domestic production of 1GWh of lithium-iron-phosphate batteries for ESS, pointing to the strength of the local energy ecosystem.

The pivot extends beyond Korea’s borders where leading producers, such as Samsung SDI, LGES and SK On, are repurposing production lines, once dedicated to EVs to supply ESS markets, particularly in the US. Accelerated data centre expansion and renewable energy build-outs are significantly driving demand amid continued uncertainty in the EV sector.

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LFP chemistry strengthens its role

Long dominated by the Chinese manufacturers, LFP battery technology continues to have its hold across Asia-Pacific. Simultaneously, South Korea has closed multiple LFP energy storage supply agreements in 2025, proving its acceptance. 

China’s dominance, however, remains firmly entrenched. Backed by a government action plan, the country is on track to lift new energy storage capacity to 180GW by the end of 2027, up sharply from 2024 levels.

Chinese energy storage specialists including Eve Energy, Cornex, Envision, Great Power Energy and Technology, and Hithium are all seeing strong growth, according to a Chinese battery recycler, even as the sector remains overshadowed by industry heavyweight CATL.

Looking ahead to 2026, expectations for China’s energy storage expansion vary widely. Argus has heard growth estimates ranging from 30 per cent to 100 per cent from analysts and market participants. While views differ on the pace, there is broad agreement on the direction: energy storage has become the dominant theme in lithium market discussions towards the end of 2025, lending support to prices and restoring confidence in the sector’s growth prospects.

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