Energy storage moves toward next-gen lithium cells as price volatility drives interest in alternatives

Lithium prices peaked in May 2026 and have turned downward, according to a report from Intertek CEA. The company projected in its Q2 2026 ESS Price Forecasting Report that prices will decline further through 2027 as delayed production comes online following the 2024–2025 market trough, when production temporarily slowed.

The report noted recent lithium price drops are large enough to absorb cost increases in other raw inputs, including a 20% jump in commodity copper and a 15% increase in copper foil since Q4.

Beyond raw materials, the market is shifting toward 587Ah prismatic LFP cells. The larger form factor delivers higher energy density per container, making it cheaper on a site basis than legacy 320Ah equipment. As manufacturers scale 587Ah production, older 320Ah BESS units are seeing heavy discounting across China and lower-cost export markets.

In China, price competition among manufacturers has squeezed BESS container prices down to just 25% above standalone cell costs. Under normal margin conditions, container prices sit roughly 100% higher than cell costs, said the report.

Persistent lithium supply chain volatility has driven new investment into sodium-ion chemistry as an alternative option, said Intertek CEA. CATL is mass-producing sodium-ion cells in China, while General Motors and Peak Energy are partnering on U.S. systems.

Even so, sodium-ion cells remain more expensive than lithium-ion on a per-kilowatt-hour basis, and the gap grows wider at the integrated system level. Intertek CEA reported that closing the price gap requires massive manufacturing and cathode processing scale, which will likely stay concentrated in China.

At the project level, cell price drops have a limited impact on total build costs. Battery cells represent less than 40% of turnkey BESS costs for European utility-scale builds, leaving non-cell hardware and balance-of-plant engineering as the main cost drivers, said the report.

U.S. buyers continue paying higher equipment prices than global peers due to labor costs, capital requirements, and existing duties. Federal tax credits under the Inflation Reduction Act lower effective costs, but policy changes create headwinds.

Intertek CEA said it expects trade action before emergency Section 122 tariffs expire in late July. Two active Section 301 investigations could add 10% to 12.5% in tariffs on imported hardware.

At the same time, Foreign Entity of Concern (FEOC) rules make federal tax credits difficult to secure, said the report. Qualifying for the Section 45X manufacturing credit requires 60% compliant domestic content in 2026, stepping up to 85% by 2030. While some manufacturers claim 45X compliance, proving FEOC compliance across every supply tier remains a major barrier.

U.S. cell manufacturing is expanding slowly, according to the report. LG Energy Solution has produced pouch cells domestically since September 2025. In April 2026, AESC sold its Tennessee facility to Fixx Energy, creating a path toward compliant production by removing ownership ties to Envision that had raised FEOC concerns. Samsung plans domestic prismatic cell production next, while SK On focuses on pouch capacity.

FEOC rules and tariffs give domestic factories a protective buffer, as making domestic cells the cheapest option for U.S. buyers in the short term, said the report. However, if global prices keep falling, imported hardware could become the lowest-cost option again by 2028 or 2029 unless tariffs change again.