Battery Storage for Data Centers, Commercial & Industrial Applications 2026-2036: Market, Forecasts, Players, Technology

Battery demand for stationary commercial and industrial (C&I) battery energy storage systems (BESS) is set to grow across a breadth of industries, including data centers, telecommunication base stations (5G, 6G), electric vehicle (EV) charging, construction, agriculture, mining, and other crucial applications such as factories, hospitals, communities, and disaster relief. Within these markets, C&I BESS is used in various applications, including uninterruptible power supply (UPS), peak shaving, microgrids, time-of-use arbitrage, grid flexibility, managing volatile artificial intelligence (AI) compute loads in data centers, among others. Across these industries, IDTechEx forecasts that by 2036, the global C&I BESS market will reach US$21B in value.

 

 

The commercial and industrial (C&I) battery storage market has traditionally been viewed as a niche segment, especially in comparison to more established grid-scale and residential battery storage markets. However, this is set to change over the coming decade, with ~5x growth expected in C&I BESS demand between 2026 and 2036. Demand across applications will shift and transform over time, and C&I BESS players will have to adapt accordingly if they are to take their share of the market from incumbent Li-ion BESS giants such as CATL, BYD, and Tesla. This report provides insights from dozens of primary interviews with C&I BESS players, providing unique insights on projects, their targeted applications, and battery technologies.

 

In the short-term, BESS for data centers is set to become a rapidly growing application, especially in the US and Europe. Over time, global demand will shift in China to support the rollout of 6G. 5G (Sub-6 GHz) towers and 6G towers (will) see large macro towers being deployed. These could be considered critical nodes in the network backbone, and almost always have batteries for UPS / backup power, whether these are lead-acid or Li-ion, or even diesel generators to cover long outages. Towards the end of the next decade, the more significant uptake of EVs in agriculture and construction industries outside the US and Europe will drive C&I BESS to be deployed at these sites to support EV charging.

 

Battery demand will closely follow the power demand of data centers, to at least cover their critical loads which includes servers, storage, and network gear. With the scale of hyperscale artificial intelligence (AI) data centers increasing, as will the power requirements and capacities of batteries for uninterruptible power supply (UPS). This will ensure data centers remain online, as per service level agreements, and prevent data loss, which could otherwise create large financial loss, pose security issues, and disruptions to key services.

 

One of the other key applications of battery storage in data centers will be to manage volatile AI compute loads. To counter these MW-scale swings in power demand, data center operators may run the data center at a higher continuous power by running extra operations, such that consistent power can be supplied from the electricity grid. However, this is a wasteful use of electricity which increases operating costs. Instead, and to reduce electricity costs, battery storage can be used to smoothen these fluctuations, by charging when there is excess electricity supply and discharging to the data center when power demand increases.

 

 

While valve-regulated lead acid (VRLA) batteries have traditionally been used in data centers for UPS, the higher cycle life and decreasing cost of Li-ion has seen these technologies steadily displacing VRLA batteries. However, key disadvantages of Li-ion batteries include their degradation, and safety risk due to flammable electrolyte. Frequent cycling per day could see their earlier retirement from data centers. Other battery storage technologies such as redox flow batteries (RFB) may be more suitable for managing volatile AI compute loads as they exhibit minimal degradation over extended cycling. RFBs also use non-flammable electrolyte, a key advantage considering the occurrence of Li-ion battery fires at data centers. Indeed, as the scale of data centers also increase, longer duration battery storage technologies, such as RFBs, may be needed as part of the wider energy management strategy for the data center facility. This report details key trends being observed for battery storage in data centers, including cost benefit analysis, use strategies, and future battery technology adoption.

 

Li-ion technology costs continue to decrease, and with the large surge in demand for data center BESS in the US and Europe, it will be important for domestic Li-ion supply chains to start being built up to reduce reliance on China. Through the 45X Manufacturing Production Tax Credit in the US, and via the One Big Beautiful Bill Act (OBBBA), the production of LFP Li-ion cells in the US will be key for supplying all domestic US Li-ion BESS markets, including commercial and industrial ones. This IDTechEx report provides developments in LFP manufacturing capacity in the US, and quantitative cost analysis on the costs of LFP cells manufactured in the US with the impact of tax credits compared to importing Chinese LFP cells with tariffs, from 2026 onwards.

 

Other than Li-ion, IDTechEx has observed Na-ion, VRLA, second-life EV, and redox flow batteries being developed for C&I applications. All technologies come with advantages and disadvantages related to cost, energy density, cycle life, safety, and response time. This report benchmarks these BESS technologies and discusses their suitability for C&I battery energy storage applications. Li-ion C&I BESS technologies from key manufacturers are benchmarked and C&I Li-ion BESS costs are provided by component breakdown.

 

This report includes granular 10-year market forecasts for global commercial and industrial BESS market, by GWh demand and market value (US$B) from 2025 to 2036, by application and by region. GWh forecasts by application per region are provided. Forecasts for BESS by GW in data centers are provided by region.

 

This IDTechEx report includes 30+ company profiles, including C&I BESS players, major Li-ion BESS companies, and players developing alternative battery storage technologies, e.g., redox flow batteries, Na-ion, second-life EV, VRLA, and zinc-based batteries.

This report provides the following information:

 

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