Battery costs are falling because of overcapacity in the electric vehicle market, but revenues from using them in the electricity sector are increasing, recent reports show.
In new results from UK battery operator Gresham House Energy Storage Fund, the company said its battery portfolio revenues rates were £76.5k/MW/Yr in Q1 2025 which was on par with Q4 2024 of £76.4k/MW/Yr. It expected increasing revenues from its battery installations.
The batteries perform various functions for the National Energy System Operator (NESO), or other customers, absorbing or providing energy in timeframes from minutes to hours. Ongoing improvements in NESO’s software are allowing it to call on progressively smaller batteries and it expects them to perform such services more often in future. Referring to NESO’s upgrades, the company said “we expect that the rollout of improvements in the Balancing Market over the rest of 2025 should lead to a further improvement in revenues” and in addition so-called ‘Merchant’ forecasts from additional sales to third parties “still assume a gradual rate of improvement in revenues“.
Ben Guest, fund manager of Gresham House Energy Storage Fund plc & MD of Gresham House Energy Transition, said it had been “good to see continued improvement in revenues for the operational portfolio. This should continue as we bring online more operational capacity and as upgrades to the NESO systems continue to be rolled out.”
The company’s battery installations range from 40MW to 200MW in capacity, and are housed in container arrays. The fund is working on a refinancing package which would see it use long-term revenues from its existing batteries to fund debt finance to allow it to build further projects. It said the refinancing was close to completion.
Research provider BloombergNEF (BNEF) previously said it expected lithium-ion battery pack prices to decrease by $3/kWh in 2025. It predicted the further reduction after a 20% reduction in pack prices in the year to the end of 2024, which brought prices to a record low of $115/kWh. Factors driving the decline include cell manufacturing overcapacity, economies of scale, low metal and component prices and the adoption of lower-cost lithium-iron-phosphate (LFP) batteries.
While demand across all sectors saw year-on-year growth, the EV market – the biggest demand driver for batteries – grew more slowly than in recent years and overcapacity saw battery manufacturers in strong competition. Evelina Stoikou, the head of BNEF’s battery technology team, said: “The price drop for battery cells this year was greater compared with that seen in battery metal prices, indicating that margins for battery manufacturers are being squeezed. Smaller manufacturers face particular pressure to lower cell prices to fight for market share.”
The figures represent an average across multiple battery end-uses, including different types of electric vehicles, buses and stationary storage projects. Average battery pack prices in the US and Europe were 31% and 48% higher than in China, respectively, “reflecting the relative immaturity of these markets, as well as higher production costs and lower volumes”. BNEF said it “expects more segments to reach price parity in the years ahead as lower-cost batteries become more widely available outside of China”.
