For the better part of three decades, lithium-ion has been the default answer to almost every energy storage question. It powered the smartphone revolution, made the electric vehicle a commercial reality, and is now being deployed at the grid scale in quantities that would have seemed impossible just a few years ago.
But the energy storage market is maturing fast, and what made lithium-ion the obvious choice in 2015 isn’t always what makes it the right choice today.
Brooks Sherman, a strategy and business development advisor whose MBA capstone at the University of Vermont focused on next-generation battery technologies and post-lithium market positioning, has been tracking how this shift is reshaping investment decisions, project economics, and community relationships across the clean energy landscape.
His perspective isn’t that lithium-ion is losing. It’s that the market is getting more nuanced, and reading it clearly matters more than ever.
The Cost Story Is Real and Remarkable
Sherman acknowledges what lithium-ion has actually accomplished on price. According to BloombergNEF’s 2025 Lithium-Ion Battery Price Survey, average pack prices fell 8% to a record low of $108 per kilowatt-hour, and that decline happened despite rising costs for battery metals including lithium and cobalt. Stationary storage saw an even steeper drop, with pack prices reaching just $70/kWh, a 45% decline from 2024 and the lowest of any segment for the first time.
Zoom out further and the numbers become even more striking. The IEA reports that lithium-ion prices have fallen from $1,400/kWh in 2010 to under $140/kWh in 2023 — one of the fastest cost declines of any energy technology ever recorded. Our World in Data puts the long-run figure even more starkly: a battery that cost $9,200/kWh in 1991 now costs around $78, a decline of more than 99% over 33 years.
These aren’t abstract statistics. They explain why:
- Electric vehicles are now cost-competitive with internal combustion engines in China.
- Residential solar-plus-storage has become economically viable across much of the U.S.
- Global battery energy storage deployments reached 18.9 gigawatts installed in the U.S. alone in 2025, a 50% jump from 2024.
The cost trajectory created a virtuous cycle: more production drove lower prices, lower prices unlocked more demand, and more demand funded further improvements. That cycle is still running.
Where Lithium-Ion Continues to Win
Given those economics, it’s not difficult to identify the applications where lithium-ion remains the most rational choice.
Consumer Electronics
These are essentially a closed question. The combination of high energy density, compact form factor, and a mature global supply chain makes lithium-ion the only practical option for smartphones, laptops, wearables, and similar devices.
No competing chemistry currently comes close to the performance-per-gram metrics that drive product design in that segment.
Electric Vehicles
This category tells a similar story, particularly for passenger cars and light commercial vehicles.
Energy density matters enormously when the battery has to fit inside a vehicle and not weigh it down. The IEA notes that lithium-ion chemistries represent nearly all batteries in EVs today, with lithium iron phosphate (LFP), a lower-cost, cobalt-free variant, now accounting for the majority of new deployments.
LFP deployment surpassed nickel-based chemistries for the first time in 2025, signaling that the EV segment is optimizing within the lithium-ion family rather than looking outside it.
Short-Duration Grid Storage
Referring to the kind that holds power for two to four hours to support renewables integration, this application, which handles peak demand or provides frequency regulation, is also a strong fit.
At $70/kWh for stationary storage packs, the economics of grid-scale arbitrage and renewables integration have fundamentally changed. At those prices, the business case for pairing utility-scale solar with four-hour storage is increasingly straightforward in high-electricity-cost markets.
Where the Economics Are Starting to Shift
The more interesting analytical question, and the one Sherman has spent time on, is where lithium-ion’s advantages begin to erode.
Long-Duration Storage
This category represents the most significant gap.
The grid needs storage that can hold energy not for four hours but for 10, 12, or even more, the kind of buffer that can carry solar power through cloudy weeks or smooth out seasonal mismatches between wind generation and demand.
Lithium-ion isn’t well-suited to this use case. The cost scales linearly with duration, meaning that a 12-hour lithium-ion system costs roughly three times as much as a 4-hour one, without any corresponding efficiency advantage.
This is precisely where alternative chemistries such as iron-air, vanadium flow, zinc-based systems are designed to compete. Alternative chemistry companies like Eos Energy and ESS Tech are still pre-profitability but are seeing revenue growth, and the push for long-duration storage mandates in markets like the U.K. is creating real commercial opportunities for these technologies.
Supply Chain Concentration
As a risk factor that doesn’t necessarily show up in today’s prices, supply chain asymmetry can reshape project economics quickly. China controls roughly 79% of global lithium-ion battery production and approximately 60% of global lithium refining capacity.
For U.S.-based projects dependent on imported LFP cells, that concentration creates tariff exposure and policy risk that alternative chemistries with domestic supply chains can avoid, an advantage that’s become more material under recent U.S. trade policy.
Community Acceptance and Permitting
The industry is still learning to price this emerging economic variable that Sherman flags as underweighted in most project analyses.
In January 2025, a fire at California’s Moss Landing battery facility forced the evacuation of 1,500 residents and destroyed more than 50,000 batteries, a high-profile incident that triggered community pushback, local moratoriums and updated fire codes across the country.
Fire risk and safety incidents now carry quantifiable costs: extended permitting timelines, rising insurance premiums and balance-of-system mitigation expenses that can meaningfully alter project-level returns. In siting-sensitive environments, these factors deserve more weight in the underwriting model than they often receive.
What the Next Wave Looks Like
Sherman’s MBA work examined not just where lithium-ion is challenged today but where the competitive landscape is heading. Several trajectories are worth watching.
Sodium-ion is the most immediately credible contender in specific segments. CATL, the world’s largest battery producer, launched its second generation of sodium-ion batteries in 2025 under a dedicated brand, and its founder has suggested the technology could replace a meaningful share of LFP batteries in certain applications. Sodium-ion doesn’t match lithium-ion on energy density, but it uses more abundant materials and could offer cost and supply chain advantages, particularly relevant for stationary storage and entry-level EVs in emerging markets. It also offers environmental benefits as sourcing its components is less toxic than lithium-ion’s requirements.
Solid-state batteries are the longer-term bet with potentially transformative implications. Toyota has targeted 2027-28 for the first commercial vehicles using all-solid-state batteries, and multiple manufacturers are making similar commitments. Higher energy density, faster charging and improved safety could materially shift the economics in long-range EV and aviation applications if manufacturing challenges are resolved.
McKinsey projects global average lithium-ion pack costs of $55-$90/kWh by 2035 depending on chemistry, with further declines contingent on raw material prices and continued manufacturing efficiency. But the same analysis notes that a price floor isn’t guaranteed, and that policy constraints affecting supply chains could reverse recent trends.
Reading the Market Clearly
The practical takeaway from all of this isn’t that lithium-ion is in trouble. It isn’t. Global lithium-ion battery demand increased 29% in 2025 to reach 1.59 terawatt-hours, and stationary storage was the fastest-growing segment. The technology is more affordable, more widely deployed, and more deeply embedded in the energy transition than at any prior point.
What’s changing is the nature of the decision, and it’s a distinction Sherman encourages practitioners to make more deliberately. For consumer electronics, passenger EVs, and short-duration grid storage in markets with competitive permitting environments, lithium-ion is still the default choice and likely will be for some time. For long-duration storage, supply-chain-sensitive projects, or applications where community siting is a genuine constraint, the calculus is more open than it looks from the headline price numbers.
The market rewards the solution that fits the actual requirements of the project in front of us, and right now, reading that match carefully is where the real analytical work lies.
