How can innovation help secure future battery markets and mineral supplies?

A complete analysis of the role of innovation in curbing or diversifying battery mineral demand and supply can be found in Chapter 7 of The State of Energy Innovation report published by the IEA earlier this year. This excerpted version – updated with the latest data, and informed by the forthcoming Energy Technology Perspectives Special Report on the Global Car Industry and the Energy Technology Perspectives report – will frame a dedicated discussion on the topic at the IEA Energy Innovation Forum 2025, which will take place in Toronto, Canada, on 29 October 2025 ahead of the G7 Energy and Environment Ministers’ Meeting. 

Battery demand surged more than forty-fold between 2010 and 2024, while average battery prices dropped by more than 90%. In 2024, the global battery market was worth about USD 130 billion – greater than the net oil imports of Germany, France and Italy combined. This rapid transformation has reshaped the battery market: portable electronics, once the dominant application, now represent just 5% of demand. In contrast, electric vehicles (EVs) account for around 75% of demand; battery energy storage systems (BESS) cover 15%, while other uses – such as electric bikes and drones – make up the remainder. This shift has been driven by sustained innovation in battery design, chemistry and manufacturing, alongside economies of scale and improved production efficiency.

The global EV battery market is currently split between lithium iron phosphate (LFP) and lithium nickel cobalt manganese oxide (NMC) chemistries, each accounting for roughly half of total demand. LFP is the fastest-growing segment, already dominating energy storage deployment due to its lower cost and longer cycle life. However, supply chains for both chemistries remain geographically concentrated, raising concerns over the security of supply.

There are opportunities to tackle this concentration and thereby improve supply chain resilience. Innovation is a key one, with research ongoing into established and new technologies. Among technologies that have already been commercialised, improvements continue to bring down costs while boosting performance. At the same time, research into new technologies could reshape battery supply chains and enhance competitiveness over the medium and long term.

For new entrants in any mature technology sector, competing with established producers is very difficult, even with substantial financial backing. Innovation in next-generation battery technologies is sometimes seen as a way for newcomers to leapfrog incumbents. However, relying on potential disruptive breakthroughs is a precarious foundation for business success, and especially for broader industrial strategy. In the absence of an efficient, competitive battery manufacturing ecosystem, even promising advances may struggle to reach commercial scale quickly enough to deliver real benefits.

Several innovative battery approaches currently stand out. Sodium-ion batteries – which are similar to lithium-ion batteries in design, but substitute lithium with the more-abundant sodium – gained significant attention after lithium prices spiked in 2022. Thanks to timely investment and existing technological maturity, sodium-ion batteries have moved quickly towards commercialisation. In China, EVs with sodium-ion batteries entered the market in late 2023 and large stationary sodium-ion storage batteries were connected to the power grid in 2024. However, sodium-ion batteries can only compete with LFP batteries on cost in the context of high lithium prices or significant energy density improvements. In addition, with China projected to hold 95% of global sodium-ion production capacity by 2030, the technology is unlikely to provide a competitive opening for new entrants, although it could offer advantages in terms of technology diversification, especially when lithium prices are high.

Meanwhile, solid-state batteries have attracted attention and investment thanks to their promise of longer driving ranges and enhanced safety, although these have yet to be demonstrated in real-world applications. The term “solid-state batteries” covers a wide range of technologies; the most frequently mentioned advantages come from designs that are currently in the prototype stage.

While solid-state battery cells are already being produced, their integration into EV battery packs remains challenging. Among the most advanced, Chinese firm BYD plans to sell its first EV using all-solid-state batteries from 2027, with mass production following in 2030. Japan’s Toyota and Korea’s Samsung have set similar timelines.

Early costs will be high, reflecting immature manufacturing processes and supply chains, but premium markets – where customers value range and performance – could support early adoption, providing margins for manufacturers to navigate scale-up challenges and work towards lower production costs. Nevertheless, this implies that it will take time for solid-state batteries to make a dent in the mass market for EVs, and they will likely remain limited to premium segments until the first half of the 2030s.

Lithium-sulphur batteries are less mature technologically but are also receiving considerable attention, especially in the United States. Their appeal lies in storing more energy per kilogram, enabling lighter battery designs. However, they also require more space for the same amount of energy compared with today’s battery technologies, which limits their attractiveness for mainstream EV applications. The defence sector may prove an early adopter if production is scaled up at sufficient volumes and technical obstacles, such as safety concerns, can be addressed.

A similar approach – focusing on niche but already sizeable or growing markets – is being pursued by developers of several other innovative battery technologies, such as redox-flow and metal-air batteries, both of which target longer-duration storage.

Innovation takes time, and while researchers continue to develop potentially disruptive battery technologies, existing technologies keep advancing, driven by incremental improvements.

Since global EV sales began to rise exponentially after 2020, lithium-ion batteries have advanced rapidly across all metrics – a trend that has accelerated since 2023. Global prices for lithium-ion batteries fell by about 30% between 2020 and 2024 thanks to economies of scale and innovations in battery cell and pack manufacturing and design. At the same time, battery pack energy density rose by over 50% for NMC batteries and about 65% for LFP batteries, without compromising safety or longevity – on the contrary, safety standards have improved substantially, and EV battery lifetimes are exceeding expectations. Fast-charging capabilities have also surpassed any previous record. In early 2025, BYD and CATL released batteries that enable 400-500 kilometres of additional range to be added in just five minutes – a timeframe comparable to refuelling conventional cars.

For new technologies to gain market share and reshape the battery industry, their viability alone is insufficient; the critical point is industrial scale-up, which ultimately determines the transformation of markets.

Viewed through this lens, established battery technologies retain a clear advantage. Manufacturing capacity for solid-state batteries that is already installed, under construction or has reached a final investment decision represents just 1% of the total battery manufacturing capacity, and 80% of these projects are in China; for sodium-ion batteries, this share is 4% (and this capacity is almost exclusively in China). The remaining 95% of capacity has been planned to produce lithium-ion batteries. While actual market shares may differ due to excess production capacity, the limited manufacturing base – coupled with higher initial costs and lower technological, supply chain and market readiness – is set to constrain the near-term potential of emerging chemistries.

Given this, new technologies are expected to capture a relatively small share of the 2030 market. Even so, a small share of a fast-growing market can still represent a major opportunity, with battery demand projected to expand more than threefold from 2024 to 2030 and fivefold to 2035 based on today’s policy settings.

Still, competition is fierce. China has now become a key engine of battery innovation worldwide. The same incumbents that dominate lithium-ion production are investing heavily in innovation – CATL alone invested over USD 2.5 billion in research and development and employed more than 20 000 researchers in 2024.

Changing this landscape will require significant investments, whether from incumbent manufacturers investing in next-generation technologies or from start-ups and smaller players. However, attracting investments has become increasingly difficult for start-ups making batteries. Equity fundraising declined from over USD 7 billion at its peak in 2021 to about USD 2 billion in 2024, making it harder for newcomers to gain traction.

Tomorrow’s leaders in next-generation batteries will be those that pair technical breakthroughs with manufacturing efficiency, strong supply chains and a skilled workforce, much as today’s lithium-ion batteries industry has done. Skills, suppliers and operational know-how must transfer smoothly across technologies if innovation is to translate into competitiveness.

Even disruptive energy technologies often require time to gain a foothold in global markets, particularly one as large and fast-growing as the battery sector. While current project pipelines suggest that established lithium-ion technologies will continue to dominate until at least the mid-2030s, emerging technologies developed today may secure critical niches and help position producers for long-term competitiveness. Specialised segments, such as premium applications, can allow producers to build experience, generate profit and eventually move towards the mass adoption of new technologies.

Looking ahead, innovation will remain at the core of the battery industry, underpinning continued improvements in performance and cost, enabling access to new applications and markets, and reinforcing the central role of batteries in energy systems.

As batteries become one of the most important technologies of the 21st century – as the IEA’s Executive Director recently wrote – the IEA will continue to monitor these trends in order to provide timely analysis and policy advice.