Author: Derek Michalski, Chief Editor.
Battery energy storage is becoming core electricity infrastructure. Global battery demand exceeded 1.5 TWh in 2025, driven by electric vehicles and rapidly expanding stationary storage (IEA, Global Critical Minerals Outlook 2025). As grids integrate more variable renewable generation, BESS is increasingly required to provide flexibility, balancing capacity and system resilience.
But the next challenge for the storage industry is not simply battery manufacturing capacity. It is the security of the materials, processing infrastructure and grid-connection hardware behind it.
The critical question is no longer whether sufficient minerals exist underground. It is whether they can be mined, refined, processed and manufactured at scale, in the right locations, with sufficient supply-chain diversity — and whether the transformers, cables and switchgear needed to connect that storage to the grid can be delivered fast enough to matter.
The Bottleneck Is Moving Downstream
Lithium, graphite, nickel, cobalt, manganese and copper all feature in the broader battery and electricity-storage supply chain. Yet their geographic distribution tells only part of the story.
The IEA’s Global Critical Minerals Outlook 2025 found that China is the leading refiner for 19 of the 20 strategic minerals it tracks, holding an average market share of around 70%, and that the top three refining nations’ combined share actually rose from roughly 82% in 2020 to 86% in 2024 — almost all of that growth coming from a single dominant supplier per mineral: Indonesia for nickel, China for cobalt, graphite and rare earths.
This creates a structural vulnerability: mining is diversifying faster than processing.
A new lithium mine does not automatically create a new source of battery-grade lithium. Ore still needs to be converted into the chemical products required by cell manufacturers. The same applies to graphite, nickel and manganese.
For investors, the midstream may therefore become more strategically important than the mine itself.
Lithium and Graphite Remain Critical — But the Price Story Is More Nuanced Than It Looks
Lithium remains fundamental to lithium-ion storage, and its market has stayed volatile. BloombergNEF’s 2025 Lithium-Ion Battery Price Survey found that battery metal prices actually rose during 2025 — lithium ticked up alongside supply risk at certain Chinese assets, and cobalt prices jumped sharply after the Democratic Republic of the Congo introduced export quotas. What’s notable is what didn’t follow: overall lithium-ion pack prices still fell 8% year-on-year to a record low of $108/kWh, as manufacturing overcapacity, intense competition and continued LFP adoption absorbed the metal-cost increase rather than passing it through. That’s an important nuance for anyone underwriting long-life storage assets: rising input costs and falling system costs are currently coexisting, and the two should not be assumed to track each other going forward.
Graphite presents a different risk. It remains the dominant anode material in conventional lithium-ion batteries, and China controls roughly 95% of global graphite supply, according to Reuters reporting on the sector. China’s export controls on certain graphite products, introduced in 2023, demonstrated that trade policy can rapidly become a battery supply-chain issue. The industry response is now visible in real contracts: General Motors signed a multi-year, multi-billion-dollar agreement with Norway’s Vianode in 2025 for synthetic graphite anode material, to be produced at a North American plant from 2027 through 2033 and used in EV batteries made by its Ultium Cells joint venture with LG Energy Solution. Vianode chief executive Burkhard Straube framed the underlying problem bluntly, telling Reuters: “the entire EV ecosystem depends upon the import of one critical mineral.” Vianode already operates a full-scale anode graphite plant at Herøya, Norway, and separately confirmed in March 2026 that it would supply synthetic graphite for grid-scale battery storage to a North American battery technology company — evidence that the same anode diversification effort now under way for EVs is extending directly into stationary storage supply chains.
For BESS developers, the implication is straightforward: supply-chain resilience must be assessed beyond the cell manufacturer.
LFP Changes the Equation — But Does Not Remove Risk
The growth of lithium iron phosphate (LFP) chemistry is reshaping the materials landscape, and it is worth being specific about what that substitution actually changes. A typical high-nickel NMC cathode — NMC-811 — contains roughly 80% nickel, 10% manganese and 10% cobalt; LFP eliminates both nickel and cobalt entirely, relying instead on iron and phosphate. According to Benchmark Mineral Intelligence data cited by S&P Global Commodity Insights, that substitution alone made LFP cells roughly $6/kWh cheaper than NMC-811 even before the 2023–24 lithium price collapse. That is precisely why LFP has become the near-default chemistry for stationary storage, where cost, safety and cycle life matter more than the energy density nickel-rich cathodes provide.
However, chemistry substitution does not eliminate supply-chain exposure. It changes it. LFP increases the importance of lithium, graphite and phosphate, while next-generation lithium manganese iron phosphate (LMFP) chemistry introduces greater exposure to manganese. The IEA has identified battery-grade manganese sulphate and purified phosphoric acid as potential emerging bottlenecks, with processing capacity heavily concentrated in China.
The material risk therefore needs to be considered alongside technology risk. A change in battery chemistry can alter the criticality of individual minerals almost overnight.
Copper and Grid Hardware: A Wider Infrastructure Risk That Is Now the Binding Constraint
Copper is not a battery active material, but it is essential to BESS deployment — and it is increasingly the less severe half of a bigger problem.
Large storage projects require copper-intensive cables, busbars, transformers, switchgear and grid connections. The equipment side of that list has become the sharper bottleneck. Wood Mackenzie’s Q2 2025 survey found large power transformers averaging 128 weeks and generator step-up units averaging 144 weeks — more than double pre-pandemic norms. Andreas Schierenbeck, chief executive of Hitachi Energy — the world’s largest transformer manufacturer — told S&P Global Platts in a January 2026 interview that despite continued investment in new production capacity, waiting times for large transformers still run up to 40 months, adding: “the gap between demand and supply is not really closing.” Siemens Energy’s response illustrates the scale of investment required to close that gap: a €220 million expansion of its Nuremberg transformer plant, backed by €20 million in Bavarian state technology funding, aimed at supporting grid infrastructure including offshore wind connections and cross-border interconnection — with new capacity not expected online until 2028.
The consequence for storage developers is direct: a project can have fully secured battery-cell supply and still slip its commissioning date by years because the wider electrical infrastructure — the transformer, not the battery — cannot be delivered on time. Materials security is therefore becoming a system-level issue that extends well beyond the cell.
Geopolitics Is Now Part of the Commodity Market
Critical-mineral markets are increasingly shaped by industrial policy and geopolitics. Export controls, local-processing requirements, tariffs and resource nationalism can change supply conditions faster than new mines can respond. Cobalt is the clearest current example: the Democratic Republic of the Congo introduced export restrictions in 2025 and has since moved toward a quota system, a shift BloombergNEF directly linked to the year’s rise in battery metal prices.
For long-life BESS assets, this matters because procurement decisions made today can lock projects into supply-chain dependencies for fifteen years or more.
Europe’s Own Answer: The Critical Raw Materials Act — and Its Limits
Unlike the US loan-guarantee model, Europe’s principal policy response runs through the Critical Raw Materials Act (CRMA), in force since May 2024, which set formal 2030 benchmarks: 10% of EU consumption from domestic extraction, 40% from domestic processing, and 25% from recycling. Its Strategic Projects mechanism has already made two selection rounds — 47 projects designated in the EU (plus 13 in third countries) from the first round, and a second call that closed in January 2026 drawing a further 95 EU-based applications, of which 75 could support the battery value chain specifically, spanning lithium, nickel, cobalt, manganese and graphite.
One of the first-round projects to near completion illustrates what the mechanism looks like in practice. Finland’s Keliber lithium project — developed by Keliber Technology Oy, majority-owned by Sibanye-Stillwater — combines an integrated mine, concentrator and chemical refinery and has been designated a CRMA Strategic Project, with the European Investment Bank contributing €150 million toward it. Keliber chief executive Hannu Hautala told AFP the project matters for Europe’s effort to cut reliance on imports, saying it “develops and increases the independence from imports from, for example, Asian countries and Australia.” Ore from the mine is trucked to a nearby concentrator before onward refining into battery-grade lithium hydroxide — a genuine domestic mine-to-chemical pathway, and one of the clearest proof points so far that CRMA financing can convert a strategic designation into operating capacity rather than a project that stalls at the announcement stage.
It is worth being candid about the mechanism’s limits, because an EU-facing storage industry will be relying on it. Independent analysis from the Brussels-based think tank Bruegel and from ODI Europe has found the picture more mixed than the headline project count suggests: of the strategic projects with an expected start of production between 2025 and 2027, ODI’s review found three out of four either behind schedule or impossible to verify against public evidence, and 14 of the original 60 projects are not expected to contribute to the 2030 targets at all, since their production start dates fall between 2029 and 2031. The European Court of Auditors reportedly went further in 2026, describing the CRM framework as not yet a fully reliable policy instrument. For developers weighing European supply-chain diversification against continued reliance on Asian processing, the CRMA is a genuine and increasingly well-funded pathway — but not yet a guaranteed one.
Finance Is Becoming the Bottleneck — With a Caveat
Public and private capital are now moving in different directions on parts of this supply chain, and it is worth being precise about which claims hold up. The IEA’s Global Critical Minerals Outlook 2025 reported that growth in critical-mineral investment slowed sharply — down to around 5% in 2024, from 14% in 2023 — rather than reversing into outright decline; exploration spending plateaued over the same period. That is a deceleration story, not (yet) a contraction story, and developers should treat any claim of an outright year-on-year investment fall with caution unless it is traced to a specific, named report.
What is unambiguous is that public finance is scaling up in response to exactly this deceleration. The EU’s CRMA funding architecture, the US Department of Energy’s loan-guarantee programme for domestic critical-mineral processing, and Canada’s public-capital support for battery supply chains all reflect the same underlying logic: new mines and processing facilities require substantial upfront capital and long development periods, and private capital alone has not been moving fast enough to de-risk that gap.
The New Investment Opportunity: The Midstream
This creates a potentially attractive investment opportunity. The supply chain needs more capacity in lithium conversion, graphite purification, anode production, cathode materials, manganese processing, battery recycling — and, as the transformer bottleneck illustrates, in the grid-connection hardware that determines whether any of that storage capacity can actually be energised on schedule.
Canada, the United States, Australia and Europe are increasingly supporting such projects because governments recognise that resource ownership alone does not provide supply security. The objective is not necessarily complete national self-sufficiency. It is strategic diversification.
Alternative Chemistries and Recycling
Technology can also reduce material dependency. Sodium-ion batteries can reduce exposure to lithium in applications where energy density is less critical — CATL’s sodium-ion cell, capable of 15-minute charging, received certification for use in China in 2025 and is due to enter the market in 2026, according to BloombergNEF’s 2025 Battery Price Survey. Vanadium flow batteries offer a different model for long-duration storage, while zinc-based systems provide another pathway with a distinct raw-material profile.
These technologies are unlikely to displace lithium-ion entirely. Their strategic importance lies in providing alternatives. Recycling will become equally important over time: as today’s rapidly expanding battery fleet reaches end of life, recovered lithium, cobalt, nickel and copper can become a secondary source of supply, progressively reducing — though not eliminating in the near term — dependence on primary extraction.
What BESS Investors and Grid Planners Should Watch
For developers and investors, materials due diligence should extend beyond cell pricing to battery chemistry, country of manufacture, lithium and graphite exposure, cathode and anode supply, geopolitical dependencies, replacement-cell availability and recycling arrangements. The same scrutiny should be applied to transformers, inverters, cables and other grid infrastructure — with lead time, not just price, treated as a first-order procurement risk.
For transmission and distribution planners specifically, the transformer shortage argues for standardising specifications across a smaller number of transformer types to widen the pool of qualifying suppliers, securing framework agreements with more than one OEM rather than single-sourcing, and building spares inventory for critical voltage classes rather than ordering only against confirmed projects. The DOE’s own 2023 industry workshop found that a lack of consistent transformer specifications across utilities — over 80,000 distribution transformer varieties nationwide in the US case — was itself a contributing factor to extended production times, a lesson equally applicable to fragmented European procurement practices.
The cheapest battery at procurement is not necessarily the lowest-risk asset over its operating life — and increasingly, the battery may not be the constraining component at all.
From How Cheap to How Fast
The BESS industry is entering a new phase. The first stage was focused on reducing battery costs and scaling manufacturing. The next will be increasingly concerned with materials security, processing capacity, grid-connection hardware and supply-chain resilience across all three.
The challenge is not simply geological scarcity. It is the concentration of refining, chemical processing and equipment manufacturing in a limited number of jurisdictions and suppliers, combined with policy instruments — Europe’s CRMA included — that are still maturing faster on paper than in delivered capacity.
That creates both a risk and an opportunity. For governments, the priority is diversification, backed by realistic delivery timelines rather than headline project counts. For BESS developers, it is supply-chain due diligence that extends to transformers and switchgear, not just cells. For investors, the opportunity increasingly lies in the midstream: processing, battery materials, recycling, and the grid-equipment manufacturing capacity that determines whether storage projects can actually be energised on schedule.
The strategic question for the storage industry is how securely, and how quickly, it can build the entire system — materials, processing and grid hardware — that makes large-scale energy storage possible.
