The only "bridge" option for America's power shortage! UBS: Energy storage demand is equivalent to a second "electric vehicle," lithium prices bid farewell to the bear market.

The key driving force in the lithium market is undergoing a fundamental shift—from supply-side concerns to demand-side optimism. According to UBS, an underestimated "new electric vehicle" market is emerging, with explosive growth in energy storage demand driving lithium prices out of a bear market, and becoming a critical "bridge" solution for addressing the U.S. power supply gap.

On November 11, according to news from Chase the Wind Trading Desk, UBS stated in its latest report that Battery Energy Storage Systems (BESS, hereafter referred to as "energy storage") are becoming the "second growth engine" for lithium demand, with its importance rivaling that of electric vehicles.

UBS forecasts that by 2030, BESS demand will account for 22% to 26% of total battery demand, its significance rising from a "marginal variable" to a "core variable." Behind this demand surge is the power supply gap brought by global energy structure transformation—annual growth in U.S. electricity demand has reached 3%, while the construction cycle for new power facilities is as long as 7 to 10 years, making energy storage systems the only realistic option to bridge the gap.

The report also points out that more aggressive forecasts show CATL expects that demand for energy storage by 2030 will be double UBS's prediction. This demand shock, compounded by supply-side disruptions, could rapidly turn UBS's forecast of only a 55,000-tonne surplus lithium market in 2026 into a shortage. UBS predicts that lithium prices have bottomed out and will start a steady upward trend.

Strong expectations for large-scale battery energy storage demand are significantly improving market sentiment. Lithium carbonate futures have continued to rally recently, rising 5% on Monday, with spot prices at their highest since August of last year. Citibank stated in a November 9 report that the recent momentum in the lithium market is primarily driven by strong demand, not supply disruptions.

Energy Storage: An Underestimated "New Electric Vehicle" Market

The report points out that Battery Energy Storage Systems (BESS) have become an important and growing driver of lithium demand.

UBS forecasts that global energy storage demand will grow from 396 GWh in 2026 to 873 GWh in 2030, which means a compound annual growth rate (CAGR) of 24% starting from 2025.

By then, energy storage demand will account for 22%-26% of total global battery demand.

The report says that when converting this to upstream lithium resource demand, and accounting for lithium usage, chemical composition, losses and inventory cycles, UBS estimates that energy storage will bring 360,000 tonnes of lithium carbonate equivalent (LCE) demand in 2026, soaring to 680,000 tonnes LCE by 2030.

From an incremental perspective, in coming years energy storage will contribute about 90,000 tonnes LCE of new annual demand, compared with 170,000 tonnes LCE annual incremental demand for electric vehicles.

UBS says this clearly shows that energy storage is becoming a new source of demand with a size close to half of electric vehicles.

Citibank’s analysis is even more aggressive, predicting that total battery demand in 2026 will grow 31% year-on-year, with energy storage system demand rising 45%, far outpacing electric vehicles’ 26%.

America's Power Gap: Energy Storage Becomes the Only "Bridge" Option

UBS states that the explosion in energy storage demand is not groundless, and is driven by three key macro factors:

Global power demand is growing beyond expectations: For example, in the U.S., annual electricity demand growth is now about 3%, far higher than the previous forecast of 1.8%. This is mainly driven by power-hungry sectors such as AI and data centers.Slow construction of new generation capacity: Building new power facilities typically takes 4 to 6 years. Specifically, new gas turbine power plants will not be delivered until 2031, and the earliest new nuclear plants will go online is 2035.Tech giants locking in clean energy: Large tech companies, led by Meta and Microsoft, are actively investing in and securing electricity supply to meet their fast-growing power needs (typically with clean energy targets).

With new generation capacity unable to keep up immediately, UBS clearly points out that Battery Energy Storage Systems (BESS) will become the key "bridge" solution for the U.S. grid to balance supply, supplement renewables, and fill power supply gaps in the next 7 to 10 years.

More Optimistic Forecast: CATL Predicts Demand at Twice UBS Estimate

It is worth noting that UBS’s forecast isn’t the most aggressive in the industry. The report specifically mentions even more optimistic outlooks.

For example, industry leader CATL forecasts that by 2030, lithium demand in the energy storage sector alone will reach 1.4 million tonnes LCE, nearly twice UBS’s estimate of 680,000 tonnes LCE. This suggests the potential explosive power of the energy storage market may greatly exceed current expectations.

While the demand side is showing astonishing growth, supply-side disturbances remain. However, UBS believes that compared to these supply uncertainties, the nearly 100% year-on-year growth in energy storage demand will have a greater and more lasting impact on the lithium market balance.

According to UBS’s model, in 2026 the global lithium market will have only a tiny surplus of 55,000 tonnes LCE, which is nearly negligible in a market with annual demand of 1.8 million tonnes. With inventory decline, such a massive demand shock will likely trigger a large-scale restocking cycle.

Positive Price Outlook but Stock Prices Have "Run Ahead"

Based on its analysis of supply and demand fundamentals, UBS remains optimistic about lithium prices.

The report forecasts that the price of spodumene concentrate will rise by more than 20% by mid-2026, with average prices reaching $1,100/ton in 2026, $1,150/ton in 2027, and $1,350/ton in 2028. Its long-term equilibrium price will remain at $1,200/ton.

UBS notes that, simply put, the structural explosive growth of energy storage demand is reshaping the fundamentals of the lithium industry, with the market supply-demand balance tipping toward tighter supply. This means the bear cycle in lithium prices is ending, and a robust, energy storage-driven uptrend is opening up.

However, the most crucial point is that UBS, via its valuation model, finds that the current stock prices of major Australian listed lithium mining companies have already reflected lithium concentrate prices rebounding to between $1,150 and $1,300. This means although industry fundamentals and commodity prices are improving, the capital markets appear to have "run ahead".

Meanwhile, mid-term futures analyst Zhang Weixin also warns that the current rapid price surge carries a risk of correction should market sentiment reverse.

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