Data Center Energy Storage Market

Data Center Energy Storage Market Size

Global Data Center Energy Storage Market size was recorded at USD 1,390.0 million in 2023 which is estimated to be value USD 1,471.8 million in 2024 and reach USD 2,326.3 million by 2031, growing at a CAGR of 6.76% from 2024 to 2031.

Investment in energy storage solutions for data centers and growing adoption of lithium-ion batteries in data centers are augmenting market growth. In the scope of work, the report includes services offered by companies such as ABB, Delta Electronics, Inc., Eaton, General Electric, Huawei Technologies Co., Ltd., Legrand, Mitsubishi Electric Corporation, Saft, Schneider Electric, Vertiv Group Corp., and others.

The growing demand for renewable energy integration in data centers is highlighting the need for advanced energy storage solutions. Data centers are energy-intensive facilities that consume significant electricity for servers, cooling systems, and backup infrastructure.

Data centers are increasingly shifting toward renewable energy sources such as solar and wind in response to the growing emphasis on sustainability. However, these energy sources are intermittent and require reliable energy storage systems to ensure uninterrupted operations.

• For instance, in May 2024, Singapore invested USD 288.3 million in its National Quantum Strategy and launched a Green Data Centre Roadmap to promote sustainable digital growth. This roadmap supports AI and computing advancements, incorporating governance initiatives such as a framework for generative AI and a partnership with Rwanda for AI safety guidelines.

Advanced storage technologies such as lithium-ion batteries, flywheels, and even hydrogen fuel cells are essential to bridge the gap between energy generation and consumption, especially during peak hours or when renewable resources are scarce. Energy storage systems are vital for load balancing, improving efficiency, and reducing reliance on grid power.

With the increasing adoption of renewable energy, data centers require robust storage solutions to maintain operational stability and sustainability. This demand presents opportunities for energy storage providers to innovate and offer scalable, reliable systems that facilitate renewable integration, which is boosting data center energy storage market growth.

Data center energy storage refers to systems designed to store electrical energy for use in data centers to ensure operational continuity and efficiency, especially during power outages or fluctuating energy demand. These systems are critical for maintaining uptime and providing backup power in case of disruptions.

Common types of energy storage technologies in data centers include uninterruptible power supplies (UPS), lithium-ion batteries, lead-acid batteries, flywheels, and emerging technologies such as hydrogen fuel cells.

UPS systems, often paired with batteries, deliver instantaneous power to protect against outages. Advanced battery technologies, particularly lithium-ion, are increasingly preferred for their long cycle life and lower maintenance requirements. Flywheel energy storage systems are employed for their ability to provide rapid energy bursts with minimal wear.

End users include hyperscale data centers, cloud service providers, colocation facilities, and enterprise-level data centers. These users are adopting energy storage systems to manage energy costs, improve sustainability, and guarantee reliable uptime amid increasing data and energy demands.

Analyst’s Review

The leading players in the global market are focused on expanding their portfolios through innovative and sustainable technologies. These companies are investing heavily in research and development to offer energy storage solutions that meet the evolving needs of modern data centers, particularly regarding renewable energy integration.

With the rising emphasis on carbon-neutral operations, numerous key players are aligning their strategies to promote energy-efficient and eco-friendly storage systems. Lithium-ion batteries, fuel cells, and hybrid storage solutions are central to product development, addressing the demands for scalability and operational reliability.

• For instance, in October 2023, Saft, a subsidiary of TotalEnergies, delivered a battery energy storage system (BESS) to replace diesel generators at Microsoft’s Swedish data center. The system has been operational since June 2023 and supports Microsoft’s goal of achieving diesel-free data centers by 2030, following a collaboration with TotalEnergies initiated in March 2021.

In addition, strategic partnerships and collaborations with energy providers and technology firms are enabling these companies to tap into the growing renewable energy market, offering integrated storage solutions.

To maintain a competitive edge, key players operating in the data center energy storage market are focusing on geographic expansion in with significant hyperscale data center growth. Their growth imperatives include technological advancements, strategic collaborations, and meeting the increasing demand for sustainability in energy management.

Data Center Energy Storage Market Growth Factors

The expansion of the market is propelled by increased investments in energy storage solutions for data centers, which is crucial for infrastructure development. This investment is further fueled by the growing demand for reliable and sustainable energy. Data centers, essential for supporting digital activities globally, continually strive to ensure energy efficiency and reduce their carbon footprint.

The growing reliance on intermittent renewable energy sources, such as solar and wind has accelerated investments in energy storage technologies. These investments are directed toward systems that provide uninterrupted power supply, reduce dependency on the electrical grid, and help manage peak energy demands.

• For instance, in May 2024, Digital Edge partnered with Donghwa ES to develop a next-generation Hybrid Super Capacitor (HSC) energy storage system. This innovative system offers a sustainable alternative to traditional batteries, enhancing data center redundancy and supporting future AI and hyperscale workloads with reliable energy solutions.

Energy storage solutions, particularly lithium-ion batteries, are increasingly integrated to store excess renewable energy, ensuring uninterrupted data center operations during power disruptions. These investments are further facilitated by the need to meet regulatory requirements for energy efficiency and sustainability, thereby stimulating data center energy storage market growth.

The expansion of data centers continue necessitates investment in advanced energy storage technologies to ensure operational reliability and mitigate environmental concerns. The high initial investment costs required for advanced energy storage systems in data centers presents a significant challenge to the development of the market.

These systems, including sophisticated battery technologies such as lithium-ion, fuel cells, and flywheels, are essential for ensuring uninterrupted power supply and integrating renewable energy sources. However, the upfront capital required for installing these systems may be prohibitive for some data center operators, particularly those managing small to mid-sized facilities.

The costs include the purchase and installation of the storage systems, infrastructure upgrades, and ongoing maintenance. This challenge is further compounded by the rapid technological change, as operators may find it difficult for to justify large upfront investments when future innovations could offer more cost-effective solutions.

However, these high costs are often offset by long-term benefits, including enhanced operational efficiency, energy savings, and reduced reliance on the grid. Mitigation strategies include the adoption of modular and scalable energy storage systems for incremental investment, utilization of government incentives for sustainable technologies, and exploration of financing options that spread costs over time.

Data Center Energy Storage Market Trends

Advancements in AI-driven energy management systems are enhancing data centers’ optimization of energy storage utilization, which is influencing the data center energy storage market.

AI algorithms, combined with machine learning and predictive analytics, are enabling data centers to manage their energy consumption more efficiently by predicting demand patterns and optimizing energy usage in real time. These systems monitor energy storage unit performance and adjust energy distribution for optimal resource use.

• For instance, in June 2024, Western Digital introduced a six-stage AI Data Cycle framework to optimize storage for AI workloads at scale. This framework enables businesses to design advanced storage infrastructures that maximize AI investments, increase efficiency, and reduce total cost of ownership for continuous AI data generation and consumption.

They can forecast peak demand periods and seamlessly switch between stored energy and grid power to reduce costs and prevent outages. AI-driven energy management systems extend the lifespan of storage assets by preventing overuse and managing the charging and discharging cycles of batteries with precision.

As data centers increasing adopt renewable energy, AI’s role in balancing fluctuating supply and demand is becoming critical. This trend is improving operational efficiency and helping data centers meet sustainability goals by optimizing the use of clean energy resources.

Segmentation Analysis

The global market has been segmented on the basis of type, technology, end user, and geography.

By Type

Based on type, the market has been classified into tier 1, tier 2, tier 3, and tier 4. The tier 1 segment captured the largest data center energy storage market share of 43.66% in 2023, largely attributed to its prominence in handling large-scale data centers operated by global enterprises and hyperscale cloud providers. Tier 1 data centers feature advanced infrastructure, extensive energy demands, and cutting-edge energy storage solutions to maintain high uptime and reliability.

Major technology firms are investing heavily in energy-efficient solutions, including battery storage and backup systems, to ensure uninterrupted operations during power outages or grid instability. Tier 1 data centers must implement advanced energy management strategies to handle the high volumes of data they process.

Furthermore, the trend toward sustainability has led tier 1 data centers to prioritize renewable energy integration, which necessitates significant investments in energy storage systems. Their superior scale, technological edge, and critical operational requirements have contributed to the growth of the segment.

By Technology

Based on technology, the market has been divided into battery energy storage, flywheel energy storage, fuel cell energy storage, thermal energy storage, and others. The battery energy storage segment is poised to record a staggering CAGR of 8.27% through the forecast period due to the increasing demand for reliable, efficient, and scalable energy storage solutions in data centers.

As data centers increasingly rely on renewable energy sources, batteries, particularly lithium-ion technology, are crucial for storing excess energy for future use and ensuring continuous operations during grid outages. The growing adoption of cloud services, artificial intelligence (AI), and big data is significantly increasing energy demands, prompting data centers to invest in energy storage technologies that offer flexibility and cost savings.

Advancements in battery technology, characterized by improved cycle life, enhanced energy density, and lower costs, are fostering the adoption of these systems across both small and large data centers. Additionally, regulatory pressure to reduce carbon emissions is promoting the deployment of battery storage as a key component of green energy strategies in data centers.

By End User

Based on end user, the market has been segmented into IT & telecommunications, BFSI, healthcare, government, and others. The IT & telecommunications segment garnered the highest revenue of USD 512.1 million in 2023, mainly propelled by the rising demand for data-driven services, cloud computing, and the rapid expansion of 5G networks. These industries require large-scale data centers to manage and process massive amounts of data, which in turn increases the need for robust energy storage solutions.

The telecommunications industry’s digital transformation is leading to increased demand for reliable and uninterrupted power supply. Energy storage systems play a critical role in ensuring that these data centers maintain operational continuity and meet the high-performance demands of their customers. Additionally, the rise in remote work setups, video conferencing, and mobile data usage necessitates IT and telecom companies to enhance their data center capacity.

The integration of renewable energy sources, coupled with investments in energy storage technologies, has further supported the expansion of the IT & telecommunications segment as they strive to enhance efficiency and reduce operational costs.

Data Center Energy Storage Market Regional Analysis

Based on region, the global market has been segmented into North America, Europe, Asia-Pacific, MEA, and Latin America.

North America data center energy storage market accounted for a notable share of 36.35% and was valued at USD 505.3 million in 2023. This dominance is attributed to the region's concentration of hyperscale data centers, especially in the United States, home to major technology and cloud service providers.

Increased digitalization, growth in cloud services, and the rise of artificial intelligence (AI) and big data applications have led to surging energy demands in data centers. North American data centers are at the forefront of adopting renewable energy sources such as wind and solar, necessitating advanced energy storage solutions to maintain energy efficiency and operational continuity.

The region's strong regulatory framework aimed at reducing carbon emissions has further prompted data center operators to invest in sustainable energy storage systems, including lithium-ion batteries and other innovative technologies. Additionally, the demand for edge computing and 5G network expansion has contributed to the steady growth of the North America market.

Asia-Pacific data center energy storage market is projected to grow at the highest CAGR of 7.34% in the forthcoming years. This growth is majorly propelled by rapid digital transformation and the expansion of cloud computing and IT infrastructure across key economies such as China, India, and Southeast Asian countries.

The region's growing internet penetration, mobile connectivity, and the rise of smart city initiatives are increasing the demand for data centers and highlighting the need for energy storage solutions. Several governments in the region are investing heavily in renewable energy projects and prompting data center operators to adopt sustainable practices, which is further fueling the demand for energy storage technologies.

• For instance, in July 2024, Siemens inaugurated a new Center of Competence for Data Centers in Chennai, India. This facility serves as a regional innovation hub for Asia Pacific, uniting over 200 professionals to collaborate with partners and customers on advanced data center solutions and designs.

The adoption of advanced energy storage solutions, including lithium-ion batteries and renewable energy integration, is expected to rise as data centers aim to improve energy efficiency and reduce operational costs. Additionally, the proliferation of 5G networks and edge computing infrastructure is creating new opportunities for energy storage providers to manage growing data traffic and ensure reliable power for the region's rapidly expanding data centers.

Competitive Landscape

The global data center energy storage market report provides valuable insights, highlighting the fragmented nature of the industry. Prominent players are focusing on several key business strategies, such as partnerships, mergers and acquisitions, product innovations, and joint ventures, to expand their product portfolio and increase their market shares across different regions.

Companies are implementing impactful strategic initiatives, such as expansion of services, investments in research and development (R&D), establishment of new service delivery centers, and optimization of their service delivery processes, which are likely to create new opportunities for market growth.

List of Key Companies in Data Center Energy Storage Market

• ABB
• Delta Electronics, Inc.
• Eaton
• General Electric
• Huawei Technologies Co., Ltd.
• Legrand
• Mitsubishi Electric Corporation
• Saft
• Schneider Electric
• Vertiv Group Corp.

Key Industry Developments

• May 2024 (Launch): ABB launched nickel-zinc (NiZn) batteries for its MegaFlex UPS solutions, targeting data centers and critical power applications. Supplied by ZincFive, these batteries provide a safe, resilient, and sustainable alternative to traditional chemistries, enhancing the performance and sustainability of energy storage in high-demand environments.

The global data center energy storage market has been segmented:

By Type

• Tier 1
• Tier 2
• Tier 3
• Tier 4

By Technology

• Battery Energy Storage
• Flywheel Energy Storage
• Fuel Cell Energy Storage
• Thermal Energy Storage
• Others

By End User

• IT & Telecommunications
• BFSI
• Healthcare
• Government
• Others

By Region

• North America
  • U.S.
  • Canada
  • Mexico
• Europe
• • France
  • UK
  • Spain
  • Germany
  • Italy
  • Russia
  • Rest of Europe
• Asia-Pacific
  • China
  • Japan
  • India
  • South Korea
  • Rest of Asia-Pacific
• Middle East & Africa
  • GCC
  • North Africa
  • South Africa
  • Rest of Middle East & Africa
• Latin America
  • Brazil
  • Argentina
  • Rest of Latin America