Rising lithium prices in early 2026 are creating renewed cost uncertainty for manufacturers and developers of battery energy storage systems (BESS), according to industry participants speaking at the Energy Storage Summit Europe in London on February 25.
Spot prices for battery-grade lithium carbonate delivered into China, Japan and Korea climbed to around $20.00–22.50 per kg in late February, rising from roughly $17.00–19.00 per kg just days earlier after the Chinese New Year holiday period in East Asia. The rebound follows a market low of approximately $7.50–8.60 per kg in June 2025, highlighting the sharp volatility that has characterized lithium markets over the past year.
Despite the rapid price recovery, many BESS market participants say the sector is still at an early stage in developing strategies to manage exposure to lithium price swings. Over the past several years, relatively low lithium prices meant that raw material costs were not always a dominant factor in determining the overall cost of energy storage systems.
Competition among cell manufacturers keeps pressure on prices
Strong competition among battery cell manufacturers—particularly those seeking to expand market share in the rapidly growing energy storage sector—has continued to suppress battery pricing in recent years.
Industry participants note that this competitive environment makes it difficult for suppliers to adopt longer-term procurement strategies for lithium.
“If a manufacturer buys lithium far in advance and the market drops significantly, it could leave them with much higher costs than competitors purchasing on shorter timelines,” one BESS industry executive said during a panel discussion at the event.
As a result, some suppliers remain reluctant to commit to forward purchasing of lithium feedstock, preferring to buy material closer to the time of production.
Forward contracts viewed as risky in a volatile market
Several industry participants said forward purchasing agreements for lithium remain difficult to justify in the current market environment.
A supplier locking in raw material purchases months ahead of delivery risks being left with higher-cost inventory if prices fall quickly. Conversely, competitors sourcing lithium on a shorter timeframe could benefit from lower spot prices.
This dynamic has made it challenging for BESS suppliers to manage raw material exposure while maintaining competitive pricing in project tenders.
Stockpiling cells offers limited protection
Holding inventories of battery cells is also not considered an ideal strategy for managing price volatility.
Battery cells can begin to lose value within months as new technologies and larger-format designs enter the market. Some industry participants estimate that the effective commercial shelf life of certain cell products may be only three to six months before technological upgrades reduce their competitiveness.
Because of these constraints, many BESS framework agreements now include clauses that allow system costs to be adjusted if lithium prices rise beyond a specified threshold.
Procurement contracts increasingly transfer commodity risk
Developers and system integrators say that risk transfer is becoming an increasingly common feature of procurement agreements.
Cell suppliers may index portions of their pricing to lithium costs, shifting part of the commodity risk downstream to project developers. The structure of these agreements can vary widely depending on the scale of the project and the bargaining power of the parties involved.
In cases where developers have flexibility in choosing suppliers, they may resist contracts that place too much commodity risk on their side of the transaction.
Limited transparency within battery supply chains also complicates negotiations. Some developers say they do not always have visibility into the raw material prices their suppliers are paying for lithium and other battery metals.
Lithium’s influence on BESS costs still debated
Although lithium carbonate prices have risen sharply in recent months, industry participants say the overall impact on BESS system costs may be relatively moderate.
Lithium represents only a portion of the cathode material used in lithium-ion batteries, and the total cost of a storage system includes numerous additional components such as electronics, enclosures and balance-of-system equipment.
Some suppliers estimate that even a significant increase in lithium carbonate prices may translate into roughly 10–15% higher system costs, though the impact can vary depending on supply chains and contract structures.
Vertically integrated battery manufacturers with upstream access to lithium supply may also be better positioned to absorb price fluctuations than smaller or less integrated competitors.
New extraction technologies could reshape supply dynamics
Technology developers say that changes in lithium production methods could eventually help moderate price volatility.
BICHEM who work on Direct Lithium Extraction (DLE) technologies believes that these processes could allow lithium to be produced from brine resources more quickly than traditional evaporation ponds.
BICHEM, like all other DLE providers, has proven that the approach can extract lithium from brines more quickly and effectively than conventional evaporation processes.
According to BICHEM’s industrial experience, faster processing times and higher recovery rates could help bring new lithium resources into production more rapidly, potentially improving supply responsiveness during periods of strong demand.
BICHEM is also conducting tests for the application of DLE technology regarding enabling lithium production from previously underutilized resources such as geothermal brines or lower-concentration deposits, potentially diversifying global supply.
As more and more DLE projects are entering pilot and commercial stages, industry participants are keen to deploy this the technology to take a lead in lithium production to secure their dominate advantages in global critical mineral supply chain.
Hedging of lithium exposure remains in its infancy
Financial hedging of lithium prices remains relatively uncommon in the BESS sector.
Although lithium futures contracts have been introduced on several commodity exchanges in recent years, trading activity is still developing and many companies have yet to incorporate hedging strategies into their procurement practices.
One BESS systems manufacturer noted that the validity period for battery cell price offers has shortened significantly, sometimes to just two weeks, reflecting uncertainty around raw material prices.
Growing volatility in lithium and other battery metals such as copper and aluminum may eventually encourage wider adoption of hedging tools, market participants said.
Global energy storage demand expected to grow rapidly
Demand for battery energy storage systems continues to expand as countries integrate larger volumes of renewable energy into their power grids.
Industry projections suggest that global energy storage installations could grow by roughly 25% annually over the coming decade, potentially reaching around 800 GWh by 2030 and exceeding 1,600 GWh by 2035.
As deployment accelerates, both the stability of lithium supply and the ability of market participants to manage price volatility are expected to play an increasingly important role in shaping the economics of the energy storage industry.
