The energy transition is accelerating, and battery storage is at the center of the shift. With more solar and wind energy on national grids, storing power is key. The world needs to save energy during peak production and release it when demand is high. Lithium iron phosphate (LFP) batteries are at the forefront: they are cheaper and more reliable than older battery types.
According to UBS, total global storage capacity needs to grow eightfold by 2030 and 34 times by 2050 to keep up with renewable energy expansion. Notably, energy storage growth now outpaces electric vehicle (EV) sales.
In 2024, battery storage demand jumped 85% from the previous year. Most of the new installations came from utility-scale projects, as reported by the International Energy Agency (IEA). By 2030, energy storage is expected to make up about 20% of the total battery market. And this means LFP batteries are becoming essential.
The Rise of LFP Batteries
LFP batteries are less expensive and do not rely on nickel or cobalt, two metals traditionally used in battery chemistries. In the last 18 months, LFP battery costs have fallen by almost 50%. This makes them very appealing for large energy storage projects.
Fidra Energy’s Thorpe Marsh project in the UK will install LFP batteries on a 55-acre site. This facility will become Europe’s largest energy storage facility. These batteries are not only cheaper but are now lasting longer, with improved lifespans of up to 20 years.
LFPs are also being embraced by Chinese EV makers like BYD, which surpassed Tesla in 2024 as the world’s largest EV seller. Their lower cost and safety profile make them ideal for grid storage and increasingly popular for EV applications.
- According to the IEA, LFP batteries now make up nearly 50% of the global EV battery market, up from under 10% in 2020.
In a separate forecast by energy transition consultancy Rho Motion, the battery energy storage projects will grow tremendously in 2030. As such, the rise of LFP negatively impacts other metals, especially nickel and cobalt.
Nickel and Cobalt Losing Ground
For years, nickel and cobalt were seen as critical for high-performance batteries. But the recent shift to LFPs has changed that. CRU (Commodity Research Unit) reports that nickel intensity in battery demand fell by almost one-third from 2020 to 2024. Cobalt intensity dropped even more, by two-thirds.
The change is already impacting markets. Benchmark nickel prices have halved over the past three years, and cobalt prices have fallen by 60%. Much of the oversupply comes from producers scaling up in response to older forecasts of sustained demand from the EV sector.
Environmental and ethical concerns are also pushing the shift. Nickel mining, especially in Indonesia, carries a high carbon footprint. Cobalt mining in the Democratic Republic of Congo raises serious concerns. It is linked to child labor and human rights abuses. This issue worries both companies and consumers.
The IEA says that switching to LFP chemistries has cut cobalt demand forecasts by over 10% compared to previous estimates.
Lithium Gains Importance — But Faces Risk
While demand for nickel and cobalt wanes, lithium remains critical. Even though lithium prices have dropped another 20% this year due to oversupply, experts see growing long-term demand due to energy storage.
Iola Hughes from Rho Motion said that stationary storage is now a bigger part of lithium demand. This is happening, especially as EV sales slow down. Companies like Norway’s Morrow Batteries, which plans to manufacture one gigawatt-hour of battery cells annually, are preparing for this shift.
According to the IEA, lithium demand is expected to grow fivefold by 2040 under its Stated Policies Scenario (STEPS). Graphite and nickel demand are projected to double, while cobalt and rare earth elements are forecast to grow by 50–60%.
Lithium Demand and Mining Requirements 2040
However, lithium mining also faces scrutiny. Environmental and indigenous rights concerns in top-producing countries like Chile, Argentina, and China could affect supply and project timelines.
The IEA warns that global supplies of copper and lithium could be 30% and 40% lower by 2035. This is despite many new mining announcements. And so, more projects need to be developed and funded to avoid this shortfall.
China’s Lead and Global Challenges
China currently dominates the global battery supply chain. More than 90% of U.S. energy storage batteries come from China. Companies like Sungrow Power Supply supply batteries for key projects in Europe, such as Fidra’s Thorpe Marsh.
The IEA report confirms that China holds dominance across both LFP and nickel-based battery supply chains, from raw material mining to battery manufacturing. It will continue to do so until 2035. This reinforces global reliance on Chinese exports.
While the U.S. and Europe are trying to localize battery production, challenges remain. U.S. President Donald Trump’s administration has imposed a 41% tariff on Chinese battery imports during a 90-day trade truce. This has led to uncertainty, which may slow short-term growth in U.S. energy storage deployment.
European leaders are also concerned about dependency on Chinese battery technologies. However, industry experts like Fidra CEO Chris Elder say that working with China is often necessary to meet net-zero targets quickly and affordably.
A Metal Market in Transition
While LFP batteries dominate for now, new technologies are emerging. Sodium-ion batteries, which do not require lithium, nickel, or cobalt, are gaining attention. These batteries use common minerals like sodium and manganese. This helps create stronger and more diverse supply chains, as noted by the IEA.
Still, the global pivot toward LFP batteries and energy storage is reshaping energy policy and investment. Governments worldwide are recognizing the critical role of storage in meeting clean energy targets.
The IEA’s Global Critical Minerals Outlook 2025 says that demand for lithium, copper, and rare earth elements will keep increasing. This rise is due to their importance in clean technologies.
Investors are also shifting strategies. As EV demand softens, companies like LG Energy Solution are changing U.S. factories. They are now making LFP batteries for storage. Meanwhile, Morrow Batteries is expanding production in Europe, signaling that the energy storage sector is becoming a major force on its own.
National grids are also getting smarter. Energy storage helps stabilize the electricity supply. It reduces blackout risks, like the recent one in Spain. With energy storage increasingly tied to grid resilience, its value is no longer just economic but strategic.
The global shift to energy storage, led by the rapid adoption of LFP batteries, is transforming the battery metals landscape. Lithium, despite price volatility, remains central, with demand projected to grow fivefold by 2040. As new technologies evolve and markets mature, those who stay ahead of these shifts will help shape the future of global energy.
- FURTHER READING: U.S. Battery Storage Hits a New Record Growth in 2024
The post The Battery Shift: How Energy Storage Is Reshaping the Metals Market with LFPs Taking Charge appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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