After years of unchallenged lithium-ion dominance, alternative battery chemistries are emerging with compelling value propositions just as US policy creates unprecedented incentives – and barriers – for storage deployment. For developers and utilities making technology decisions today, the choice extends beyond simple cost comparisons to encompass duration-specific revenue opportunities, supply chain resilience, safety profiles, and evolving policy requirements.
The IRA established a project finance framework that enables up to 70% cost reductions with increased incentives for domestic content, prevailing wages, and underserved communities.1 Meanwhile, reciprocal tariffs and Foreign Entity of Concern (FEOC) restrictions threaten to upend established procurement strategies. As developers face potential disqualification from ITC benefits for using certain foreign suppliers, some are turning to domestically sourced alternative chemistries, but with new options on the table, new trade-offs must be considered for project success.
In this edition of Battle of the BESS, we examine the technical and economic realities shaping battery chemistry decisions for utility-scale deployments.
The Technical Reality: No Universal Winner
While lithium-ion batteries dominate in US utility-scale deployments, capturing 99% of market share in 20242, different performance metrics vary across chemistries, creating distinct economic benefits for specific grid applications. Our experience at Stem managing over 800+ BESS assets has shown us that optimal technology selection depends on four key factors: duration requirements, cycling frequency, safety constraints, and revenue stacking opportunities.
Table 1: Technical Performance Comparison
| Category | Lithium-Ion | Alternative Chemistries |
| Optimal Duration |
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| Efficiency |
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| Cycles to End of Life |
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| Safety Profile |
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Note: Alternative chemistries include sodium-ion, vanadium flow, iron flow, zinc hybrid, and iron-air batteries.
Lithium-Ion’s Strengths: Revenue Stacking and Efficiency
The ability to participate in multiple revenue streams —known as revenue stacking—has become essential for battery storage economics. Lithium-ion’s high round-trip efficiency and rapid response times make it the dominant choice for frequency regulation and fast-response ancillary services markets.
LFP systems achieve 90-95% efficiency with sub-second response times, enabling them to capture premium pricing in markets that reward performance. This efficiency advantage becomes particularly valuable in applications requiring frequent cycling where energy losses compound over time. For 2-4 hour applications like peak shaving or short-term grid services, lithium-ion maintains clear economic advantages through this combination of mature procurement strategies and superior round-trip efficiency.
Lithium Ion’s Challenges: Fire Safety and Supply Chain Vulnerabilities
Despite its market dominance, lithium-ion faces two critical challenges that are driving interest in alternatives: safety concerns and supply chain vulnerabilities.
Fire Safety Concerns
Safety profiles are increasingly driving technology selection decisions following high-profile incidents. For example, the Moss Landing facility experienced three thermal runaway events between 2021 and 2025, resulting in months-long shutdowns and enhanced regulatory scrutiny.3 One of these instances necessitated the evacuation of over 2,000 residents and created concerns about air quality. These events highlight lithium-ion’s fundamental thermal runaway and fire risk, particularly in large-scale deployments.
Supply Chain Vulnerabilities
The December 2024 Chinese export restrictions on graphite sent shockwaves through the industry. With the US import-dependent for this critical anode material and China controlling 77% of global processing, project developers face unprecedented uncertainty.4 The compounding effects include:
- Section 301 tariffs: 25% on Chinese-origin batteries effective January 20265
- FEOC restrictions: Disqualification from ITC starting in 2026
- Domestic content penalty: Missing the 10% ITC bonus
- Supply chain premiums: US-manufactured cells command price premiums
Specifically, for domestic content calculations, the IRS states battery cells represent 52% of total project cost.6 Therefore, projects using imported cells cannot exceed 48% domestic content even with 100% US-manufactured balance of system—failing to meet the 50% threshold required for projects starting construction in 2026.
Sodium-Ion: The Emerging LFP Alternative
Sodium-ion batteries represent the most direct alternative to lithium-ion for short-duration applications, offering 2-4 hour duration capabilities similar to LFP systems while addressing key lithium-ion limitations.
Temperature Resilience
Temperature resilience has emerged as a critical differentiator following extreme weather events. CATL’s second-generation sodium-ion batteries maintain 90% capacity at -40°C, compared to lithium-ion’s significant degradation below -20°C.7 For northern climate deployments, this eliminates the need for expensive thermal management systems.
Supply Chain Advantages
The US has abundant domestic resources for sodium-ion raw materials, enabling potential domestic supply chains that could easily satisfy ITC domestic content requirements. For instance, Peak Energy, a Colorado-based startup, has established fully domestic manufacturing for their sodium-ion technology.
Current Development Stage
Sodium-ion currently has different performance trade-offs compared to LFP, but the technology has not been in development as long as lithium-ion systems. As the technology matures and production scales, sodium-ion capabilities are expected to improve, paving a path for this technology to be a direct substitute for LFP.
Long Duration Energy Storage Options
Beyond the 4-hour threshold where lithium-ion options start to dwindle, alternative chemistries fill the demand gap for extended discharge applications.
Zinc Hybrid: Medium to Long Duration Applications
EOS Energy has established US manufacturing for zinc hybrid batteries, representing one of the larger alternative chemistry manufacturing presences in the country. These systems target the 3-12 hour duration market, filling the gap between short duration lithium-ion and ultra long duration solutions.8
Iron Air: Ultra Long Duration
Form Energy’s Iron Air technology targets ultra long duration energy storage applications, typically defined as 12-24+ hours of discharge capability. These systems are specifically designed for up to 100 hour duration applications that would be prohibitively expensive with any lithium-ion configuration.9
Revenue Stacking Considerations
Alternative chemistries, despite lower efficiency, can capture value through different service combinations. Their higher cycling capability makes them well-suited for capacity market participation and multi-hour energy arbitrage. The optimal revenue stacking strategy ultimately depends on local market structures—lithium-ion dominates fast-response ancillary services requiring high efficiency, while alternative chemistries compete effectively in long-duration capacity and energy-shifting applications where cycle life and duration capabilities outweigh efficiency considerations.
Navigating Chemistry Crossroads
The utility-scale battery storage market stands at a critical juncture where technology selection extends far beyond simple cost comparisons. The convergence of policy incentives, supply chain pressures, and technological maturation creates both unprecedented opportunities and complex challenges for project developers and utilities.
While lithium-ion batteries will maintain plurality market share at least through 2030, alternative chemistries are transitioning from promising concepts to commercial deployments, each targeting specific weaknesses in lithium-ion’s value proposition.
Success in this evolving market requires sophisticated analysis that goes beyond headline costs to encompass degradation patterns, revenue stacking opportunities, supply chain resilience, and risk mitigation across multiple dimensions. The winners will be those who recognize that optimal technology selection varies by application, location, and time horizon—and who build portfolios that capture value across the full spectrum of grid service opportunities.
The chemistry crossroads facing the industry today will determine not just which technologies dominate, but fundamentally how electric grids achieve reliability, resilience, and decarbonization goals in an increasingly electrified economy. For utilities and developers making decisions today, the choice of battery chemistry has become as strategic as the decision to deploy storage itself.
References
- Utility Dive.
- Fortune Business Insights.
- Energy Storage News.
- S&P Global.
- Morgan Lewis.
- Morgan Lewis.
- CATL.
- EOS Energy.
- Form Energy.
At STEM, our hardware and technology-agnostic platform positions us to work with all battery chemistries as they achieve commercial viability. Our experience managing 1.5+ GWh of storage assets and evaluating numerous technologies provides unique insights into real-world performance across diverse applications. As independent advisors, we help utilities and developers navigate technology selection, perform rigorous due diligence, and optimize project economics across the full spectrum of available and emerging storage solutions.
To explore learn more about how we can support your storage projects, reach out to us at stem.com