Industry Overview of Liquid Air Energy Storage (LAES)
Liquid Air Energy Storage (LAES), also known as cryogenic energy storage (CES), is a long-duration energy storage technology that utilizes air as the storage medium. The process involves cooling ambient air to cryogenic temperatures (approximately -196°C) to turn it into a liquid, which is then stored in insulated low-pressure tanks. When electricity is needed, the liquid air is drawn from the tanks, pumped to high pressure, heated, and expanded. This high-pressure gas drives a turbine to generate electricity.
LAES stands out in the energy transition landscape as a "locatable" solution that does not rely on specific geological features (unlike Pumped Hydro or Compressed Air Energy Storage in salt caverns). It uses proven components from the industrial gas and power sectors, such as compressors, heat exchangers, and turbines, which mitigates technical risk and leverages existing supply chains. Crucially, LAES offers a lifespan of 30 to 40 years without the degradation issues associated with chemical batteries.
As the global energy mix shifts toward intermittent renewable sources like wind and solar, the need for long-duration storage—capable of providing power for 6 to 24 hours or more—has become critical. LAES is increasingly viewed as a central pillar for grid stability, providing synchronized inertia and reactive power, which are vital for maintaining grid frequency as traditional fossil-fuel plants are decommissioned.
Market Scale and Growth Projections
The global Liquid Air Energy Storage (LAES) market is moving from the pilot and demonstration phase into large-scale commercial deployment. By 2026, the market size is estimated to reach between 0.8 billion USD and 1.5 billion USD. This range reflects the high capital expenditure (CAPEX) associated with initial large-scale projects and the long lead times for infrastructure development.
Looking toward the end of the decade, the market is expected to experience accelerated growth as more projects reach Financial Investment Decision (FID) and regulatory frameworks for long-duration storage mature. From 2026 to 2031, the Compound Annual Growth Rate (CAGR) is projected to fall within the range of 6.0% to 8.0%. The growth trajectory is heavily influenced by government decarbonization mandates, the rising cost of carbon, and the technical necessity of stabilizing grids with high renewable penetration.
Analysis by Application
The deployment of LAES is categorized into three primary functional areas, each addressing specific challenges in the modern power grid.
• Renewables Integration: This is the primary driver of LAES adoption. Unlike lithium-ion batteries, which are optimized for short-duration (1-4 hours) storage, LAES can store vast amounts of excess wind or solar energy produced during peak generation times and release it during extended periods of low generation. This reduces "curtailment"—the forced reduction of renewable output when supply exceeds demand—thereby maximizing the return on investment for renewable assets.
• Network Reinforcement Deferral: Transmission and distribution networks often face congestion as demand grows or as new renewable plants are added in remote areas. Instead of building expensive new power lines or transformers, grid operators can deploy LAES systems at strategic points in the network. By absorbing excess power locally and releasing it when the lines are less congested, LAES allows operators to defer or even eliminate the need for costly physical grid upgrades.
• Energy Shifting: This involves "arbitrage"—buying electricity when prices are low (or negative) and selling it during peak price periods. LAES is particularly well-suited for this because its marginal cost of adding storage capacity (more tanks) is lower than the marginal cost of adding capacity in battery systems. This makes it an economically viable tool for large-scale bulk energy shifting on a daily or weekly cycle.
Major Market Developments and Projects
The LAES landscape has recently been shaped by landmark project announcements and strategic collaborations that signal the technology's readiness for global scaling.
• Highview Power and the Hunterston Project: In October 2024, Highview Power announced the development of the Hunterston project in Ayrshire, Scotland. Set to be the largest liquid air energy facility in the world, this plant is strategically located at the site of the former Hunterston power station near West Kilbride. Once operational, the facility will deliver five times Scotland’s current operational battery storage capacity. Its strategic placement in the grid transmission network is specifically designed to maximize the utilization of Scottish-produced renewable electricity, particularly from offshore wind.
• Sumitomo SHI FW (SFW) and Siemens Energy Collaboration: In July 2024, Sumitomo SHI FW and Siemens Energy signed a Memorandum of Understanding (MoU) to collaborate on the development of LAES solutions for the global market. This partnership combines SFW’s expertise in cryogenic storage technology and project execution with Siemens Energy’s world-class turbomachinery and power generation equipment. Such collaborations are essential for reducing the costs of LAES through standardized designs and integrated supply chains.
• Contextual Competition and Synergy: The broader storage market is also seeing massive activity in complementary technologies. For instance, in January 2025, Statera acquired a 1360 MWh battery project in north-west England. While large battery projects like this handle short-term frequency response, LAES projects like Hunterston are intended to handle the longer-duration "heavy lifting" of the grid, demonstrating a bifurcated storage market where multiple technologies coexist.
Regional Market Dynamics and Trends
The adoption of LAES is highly regionalized, depending on the maturity of renewable energy policies and the physical constraints of local power grids.
• Europe: This region is the global leader in LAES development, with an estimated market share of 40% to 50%. The United Kingdom, and specifically Scotland, has emerged as the primary hub due to its aggressive offshore wind targets and the technical need for long-duration storage to manage "wind-heavy" grid profiles. The UK government’s support for Long-Duration Energy Storage (LDES) through "cap and floor" mechanisms provides the revenue certainty required for large-scale LAES investments.
• Asia-Pacific: The APAC region holds an estimated share of 25% to 35%. Japan and Australia are the key markets. Japan’s interest is driven by the need for grid resilience and the involvement of domestic industrial giants like Sumitomo Heavy Industries. In Australia, the decommissioning of coal plants and the rapid rise of solar and wind in the National Electricity Market (NEM) create a significant opening for locatable storage technologies like LAES.
• North America: This region accounts for approximately 15% to 22% of the market. While historically focused on short-duration batteries, states like California and New York are implementing mandates for long-duration storage. The presence of major industrial gas companies provides a strong foundation for the mechanical components required by LAES systems.
• Middle East & Africa (MEA): The MEA region (5% to 8% share) is exploring LAES to complement massive solar projects in desert environments. The ability of LAES to utilize "waste heat" from industrial processes or solar thermal plants to improve its efficiency makes it an attractive option for integrated energy parks in the GCC countries.
Value Chain and Industry Structure
The LAES value chain is built upon the convergence of the industrial gas sector and the power generation industry.
• Upstream (Component Manufacturers): This segment includes the production of high-capacity compressors (to liquefy air), cryogenic heat exchangers, and insulated storage tanks. Companies like MAN Energy Solutions are critical here, providing the specialized turbomachinery required to move air through the different thermodynamic phases of the LAES cycle.
• Midstream (System Integrators and Technology Providers): These are the companies that design the overall system architecture and manage the complex thermal integration. Highview Power and Sumitomo SHI FW are leaders in this segment. This stage involves the "secret sauce" of LAES—the ability to capture and store the heat generated during compression and the cold generated during expansion to improve round-trip efficiency.
• Downstream (Developers and Grid Operators): This involves the firms that own and operate the facilities, such as independent power producers (IPPs) and national grid utilities. These players are responsible for integrating the LAES plant into the local power market and managing the bidding strategies for energy shifting and grid services.
• EPC (Engineering, Procurement, and Construction): Given the scale of LAES facilities, specialized EPC firms with experience in large-scale cryogenic or power plant projects are essential for project delivery.
Competitive Landscape: Key Market Players
The LAES market is characterized by a high degree of technical specialization and strategic partnerships.
• Highview Power: Highview is widely considered the pioneer of commercial LAES. Their "CRYOBattery" technology has moved from pilot stages to multi-hundred-megawatt projects. The Hunterston project in Scotland solidifies their position as the market leader in project development and system integration.
• Sumitomo Heavy Industries (SHI): Through its subsidiary Sumitomo SHI FW, the company has become a major technology provider. By leveraging its global manufacturing footprint and its partnership with Siemens Energy, SHI is positioned to scale LAES technology across the Asian and European markets. Their focus is on high-efficiency, standardized LAES blocks that can be easily deployed in industrial settings.
• MAN Energy Solutions: A key hardware provider, MAN specializes in the compressors and turbines that form the mechanical core of an LAES system. Their expertise in thermal management and large-scale turbomachinery makes them an essential partner for technology integrators. MAN is also exploring the integration of LAES with other thermal storage solutions.
Market Opportunities
• Industrial Decarbonization and Waste Heat Recovery: One of the biggest opportunities for LAES is its ability to integrate with industrial processes. By utilizing waste heat from nearby factories or power plants during the discharge phase, the round-trip efficiency of an LAES system can be significantly improved, sometimes reaching over 70%.
• Repurposing Fossil Fuel Infrastructure: As coal and gas plants are retired, LAES offers a way to reuse existing grid connections, cooling water systems, and even some turbomachinery. The Hunterston project is a prime example of repurposing a former power station site, which significantly reduces the cost and complexity of grid interconnection.
• Long-Duration Storage Policy Support: Governments are increasingly recognizing that lithium-ion batteries alone cannot solve the seasonal or multi-day storage challenge. New market mechanisms, such as LDES-specific auctions and capacity payments, are creating a bankable environment for LAES developers.
• Hybridization with BESS: There is a growing opportunity to co-locate LAES with Battery Energy Storage Systems (BESS). In such a hybrid setup, the batteries handle fast-response frequency services, while the LAES handles the bulk energy shifting, providing a comprehensive "virtual power plant" solution.
Market Challenges
• Round-Trip Efficiency (RTE): The primary technical challenge for LAES is its round-trip efficiency, which is typically lower (50%-60% in standalone mode) than that of lithium-ion batteries (85%-90%). Improving RTE through better thermal integration and high-efficiency components is a major focus for R&D.
• High Initial CAPEX: LAES plants are massive infrastructure projects that require significant upfront investment. While the "Levelized Cost of Storage" (LCOS) is competitive over 30 years, the high initial cost can make project financing difficult without government guarantees or long-term contracts.
• Complexity of Thermal Management: Managing the extreme temperature gradients between liquid air and stored heat requires advanced materials and sophisticated control systems. Any inefficiency in the heat exchange process significantly impacts the overall performance of the plant.
• Competition from Other LDES Technologies: LAES competes with other emerging long-duration technologies, such as flow batteries, iron-air batteries, and advanced compressed air storage. Each of these technologies has different strengths, and the competition for project sites and government funding is intense.