The battery energy storage system market is growing rapidly, breezing past ongoing federal policy headwinds.
A report from Rystad Energy said energy storage installations increased from about 6 GW in 2023 to 10 GW in 2024, growing over 60% year-over-year. The growth is due partially to falling battery manufacturing costs, a trend that Rystad expects to continue over the next five to seven years. The group estimates installations will grow to 16 GW per year by early 2026.
“As energy demand rises in the US due to increased electrification, grid resilience will continue to be critical, with batteries playing a key role in meeting this need, along with both traditional and renewable energy sources,” said Artem Abramov, head of new energies, Rystad Energy.
Texas was the largest installer of energy storage, adding about 4 GW per annum in 2024, said the report. Looking ahead, Rystad said planned inventory is a strong indicator of actual capacity additions. Texas’ planned inventory for battery installations has increased from 5 GW to more than 7 GW over the last 12 months, suggesting further growth this year.
Outside of Texas, planned energy storage inventories are experiencing a boom. Led by Arizona, inventories grew from 3 GW in the second quarter of 2024 to 7 GW currently. The actual installation rate currently stands at about 3 GW, in-line with the year-ago planned inventory, said Rystad.
“While some construction delays are expected, there is no doubt that these emerging markets will drive most of the growth in the second half of this year and first half of next year, and even beyond,” said the report.
California
Batteries are playing an increased role during peak power demand periods in mature markets. During peak demand events, the batteries “extend” solar generation curves into evening hours. Over the past three months, batteries have met 13% of California Independent System Operator (CAISO) demand during battery discharge hours. The 90-day average peak hour contribution from batteries currently stands at 26%, adding 10 percentage points over the last 12 months.
Rystad noted that renewable energy sources, including solar, wind and hydropower, have increased their average annual grid contribution in CAISO from less than 30% in 2021 to more than 40% over the last 12 months. Renewable energy contributions are peaking in the spring, meeting more than 65% of daily demand, but winter dips in contributions remain low, contributing only 20% to 25% of demand. This has lessened CAISO’s dependency on energy imports, reducing from about 27% to 16% over the last four years.
As both solar and battery installed capacity grow in California, Rystad said it is important to consider what power system challenges are being met by batteries, and what challenges batteries cannot realistically help with.
“Whether it is theoretically possible to have all renewable plus BESS systems in CAISO and what kind of overbuild – and economic implications for project developers and end consumers – will be associated with it remains to be seen,” said Abramov.
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