US battery energy storage market soars despite federal policy shifts

The US battery energy storage (BESS) market is booming across the country this year, coming off an already impressive growth streak in 2024. The rapid clip of expansion is partially due to falling battery manufacturing costs, with Rystad Energy predicting this trend to continue over the next five to seven years amid ongoing design improvements. While renewable energy investment faces policy headwinds as legislators weigh rolling back tax incentives for low-carbon energies, the grid-scale BESS market remains unscathed, for now. Rystad Energy estimates that this growth will continue, predicting an increased installation rate of approximately 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. The US grid-scale BESS market delivered a very healthy growth of around 60% in 2024, rising from six gigawatts (GW) of capacity added in 2023 to 10 GW of installations. Planned inventory is a very strong leading indicator of actual capacity additions and we believe this rate of growth will create increased annual battery demand for grid-scale BESS

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States that are witnessing the highest levels of BESS market growth are Texas and Arizona, with the California market stabilizing last year. Texas became the largest US BESS market in 2024 and currently exhibits an installation rate of around four GW per annum – similar to California. Contrary to California, the BESS inventory in Texas has increased from five GW to more than seven GW in the last 12 months, pointing to a likely further increase in installations this year.

Notwithstanding the growth in Texas, it is the rest of the country that is currently experiencing a BESS boom. Led by Arizona, the BESS inventory across all emerging US markets grew from three GW in the second quarter of last year to seven GW currently. The actual installation rate currently stands at around three GW – perfectly in line with the inventory level 12 months ago. 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.

In the most mature markets, batteries play an increasingly important role during peak power demand periods as they ‘extend’ solar generation curves into evening hours. In the last 90 days, batteries have satisfied 13% of the power demand of the California Independent System Operator (CAISO) during battery discharge hours.  Although the trend is new, the days of batteries delivering more than 16% of electricity during discharge hours are becoming increasingly common. While the average contribution during all discharge hours stands at around 13%, the typical peak contribution during discharge hours is already close to 30%. The 90-day average peak hour contribution currently stands at 26%, adding 10 percentage points over the last 12 months.

Looking at the share of CAISO power demand satisfied by renewables – mainly solar, wind and hydro – we observed that the annual average increased from less than 30% in 2021 to more than 40% in the last 12 months. While the peak of renewable contribution in springtime is growing each year – renewables met more than 65% of daily demand on some days this year, for instance – winter dips remain similar, with renewables delivering only 20% to 25% of demand. As a result, renewables integration has to date only been able to reduce CAISO’s dependency on energy imports, which have declined from around 27% to about 16% of system demand in the last four years.

As both BESS and solar PV installed capacity continue to grow in California, it is important to remember two things in particular: which power system challenges are being addressed by batteries, and what batteries cannot really 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

Contacts 

Artem Abramov
Head of New Energies
Phone: +47 24 00 42 00
artem.abramov@rystadenergy.com

Katie Keenan
Senior Media Relations Manager 
Phone: +1 713 301 9300
katie.keenan@rystadenergy.com

About Rystad Energy 
Rystad Energy is an independent energy research and business intelligence company providing data, tools, analytics and consultancy services to the global energy industry. Our products and services cover energy fundamentals and the global and regional upstream, oilfield services and renewable energy industries, tailored to analysts, managers and executives alike.

Rystad Energy’s headquarters are located in Oslo, Norway with offices in London, New York, Houston, Aberdeen, Stavanger, Rio de Janeiro, Singapore, Bangalore, Tokyo, Sydney and Dubai.