US Battery Storage Market Accelerates Amid Falling Costs And Statewise Expansion

The battery energy storage market in the United States is growing quickly this year, continuing the strong momentum seen in 2024. This growth is supported by the steady fall in battery manufacturing costs. According to Rystad Energy, this trend is expected to continue for the next five to seven years as battery designs keep improving. Even though there are some policy concerns about possible changes to tax benefits for renewable energy, the grid-scale battery energy storage system, or BESS, the market has not been affected so far. Rystad Energy predicts that the yearly installation rate of BESS projects could reach around 16 gigawatts by early 2026.

Texas and Arizona are leading this growth, while the California market has leveled off after earlier expansion. In 2024, Texas overtook California as the largest BESS market in the country. Currently, both states are installing battery storage systems at a rate of about four gigawatts per year. However, unlike California, Texas has increased its BESS capacity from five gigawatts to more than seven gigawatts over the past year. This suggests that Texas will likely continue adding more storage capacity through 2025.

At the same time, other parts of the country are also seeing fast-paced growth in battery storage. Arizona is at the front of this expansion in emerging markets. The total BESS capacity across these newer markets has increased from three gigawatts in the second quarter of last year to seven gigawatts today. The actual installation rate in these regions is now around three gigawatts per year, which matches the level of available projects from a year ago. Although there may be some delays in construction, these newer markets are expected to be the main contributors to BESS’s growth through the end of this year and into the next.

In the more developed regions, battery systems are playing a bigger role in managing power demand. They are now widely used to extend solar energy use into the evening hours. In the past 90 days, battery systems provided about 13% of the California Independent System Operator’s power needs during discharge hours. This number is climbing, with batteries now often supplying more than 16% of electricity during these key hours. On average, battery systems are now contributing up to 30% during the most demanding periods. In fact, the average peak-hour contribution has risen to 26%, which is 10 percentage points higher than it was a year ago.

As for renewable energy, sources like solar, wind, and hydro have steadily increased their share of the power mix in California. The annual average share of renewables has risen from below 30% in 2021 to over 40% in the past year. During the spring, renewable power sometimes meets over 65% of daily electricity demand. However, this share falls during the winter, when renewable generation typically only covers 20% to 25% of the demand. Even with these seasonal changes, the increase in renewables has helped California reduce its dependence on electricity imports. Over the last four years, the share of imported energy has dropped from 27% to 16% of the state’s total electricity needs.