Despite challenges like tariffs and supply chain interconnection issues, the U.S. energy storage market continues to experience unprecedented growth.


Growth Trends and Future Projections

The U.S. energy storage market is expected to see another record breaking year, with Wood Mackenzie predicting a 45% growth in 2024, following a 100% increase from 2022 to 2023. Although there was a dip in installations in the first quarter of this year due to seasonal project completions, the strong growth pipeline suggests higher installations later in the year, mirroring the trend seen in 2023.


Annual installations in the energy storage sector are increasing at a faster rate than those in the wind and solar sectors, driven by the need to balance renewable energy sources and enhance grid resilience. This growth is further supported by declining module costs and incentives from the Inflation Reduction Act (IRA). Despite the challenges, the sector has significant opportunities for expansion.


Impact of Tariffs and Interconnection Issues

The announcement of increased section 301 tariffs on imported lithium-ion batteries from China, effective in 2026, is expected to raise prices and slightly temper growth expectations. However, the extended timeline and potential shifts in manufacturing to other Asian countries or domestically will help mitigate the impact on demand. Future tariff increases or additional trade barriers, depending on the next presidential term, could pose further risks.


Developers are also facing challenges with project interconnection across various markets. The interconnection queues are congested with numerous submissions that are no longer active, and the Independent System Operator (ISO) analysis is lagging behind the volume of submissions. These delays create cost and timeline uncertainties for project developers. Although the new Federal Energy Regulatory Commission (FERC) interconnection rule (Order No. 2023) aims to reduce speculative projects and expedite processing, ISOs need time to implement these changes and manage the current backlog.


Support from Renewable Penetration and State Policies

Grid-scale storage dominates the U.S. market, with ERCOT and CAISO accounting for nearly half of all installations over the next five years. The increasing penetration of renewables in these regions is driving new revenue opportunities in wholesale energy markets, despite the saturation of ancillary markets due to the growing number of storage installations.


New contracting methods and partners are being developed to guarantee project revenues. In Texas, tolling agreements match risk-takers with experts in optimizing operations during real-time price fluctuations, while conservative players obtain stable revenue for project funding. In California, major Investor Owned Utilities (IOUs) are securing contracts for energy and resource adequacy, providing merchant opportunities for owner-operators.


In other regions, state policies that support renewables and energy storage, along with utility long-term planning for balance and reliability, are driving the procurement of storage systems. In the desert southwest, the large solar build-out is expected to increase installed storage capacity 14-fold to nearly 30 GW by 2033. Other leading markets, like New York and Massachusetts, are also seeing growth due to state mandates, though completion timelines may vary from original projections.


While lithium-ion batteries will dominate projects over the next decade, longer-duration systems will become crucial for smoothing renewable generation across seasons. Early pilot projects featuring iron-air technology with a 100-hour duration, as well as other systems with 8-12 hour durations using compressed air and flow batteries, represent nearly 10% of the project pipeline by megawatt-hour, though they comprise only 1% of the power capacity.



Overall, the U.S. energy storage market is poised to meet the evolving needs of the grid, supported by existing tax credits and a declining cost curve. Accelerating interconnection processes and diversifying supply sources will be key to achieving carbon reduction goals.


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