The US grid-scale Battery Energy Storage System (BESS) market faces a potential contraction of nearly 29% in 2026 due to ongoing policy uncertainties, according to Wood Mackenzie. The market research firm released its latest quarterly US Energy Storage Monitor report on June 25, 2025.
Despite a record deployment of energy storage in the first quarter of this year, including utility-scale, commercial, and industrial (C&I), and distributed energy storage, the market is at risk of significant decline if unfavorable policy changes are implemented. The report was published just before the Senate’s debate on a budget reconciliation bill that could impact clean energy tax incentives.
The proposed legislation includes potential cuts to residential clean energy tax credits and limitations on material assistance from foreign entities, which may hinder the progress of energy storage projects. Current tariffs on Chinese goods, critical to the US BESS market, are paused at 54% for certain battery products, but this reprieve ends on August 12, with future negotiations pending.
In Q1 2025, the energy storage sector saw unprecedented growth, with a total of 2GW deployed. This included 1,558MW/4,078MWh in utility-scale storage, a 57% increase compared to the same quarter in 2024. Last year also marked the first time total installations surpassed the 10GW mark, reaching 12,314MW of output and 37,143MWh of storage capacity, representing approximately a one-third increase from 2023.
Looking ahead to 2025, the market appears stable despite potential tariff impacts in the first half of the year. Wood Mackenzie anticipates breaking records again, forecasting 15.2GW/48.7GWh across all segments. While California’s CAISO and Texas’ ERCOT remain leaders in utility-scale additions, other states like Indiana are rapidly expanding their storage capacities. Indiana quadrupled its storage capacity in Q1, adding 256MW, and it now ranks second nationally in new capacity additions.
Wood Mackenzie’s global head of energy storage, Allison Weis, emphasized the importance of stable policies to ensure continued growth in the energy storage sector. The report highlights the risk of a 29% contraction in utility-scale storage due to regulatory uncertainties, which could lead to a 16GW drop in expected grid-scale additions over the next five years.
For residential and C&I storage, forecasts are even more concerning, with potential declines of 42% for C&I installations and 46% for distributed storage. Weis noted that policymakers must recognize the significance of consistent and supportive policies to promote energy storage expansion.
The rising demand for energy storage is vital for maintaining a reliable grid amid increasing electricity demands. John Hensley, senior vice president of markets and policy analysis at the American Clean Power Association, pointed out that the energy storage market is crucial for managing this growth efficiently and affordably. However, policy uncertainty remains a significant risk that could impact the balance between economic expansion and energy reliability for Americans.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/us-battery-energy-storage-market-faces-potential-29-decline-by-2026-amid-policy-uncertainty-warns-wood-mackenzie/
