The battery energy storage market in the United States is experiencing rapid growth this year, building on the strong momentum observed in 2024. This expansion is largely driven by a consistent decline in battery manufacturing costs. According to Rystad Energy, this trend is anticipated to persist for the next five to seven years as advancements in battery designs continue. Despite some policy concerns regarding potential changes to tax benefits for renewable energy, the grid-scale battery energy storage system (BESS) market remains largely unaffected. Rystad Energy forecasts that the annual installation rate of BESS projects could reach approximately 16 gigawatts by early 2026.
Texas and Arizona are at the forefront of this growth, while the California market has stabilized following a period of significant expansion. In 2024, Texas surpassed California as the largest BESS market in the nation. Currently, both states are installing battery storage systems at a rate of about four gigawatts per year. Unlike California, Texas has increased its BESS capacity from five gigawatts to over seven gigawatts within the past year, indicating that Texas is likely to continue expanding its storage capacity through 2025.
Additionally, other regions are witnessing rapid growth in battery storage. Arizona is leading this expansion among emerging markets, with total BESS capacity rising from three gigawatts in the second quarter of last year to seven gigawatts today. The installation rate in these regions is now around three gigawatts per year, matching the level of projects available from a year ago. Although some construction delays may occur, these emerging markets are expected to be key contributors to BESS growth through the end of this year and into the next.
In more developed areas, battery systems are increasingly being utilized to manage power demand, extending solar energy usage into evening hours. Over the past 90 days, battery systems have met about 13% of the California Independent System Operator’s power needs during discharge hours, a figure that is on the rise, often exceeding 16% during critical periods. On average, battery systems are now contributing up to 30% during peak demand times, with the average peak-hour contribution reaching 26%, which is a notable increase of 10 percentage points compared to a year ago.
Renewable energy sources, such as solar, wind, and hydro, have consistently increased their share of the power mix in California. The annual average share of renewables has grown from below 30% in 2021 to over 40% in the past year. During spring, renewable energy occasionally meets more than 65% of daily electricity demand, although this share drops to between 20% and 25% during winter months. Despite these seasonal fluctuations, the rise in renewable energy has allowed California to reduce its reliance on electricity imports, with the share of imported energy decreasing from 27% to 16% over the last four years.
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