Storage is booming and batteries are cheaper than ever. Can it stay this way?

A battery energy storage system used for testing purposes at the National Renewable Energy Laboratory (NREL) in Golden, Colorado. Courtesy: Paul Gerke

The U.S. energy storage market is stronger than ever, and the cost of the most commonly used battery chemistry is trending downward each year. Can we keep going like this, or are we in a bubble bound to burst?

According to the latest Energy Storage Monitor report released today, in the third quarter of 2024, the United States deployed a total of 3,806 megawatts (MW) and 9,931 megawatt-hours (MWh) of energy storage, a new Q3 record and an 80% and 58% increase over the same span in 2023.

Most of that fresh capacity came courtesy of utility-connected batteries. The new American Clean Power Association (ACP) and Wood Mackenzie offering found that the grid-scale storage segment added 3,431 MW and 9,188 MWh in Q3, also a record for the quarter.

The cost of doing business

The rapid proliferation of energy storage onto the U.S. grid can be credited (at least partially) to the declining price of lithium-ion (Li-ion) batteries. Globally, battery prices just sustained their deepest year-over-year plunge since 2017 according to an analysis by research firm BloombergNEF (BNEF). Lithium-ion pack prices dropped 20% from 2023 to a record low of $115 per kilowatt-hour.

BNEF credits factors including cell manufacturing overcapacity, economies of scale, low metal and component prices, adoption of lower-cost lithium-iron-phosphate (LFP) batteries, and a slowdown in electric vehicle sales growth. Granted, Li-ion packs in the U.S. and Europe were 31% and 48% higher than those in China, which the analysis suggests is a reflection of the relative immaturity of the American and European markets, plus their higher production costs and lower comparative volumes.

Still, energy storage is getting connected to the grid at an ever-increasing clip, and competition in the global battery market is tightening (tariffs will help ensure that). And you can expect both trends to continue through 2025.

Record growth and more in Q4

ACP and Wood Mackenzie’s latest Energy Storage Monitor highlights rapid growth in Texas and California, where grid operators ERCOT and CAISO have been particularly eager to embrace storage as a solution to constraints and resiliency concerns.

Texas continues to break battery energy storage records
Jupiter Power’s 200 MW/400 MWh Calisto I BESS in Harris County, Texas. Courtesy: Jupiter Power

In Q3 2024, Texas tripled installations compared to the previous quarter, adding nearly 1.7 gigawatts (GW). Only California brought gigawatt hours online, 6 GWh, thanks to the state’s focus on longer-duration storage.

Arizona, Colorado, Florida, and Vermont also added storage last quarter, hinting at a much larger appetite for grid-scale battery deployment nationwide.

The residential market set an all-time high in Q3, with 346 MW of residential storage installed, a 63% increase over Q2 2024. California, Arizona, and North Carolina had the most quarter-over-quarter growth, installing 56%, 73%, and 100% more residential storage in Q3 than in Q2 respectively. Community-scale and commercial and industrial (C&I) storage installations remained steady, with 29 MW installed, a 4% dip from year-ago numbers.

“We are seeing the energy storage industry fill a real need across the country to provide reliability in an affordable and efficient manner for communities,” noticed John Hensley, the senior vice president of markets and policy analysis for ACP. “The market signal continues to be clear that energy storage is a critical component of the grid moving forward.”

Texas’ recent battery boom is already paying off for customers in ERCOT territory, as new ACP analysis indicates the grid operator’s energy storage additions saved ratepayers $750 million this summer alone. Demand in ERCOT is higher than ever, but the problems that plagued Texas during the record-breaking summer of 2023 were abated this year by the state’s increasingly diverse mix of renewable energy generation and a whole lot of new storage.


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ACP adds that increased energy storage deployment not only enhances reliability and affordability but also drives U.S. economic expansion, supporting growing industries like manufacturing and data centers.

“Energy storage is crucial for energy security and to help outpace rising demand,” chimed Noah Roberts, ACP’s VP of energy storage.

“Energy security” will no doubt be a combination of words we’ll hear often under Trump 2.0, regardless of what the administration chooses to do.

Potential growing pains

Grid-scale storage installations are projected to more than double by 2028, nearing a cumulative volume of 64 GW, and residential installations should eclipse 10 GW by then, per ACP and Wood Mackenzie.

“Overall, storage installations will grow 30% in 2024, signaling the industry’s strongest year yet. However, it will be difficult to keep this pace,” admits Wood Mackenzie senior research analyst Nina Rangel. “Between 2025 and 2028 we are projecting an annual average growth rate of 10%, as early-stage development constraints continue.”

Allison Weis, Wood Mackenzie’s global head of storage, noted that while consistent growth is expected, there are some uncertainties over the new presidential administration regarding potential changes to clean energy tax credits and increased tariffs that could come into play.

“While there might be potential opportunities in a new pricing environment for domestic manufacturers in terms of competition, any major shifts in tax incentives or increased tariffs could outweigh benefits and have an impact on new project development,” Weis warned.

That brings us back to the declining price of lithium-ion batteries. The market has benefitted from low raw material prices, which could rise in the next few years as geopolitical tensions, tariffs on critical minerals, and more stall new mining, refining, and manufacturing projects.

“One thing we’re watching is how new tariffs on finished battery products may lead to distortionary pricing dynamics and slow end-product demand,” said Yayoi Sekine, head of energy storage at BNEF.

As BloombergNEF notes, battery manufacturers have aggressively expanded production capacity over the past two years in anticipation of surging demand for batteries in the EV and stationary storage sectors. And they may have been a tad too ambitious.

Too much of a good thing?

Currently, overcapacity is a real concern. BNEF estimates the 3.1 terawatt-hours of fully commissioned global battery-cell manufacturing capacity is more than 2.5 times the annual demand for lithium-ion batteries in 2024. While demand across all sectors saw year-on-year growth, the EV market – the biggest demand driver for batteries – grew more slowly than in recent years.

“The price drop for battery cells this year was greater compared with that seen in battery metal prices, indicating that margins for battery manufacturers are being squeezed,” Sekine observes. “Smaller manufacturers face particular pressure to lower cell prices to fight for market share.”

“Regardless, higher adoption of LFP chemistries, continued market competition, improvements in technology, material processing, and manufacturing will exert downward pressure on battery prices,” BNEF’s head of energy storage predicts.

RWE testing EnerVenue long duration metal-hydrogen batteries in pilot project
The Energy Storage Vessel, EnerVenue’s metal-hydrogen battery currently being piloted by RWE. Courtesy: EnerVenue Energy

BNEF expects Li-ion pack prices to decrease by $3/kWh in 2025 based on its near-term outlook. Over the next decade, the research firm believes continued investment in R&D, manufacturing process improvements, and capacity expansion across the supply chain will help improve battery technology and further drive prices downward.

In addition, next-generation technologies like silicon and lithium metal anodes, solid-state electrolytes, new cathode material, and new cell-manufacturing processes will play an important role in enabling further price reductions. Plenty of lithium-ion alternatives are being actively piloted for their viability, technologies ranging from Natron’s sodium-ion battery to EnerVenue’s metal-hydrogen vessel; from gravity storage to IceBricks, it seems like there’s a storage solution for any situation.

Lithium-ion batteries are still the most economical solution for most situations, even without considering their trend downward pricing trend, but it takes a village, as they say- and ours should be doing all it can to ensure storage stays an economical solution for the foreseeable future.

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