Solmar Insights
The U.S. battery storage sector is experiencing rapid expansion, with RMI forecasting a 30% annual growth rate in battery deployment over the next five years. However, industry progress is threatened by a series of new policy and regulatory headwinds, including tariffs, Treasury requirements, and recent executive restrictions on foreign-made grid components.
Key figures
30% projected annual battery deployment growth rate, RMI
Utility-scale battery deployment growth downgraded to 16%, Wood Mackenzie (2024)
$29 million in peak energy costs avoided on California grid, 2024
Growth outlook and new constraints
RMI’s report highlights a strong outlook for U.S. battery storage, anchored in a projection from Wood Mackenzie during the height of the Inflation Reduction Act’s influence. The anticipated 30% annual growth rate in battery installations reflects the sector’s potential to transform grid resilience and economics. However, Wood Mackenzie’s 2024 update adjusted this figure downward to 16%, citing a landscape altered by shifting policy signals and supply chain uncertainties.
Analysts point to the August 2026 executive order from President Trump, which restricts the use of foreign-produced bulk power components on U.S. grids, as a specific policy creating new obstacles for storage developers. This rule change compounds existing challenges from import tariffs and complicated tax treatment for energy storage systems utilizing components sourced from China. The result, according to Wood Mackenzie’s latest report, is a dramatic slowdown in utility-scale battery growth, forecasting just 8% annual growth through 2031 and a flat deployment outlook for 2026.
Grid reliability and cost impacts
Installed battery systems have already demonstrated their value in stabilizing grid operations and reducing peak costs. During California’s tightest grid hours in 2024, energy storage provided between 13% and 19% of total generation at capacity, paralleling the role of gas-fired peaker plants. The RMI analysis underscores that batteries contributed to over $29 million in avoided peak energy costs in the state during these periods.
Performance in ERCOT has been similar. In the following year, batteries supplied 6% to 9% of generation during critical tight hours, emphasizing their grid-balancing role. However, ERCOT’s December 2025 rule change hindered storage systems’ participation in ancillary services, resulting in an extra $3.6 million in wholesale pricing over just 24 hours. This highlighted storage’s ability to maintain grid stability and deliver cost savings even as participation rules evolve.
Historical performance in heat events
Battery assets have helped system operators weather extreme weather events in recent years. During a record-breaking heat wave in California in 2022, 3.4 GW of grid batteries supplied 6% of the state’s power during peak demand and significantly improved reserve margins, as cited by RMI referencing ICF data. This marked a stark contrast to two years prior, when battery deployment was under 1 GW and grid operators were forced to trigger rolling blackouts despite considerably lower peak demand.
These events confirm that grid-scale storage is playing a growing role in contingency planning and reliability, supplementing traditional generation and supporting utility reserve requirements. The enhanced operational flexibility provided by batteries allows ISOs and host utilities to withstand abrupt demand spikes, underscoring the practical importance of continued deployment even as external policy factors threaten to dampen growth.
Community and financial benefits
RMI’s report also points to notable financial benefits that flow directly to host communities from utility-scale battery projects. By mitigating periods of peak demand and reducing reliance on peaker units, which are often costlier and higher-emitting, batteries can stabilize local power costs, support regional emission reduction targets, and provide additional revenue through participation in capacity or ancillary service markets.
This dynamic is reinforced by recent operational results from the Viejas microgrid project in California, where on-site batteries supported community-level reliability and cost management. The successful prevention of peak pricing spikes and blackout events in high-stress periods has strengthened the argument for continued investment in energy storage projects, particularly for municipal and cooperative utilities seeking localized resilience upgrades alongside their grid-scale peers.
Market adjustment and project financing
Although RMI’s headline growth projections remain optimistic, the U.S. energy storage sector now confronts a volatile market environment for project delivery and offtake. Export restrictions, tariffs, and supply chain rules could slow project timelines or drive cost escalation if developers are forced to re-source non-domestic equipment or restructure financing to address uncertain tax incentives.
For project financiers, these risks will require increased due diligence on supply chain provenance and compliance with domestic content rules. Utilities and ISO planners will need to adjust resource adequacy models to reflect these updated deployment forecasts, as the earlier expectation of sustained, double-digit gigawatt-scale annual growth may no longer hold. While host communities could continue to see substantial benefits where batteries are already operational, achieving the broader grid transformation RMI envisioned may require additional regulatory or policy measures to secure the anticipated pace of storage expansion.
What this means for buyers
Battery storage projects across ISOs such as CAISO and ERCOT will be directly affected by the slowdown in utility-scale deployment growth. Wood Mackenzie’s downward revision to 16% growth, and the White House restrictions on equipment, increase project cost risk and timeline uncertainty for new procurements this quarter. Buyers evaluating land, interconnection rights, or storage equipment will need to reassess supply chain strategies and risk premiums before committing to new projects in 2026.
Reporting via the original publisher
