Solmar Insights
US battery energy storage is expected to grow at a 30% annual rate over the next five years, according to a new RMI analysis, even as the sector faces mounting policy and supply chain challenges. The report also highlights substantial cost savings and grid stability contributions from existing battery assets in major markets such as California and Texas.
Key figures
30% forecasted annual US battery storage growth
13% to 19% of capacity factor power from storage in California during 2024 peak
More than $29 million in peak energy costs avoided in California
$3.6 million in added costs from ERCOT rule change in 2025
Battery deployment forecasts
RMI’s five-year outlook for 30% annual growth in US battery energy storage is grounded in earlier projections by London-based Wood Mackenzie, leveraging momentum from 2024’s policy environment. This bullish estimate comes as the Inflation Reduction Act’s incentives continue to shape the deployment landscape. However, Wood Mackenzie has revised its own forecasts downward multiple times in 2026, citing intensifying headwinds. Its current guidance sees new deployments flattening in 2026, with only 8% growth projected through 2031, reflecting heightened concerns over escalating tariffs, regulatory shifts, and international trade restrictions.
Despite these moderating expectations, the persistent fundamentals behind battery storage growth, cost savings, grid flexibility, and market opportunities, remain visible. This sets the stage for volatility as developers navigate between optimistic legacy projections and more conservative, policy-informed updates.
Policy and supply chain challenges
The energy storage sector enters the second half of the decade facing intersecting regulatory and economic barriers. The August 2026 executive order restricting foreign-made bulk electrical components, especially items sourced from Chinese supply chains, adds uncertainty for utility-scale project delivery. Entities relying on international or foreign-manufactured systems confront both import tariffs and rapidly shifting Treasury guidance regarding tax credits and equipment eligibility.
Industry analysts link this regulatory climate directly to revised deployment forecasts and delayed or canceled projects. Projects depending on parts from targeted geographies must now reassess sourcing, timelines, and cost structures. These policy dynamics sit atop lingering inflationary pressures and a competitive procurement environment for grid-scale batteries, amplifying delivery risk for institutional investors and project sponsors.
Grid reliability and operational benefits
RMI’s report details how battery storage has already demonstrated critical value on US grids during recent high-demand periods. In 2024, California batteries supplied between 13% and 19% of total power generation at capacity factors, comparable to legacy gas-fired peakers, during the grid’s tightest hours. This deployment avoided more than $29 million in peak energy costs through strategic discharge during high-value periods.
Texas, meanwhile, saw batteries deliver 6% to 9% of total generation during ERCOT’s most constrained intervals the following year. However, a December 2025 ERCOT rule change limiting energy storage’s ancillary services participation led to a $3.6 million increase in wholesale power costs over just 24 hours, according to RMI, underscoring both the flexibility and the fiscal impact of batteries in stabilizing grid operations under stress.
Community impacts and developer economics
Beyond the macro grid picture, the report highlights financial benefits for host communities. Utility-scale storage in California maintained reserve margins in 2022 during a severe heat wave, absorbing peak loads that prevented blackouts, contrasting with 2020’s rolling outages when less battery capacity was available. These operational benefits translate into lower energy prices for local utilities, heightened resilience during emergencies, and more predictable returns for project operators.
For developers and investors, evolving market rules and regulatory actions impact project economics as directly as capital cost or PPA structure. The push-pull between ambitious deployment forecasts and conservative policy responses will require adaptive strategies for supply chain management, asset siting, and interconnection prioritization, especially in markets prioritizing resilience and cost effectiveness.
The road ahead for storage projects
Volume projections and real-world returns are diverging as market players adjust to policy and regulatory risks. While RMI’s 30% annual growth remains an aspirational touchstone, Wood Mackenzie’s rapidly scaled-back outlook suggests the operational reality will reflect shifting guidance out of Washington and state capitals.
Projects awaiting final procurement or in late-stage development must weigh the likelihood of component restrictions or ancillary services rule changes curtailing expected returns. For investors and large buyers, the near-term focus will likely be on portfolio diversification, risk management strategies for procurement and supply chain exposure, and close monitoring of ISO rulemaking that could curtail or enable new market entry for storage resources.
What this means for buyers
Battery and power equipment buyers in California and ERCOT will need to adapt procurement schedules as 2026 policy changes may slow new capacity. RMI’s 30% growth forecast highlights robust demand, but recent executive restrictions on foreign-made bulk power components create uncertainty for timing and cost. Developers should review project sourcing strategies this quarter to minimize risk of supply-related project delays or cancellations.
Reporting via the original publisher
