U.S. Battery Storage Deployments Surge in 2020, Set Record

The U.S. battery energy storage market set a new annual deployment record as 1,464 megawatts (MW) / 3,487 megawatt-hours (MWh) came online in 2020 according to a recent Wood Mackenzie and the U.S. Energy Storage Association (ESA) report. Not only did the industry surpass the gigawatt threshold for the first time, in terms of megawatt-hours, deployments exceeded the aggregate capacity installed from the previous seven years.

U.S. Energy Storage Annual Deployment Forecast, 2012-2025E

Despite some slowdowns at the height of the pandemic, the sector demonstrated remarkable resilience as development activity sharply picked up during the latter half of 2020. Record deployments were achieved in both the third and fourth quarters, largely driven by utility-scale projects.

“These results reveal two important trends that will characterize the market for the foreseeable future,” CFC Energy Industry Analyst Bijan Patala said. “First, developers are responding to evolving customer demand with increasingly large projects.”

Three California projects alone accounted for roughly half of the megawatt capacity deployed in 2020, with two of these holding the title of world’s largest battery at commissioning. Prior to 2020, there were no battery projects in the U.S. that surpassed 40 MW. Meanwhile, roughly 80 percent of utility-scale storage capacity in development is from projects sized at 100 MW or greater, according to EIA-860 data.

“The second trend is the shift toward longer duration batteries, especially four hours or more,” Patala added. “This is why installed energy capacity, megawatt-hours, is growing much faster than installed power capacity, megawatts.”

The off-balance is partly a reflection of FERC Order 841. The order requires regional transmission organizations to include storage as a qualified participant in capacity markets if the system can discharge for at least four hours.

U.S. Storage Market to Continue Surge in 2025

The ESA expects the U.S. storage market will install five times more megawatt capacity in 2025 than was added in 2020, with utility-scale storage continuing to lead the growth. Importantly, the geographic dispersion of deployments is heavily influenced by state-mandated targets. California, which has dominated deployments since 2016, exemplifies the power of mandates. There are seven states with storage mandates totaling 11 GW, which should drive comparatively fast growth in these states.

Future additions will also be directed toward markets where there is superior opportunity to monetize grid-reliability services and markets with growing generation from renewables.

“Texas, for example, is the second leading state for utility-scale capacity both in operation and in development, yet has no mandated target,” Patala explained “Finally, utility resource planning–underpinned by decarbonization ambitions–is also driving deployments in states such as Arizona and Florida.”

There is currently more than 16 GW of storage capacity outlined in utility resource plans.