Grid storage investment is surging worldwide, but the U.S. has emerged as the undisputed global leader — for now.
Energy storage allows the electrical grid to balance supply and demand. More importantly for countries’ climate goals, it also transforms super-cheap but intermittent wind and solar power into a still-cheap but more reliable resource. Almost all the recent storage investment has gone to lithium-ion batteries, though new technologies and old ones, like pumped hydro storage, are vying for a foothold.
The vast majority of lithium-ion battery manufacturing happens in Asia. So how did the U.S. take the lead in grid storage investment? Through a combination of state policy support, competitive market rules and a little (but not much!) help from the federal government.
U.S. battery developers made their first breakthrough by providing ancillary services, the rapid-fire moment-by-moment adjustments that keep the grid humming. Batteries can do this faster than traditional power plants can, and they gained an early foothold in the Mid-Atlantic PJM power market after rule changes allowed batteries to compete there.
The ancillary-services opportunity was what got battery developers moving, but that market was too small to sustain long-term growth. The action moved west. California solicited power companies to build battery plants that could deliver four hours of power in high-demand moments. As the state shuts down its fossil-fueled gas plants, batteries are emerging as the preferred replacement for on-demand power.
Elsewhere in the sunny West, solar developers found they could add batteries to massive solar arrays to get more value out of projects — and claim the federal Investment Tax Credit. This hybrid solar-storage model proliferated in places such as Nevada, Arizona and Texas. The title for world’s most powerful battery jockeys from one part of the U.S. to another, and for now it resides in Florida, at the 409-megawatt Manatee storage facility.
Storage investment in other countries followed a similar trajectory, starting with projects for ancillary services and graduating into bulk storage once renewable plants reach a critical mass. New forms of investment are still emerging; Europe and Australia are exploring storage as a transmission resource to alleviate congestion on their high-voltage grid networks.
U.S. dominance on battery investment is relatively new, though. In the latter 2010s, South Korea had a strong run thanks to some highly lucrative government incentives. Europe has spent considerable sums on storage, and China now complements its world-leading renewables deployments with more than $1 billion worth of annual storage investment.
Government incentives can jump-start a storage market. But sustainable, long-term growth happens when batteries can compete to provide a range of useful services for the grid. Once power companies try it, they tend to come back for more.