Big banks of batteries are an important part of the renewable energy transition. Their role is to store power generated when the sun is shining or the wind is blowing so that it can be used when it’s dark or the wind is calm.
According to the Energy Information Administration, the U.S. made good progress on the battery storage front in 2024 — capacity grew 66%. And almost twice as much could be added to the grid this year.
A battery storage system isn’t much to look at. “It’s just, you know, a large, unremarkable set of rectangular structures hanging around,” said Michael Craig at the University of Michigan.
But inside those unremarkable rectangles are lithium-ion batteries.
Seth Feaster at the Institute for Energy Economics and Financial Analysis said they have something pretty remarkable: “The ability to time-shift power.”
This means storing up power generated when demand is low, then pushing it out into the grid when demand is high.
A lot of these battery systems are up and running in Texas. Feaster said that the other morning at about 5 a.m., “the market power price in Texas was below $20. But once you hit about 6:30, 7 o’clock, as demand increases, power prices jump.”
So a power company could have charged its batteries on the cheap at 5 a.m. “and then gotten two or three or four times that price for that power during the morning period of peak demand.”
The costs associated with batteries have come down, said Joshua Rhodes at the University of Texas at Austin, thanks to their widespread use in electric vehicles, laptops, smartphones and storage systems.
“The price of lithium has gone down by, like, 80%. The cost of batteries to install, you know, has gone down by a factor of two or three,” said Rhodes.
Battery storage has also benefited from government incentives — including a tax credit in the Biden-era Inflation Reduction Act. The GOP-controlled Congress could repeal it. But, said Allison Feeney at Wood Mackenzie, “even if the IRA phases out earlier or goes away entirely, we’ll still see strong storage installs, but they just won’t be probably as high.”
They could stay strong, she said, because demand for electricity is likely to increase. And battery storage is, for now, a cheaper way to meet that demand.
But there’s one more wild card on the price side, Feeney said. You guessed it — tariffs.
