The U.S. energy storage market is evolving rapidly, shaped by shifting regulations, changing revenue streams, and new project development/financing models. Last week, industry leaders gathered in Dallas, TX for Energy Storage Summit USA to discuss the challenges and opportunities ahead. Three key themes emerged.
[1] ERCOT had a down year – but storage is a long-term play
After years of record breaking returns driven by extreme weather and price volatility, ERCOT’s storage market cooled in 2024. A milder summer meant fewer price spikes, and ancillary service prices declined. But seasoned storage operators understand that batteries are long volatility, and a single year neither defines success nor market viability.
“You don’t look at power markets on a one year basis,” Christian Hofer, Vice President of Market Operations for Key Capture Energy said. Storage operators need to play the long game, which requires weathering down years in the process.
Hofer also pointed out that many tolling agreements — where storage owners get paid a fixed fee to operate their assets — are currently priced relatively low. “That assumes we won’t see another August 2023 in the next five years. That’s a bad bet.”
Randy Mann, President & CEO of esVolta also remains bullish on the market. “We’re in business to make money,” Mann said. “The reason we do storage in some markets and not others has to do with the market fundamentals – the shape of load and the other resources on the grid.” The company has a robust pipeline in multiple markets including ERCOT, and still views it as one of the highest potential storage opportunities.
While 2024 may have been a weaker year for ERCOT storage revenues, the broader trends remain clear: demand is rising, renewable penetration is growing, and volatility is here to stay.
[2] New models are emerging to meet demand
As U.S. power demand is set to grow 16% by 2029, developers are adapting their strategies to keep pace. The combination of rapid load growth and an increasingly renewable-heavy grid is accelerating the shift toward hybrid and co-located storage models. These approaches will continue to accelerate as they help bolster project economics and bypass long interconnection processes.
“The other side of the equation is supply,” Tom Thunell, Tyba’s Co-founder and COO noted. “Over 90% of new generation capacity coming online is from intermittent renewables. Great operators want to maintain a reliable, stable, and low-cost grid. Storage is the only technology that can be deployed at scale to provide that balancing services.”
In markets like CAISO, where solar saturation has eroded midday energy prices, storage is becoming an essential counterpart to new projects. “Storage coupled with solar is the best bet” said Marwan Alaydi, SVP of Engineering & Technology at Swift Current Energy. “Solar is so prevalent during the day that shifting that energy is critical to support the grid and project economics. We are future proofing our solar pipeline with storage.”
DC-coupling, an approach that integrates storage directly with solar at the inverter level, is also making a resurgence. Thanks to improved technology and tax credit eligibility, developers are reevaluating this design as a way to boost efficiency and cut interconnection costs. Panelists agreed that the DC versus AC coupling decision is still project-dependent, but most are again considering DC-coupled as a viable option.
[3] While there is uncertainty in federal regulations, the fundamentals are still there for batteries, and states are stepping up
While federal policies – most notably the future of the Investment Tax Credit (ITC) – face uncertainty, the fundamental value proposition of batteries remains strong – and some states are stepping in to support project viability.
At the conference, multiple industry leaders pointed to state incentives as a critical lifeline. New York’s Index Storage Credit (ISC), Massachusetts’ Clean Peak Standard (CPS), and Illinois’ Shines program were all cited as key drivers making storage projects financially viable.
Meanwhile, certain “ISOs are correctly predicting a dire future” said Peter Rood, Chief Development Officer at Spearmint Energy. Some system operators predict capacity shortfalls within the next few years, and in many cases, storage may be the only near-term solution. “Gas plants take too long to build,” Rood pointed out. “Storage is one of the few scalable options that can come online fast enough to meet these challenges.”
Even in CAISO, one of the largest storage markets that often serves as an exemplar for emerging markets, reforms are underway to streamline the interconnection process. A new weighted scoring system aims to manage the volume of projects in the queue and accelerate the timeline for viable projects.
While federal uncertainty looms large, developers are pushing forward. Between state-led initiatives, grid operator urgency, and market-driven opportunities, storage continues to prove its value — even in a shifting policy landscape.
