Soaring demand for energy storage in the data centre industry is leading to consolidation in the storage sector as suppliers look to rapidly scale – Brookfield recently completed a $7bn acquisition of Aypa Power, KKR acquired EDF power solutions North America for $4.2bn, and Nextpower acquired Prevalon Energy
Opposition to data centre developments is on the rise in the US, partly due to the public’s concern about rising energy prices given that the industry is expected to hoover up large amounts of the available electricity supply. Consequently, the data centre industry now knows that, to maximise the chances of proposed new sites being given the go-ahead, it is imperative that they are as self-sufficient as possible from an energy perspective. It is for this reason that energy storage is increasingly being viewed as the potential saviour of the data centre industry. As the International Energy Agency has highlighted, data centre deployment is also being delayed by slow grid connections, a factor that means “onsite battery storage is becoming a critical technology for the next generation of AI data centres”. And with global data centre capacity set to approximately double to 200GW during the period 2025 to 2030, according to JLL, global energy storage capacity will have to increase at a similarly rapid rate.
With data centre demand for energy storage set to boom, the storage sector will now undergo a period of significant consolidation as market players seek the scale required to satisfy the data centre industry’s power needs. This race to consolidate has become increasingly apparent in recent months. The recognition that battery storage is increasingly critical to the reliability of energy systems besieged by data centre demand was one of the key drivers behind Brookfield’s decision to acquire Aypa Power – from funds managed by Blackstone Energy Transition Partners – for approximately $7 billion, as confirmed last week.
Buying into North American BESS market at scale
Under the terms of the deal, Brookfield acquired Aypa’s operating, under-construction and contracted project portfolio, together with its development platform and approximately 200-person team, which is led by CEO and founder Moe Hajabed. By acquiring Aypa – which is described as the largest standalone battery energy storage platform in North America, with 6.5 GW of operating, under-construction and contracted battery storage capacity, complemented by a development pipeline of more than 20GW – Brookfield has bought into the North American BESS market at scale.
Of particular appeal to Brookfield was Aypa’s contracted, and therefore resilient, cash flows – Aypa’s operating and under-construction portfolio is 95 per cent contracted under long-term agreements with “investment-grade customers” for an average remaining contract life of 17 years. For its part, Aypa Power’s growth will now be turbo-charged by leveraging Brookfield’s operating and development expertise, access to capital, and global supplier and commercial relationships. Meanwhile, major battery storage deals such as these will also strengthen the pool of legal and financial expertise that can be drawn upon to advance similar such major transactions, further boosting this M&A trend. In the case of the Aypa deal, Cantor Fitzgerald & Co. acted as lead financial adviser – with BofA also serving as financial adviser – to Aypa and Blackstone. Kirkland & Ellis acted as legal counsel to Aypa and Blackstone. White & Case acted as legal advisers to Brookfield.
Executing BESS deals more quickly
Serving rising data centre demand was also one of the factors in KKR’s decision to
acquire the operations and assets of EDF power solutions in the United States and Canada for $4.2 billion, as announced last month. EDF power solutions North America is among the top ten owners of renewable energy capacity in the US with an approximately 40-year track record of clean energy developments, across the US and Canada. While the company’s portfolio includes solar and wind, its expertise in battery storage was particularly attractive to KKR. Around six weeks prior to being acquired, it was announced that EDF power solutions North America had signed a five-year framework agreement with Ford Energy under which EDF would have the ability to procure up to 4GWh of DC Block battery energy storage systems annually, representing a total potential volume of up to 20 GWh over the term of the agreement. At the time of the deal, EDF North America made clear that the agreed framework would give the company the “supply visibility and product confidence we need to execute at the pace the energy transition demands”. Cecilio Velasco, managing director at KKR – who featured in last year’s Tamarindo Energy Transition Power List 2025 – has said the EDF power solutions North America acquisition supports the critical need for affordable power driven by, in large part, the “rapid expansion of data centres”.
Similarly, California-headquartered energy technology systems provider Nextpower – which reported record revenue of $3.56 billion for the fiscal year ending 31 March 2026 – last week announced the acquisition of Prevalon Energy, a US-based provider of large-scale battery energy storage systems. Earlier this year, Prevalon Energy – which has 6.4GW of deployed, contracted or awarded projects – announced it had entered a strategic supply agreement with Automotive Energy Supply Corporation (AESC), which, they said, would support 10GWh of “energy storage and data centre deployments”. It’s clear that Nextpower’s acquisition of Prevalon was driven, in large part, by its desire to enhance its ability to serve the data centre industry.
Goldman Sachs data centre demand warning
We should anticipate more significant M&A activity in the energy storage sector as major players seek to scale quickly in order to fully satisfy the demands of the booming data centre industry. However, Goldman Sachs has warned against hubris in the context of data centre demand growth. AI will be one of the primary uses for data centres and Goldman Sachs has modelled a scenario in which enterprises – the main users of AI – balk at having to pay for AI applications having been able to use them for a long period for free. In such a scenario, the “monetization rate of these offerings may weaken more than expected and demand for data centres could decline”, Goldman Sachs said. Factoring in a 20 per cent falloff in AI demand between 2025 and 2030, the investment banking firm added that occupancy would run “8 percentage points less than the base case”. It concluded: “This means there would be excess supply in data centres, potentially forcing operators to lower their lease rates.”
The race to power the AI economy will continue to dramatically reshape the energy storage market and drive consolidation as developers seek the scale, resilience and capital required to meet surging data centre demand. Yet while long-term fundamentals remain compelling, investors and acquirers must balance optimism with caution as AI adoption and data centre utilisation evolve.
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