Solar and battery storage will make up the vast majority of new US electricity capacity additions in 2025, with plummeting storage installation costs meaning deployment is growing at a rapid rate, however uptake could be further boosted by providing ‘fair compensation’ for storage and promoting adoption in vulnerable communities
Solar and battery storage makes up a massive 81 per cent of utility scale electricity capacity additions planned for the US in 2025. In total, 32.5GW of solar is expected to be added to the US grid before the end of the year, an 8.3 per cent increase on last year’s total of 30GW. Expressed as a proportion of total electricity capacity additions in the US in 2025, solar will represent 52 per cent.
Texas (11.6GW) and California (2.9GW) will account for almost half of the new utility-scale solar capacity added in the US this year. Meanwhile, five other states are expected to add more than 1GW of solar capacity, namely Indiana, Arizona, Michigan, Florida, and New York.
Meanwhile, 18.2GW of battery storage is set to be added to the grid in 2025, a massive 80 per cent increase on last year’s total of 10.3GW. Battery storage will represent 29 per cent of total electricity capacity additions in the US in 2025.
To place the anticipated levels of solar and energy storage deployment in the US this year in context, it is expected that 7.7GW of wind will be added in the US in 2025, as well as 4.4GW of natural gas (see chart below).
While solar will contribute most new capacity in the US this year, the deployment of energy storage is growing at a much faster rate. Why is this? One of the main reasons is the dramatic decrease in energy storage installed system costs, as the Solar Energy Industries Association (SEIA) has highlighted. In 2023, the median price for two-hour utility scale energy storage deployments stood at $1,500/kW, but this dropped by approximately 50 per cent to around $750/kW in 2024 (see chart below).
However, while it is anticipated that storage is set to reach 450GWh in the US by 2030 “under a baseline scenario”, according to the SEIA in its report ‘SEIA’s Vision for American Energy Storage’, the association says that “energy storage is critical to America’s energy security” and has set a more ambitious target of 700GWh.
But how can this higher target be reached? The SEIA says that policymakers need to focus on actions and policies that:
How to level the playing field
With regard to wholesale markets, the SEIA has highlighted how FERC has tried to provide access to storage with Orders 841 (requiring regional markets to include participation for energy storage) and 2222 (directing regional market operators to allow aggregated distributed energy resources to participate in wholesale markets). The problem is that implementation has resulted in significant gaps and many regional markets will not allow storage to compete equally for several more years. Storage is also “systemically undervalued” on the distribution grid due to a mismatch between retail electric rates and compensation that electricity dispatched from storage can receive, according to the SEIA. This means projects that should be viable may not be because they do not have free and fair market access to buy and sell energy at fair wholesale rates. Meanwhile, the SEIA says that in many states and RTOs [regional transmission organisations], storage is “not accurately represented during interconnection studies”. In effect, grid operators study storage under a ‘worst case’ scenario – for example, importing power during peak load conditions, or exporting at maximum power when the grid is saturated with renewable generation or is in a low-load situation. “This isn’t the way storage operates, and it can leave storage owners to cover a large price tag for equipment they don’t really need,” the SEIA concludes.
How to maintain and build financial support
The SEIA has highlighted how states like California and New York are already realising the benefits of storage by developing compensation structures, grid access programmes, and other incentives to encourage the development of projects and maximise the value of such assets. The association has called on policymakers to act now with “long-term investments” in the US’ energy and economic future. It has also said that state governments should “provide a clear pathway for procurement targets to be financed, and public utility commissions should ensure that storage is fully considered in integrated resource planning – as a tool to improve the capacity rating of renewable generation, as a non-wires solution to grid constraints, and as a stand-alone asset”.
How to promote storage adoption in vulnerable communities
Policy makers should provide extra financial support for vulnerable communities that can benefit most from the reliability that storage provides, the SEIA argues. Households with significant needs, including people with disabilities, medical equipment, and the elderly, are among those that could benefit the most from small-scale storage because they need reliable power and could find it more difficult to evacuate during emergencies. “Focusing storage and resilient energy development on community centres and other emergency hubs in underserved areas can increase their resilience and provide valuable economic benefits,” the SEIA said. Meanwhile, with regard to the issue of fire risk, the SEIA has called on state fire marshals to “work with industry experts to provide training to first responders to help mitigate these risks”.
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