The State of Energy Storage: From Lithium-Ion to 100-Hour Batteries

In this week's energy market update, we explore the explosive growth of the energy storage sector, now widely recognized as the "Swiss Army knife" of the modern power grid. Ever since the Aliso Canyon gas leak in 2016 kickstarted utility-scale battery deployment, plunging lithium-ion costs—driven largely by the EV industry—have completely transformed how we balance the system.

We break down the latest US Energy Storage Monitor report from Wood Mackenzie and American Clean Power, which reveals that an incredible 18.9 gigawatts (51 GWh) of storage was installed in 2025, marking a massive 52% year-over-year increase. Since 2019, the US has added over 50 gigawatts of storage to the grid.

For energy professionals tracking resource adequacy and grid integration, this video covers several critical trends:

Data Center Interconnection: How data centers are increasingly relying on on-site batteries to provision loads during system peaks, effectively bypassing congested grid constraints and potentially saving billions in fees.

Solar Hybridization & Transmission: Why nearly half of all utility-scale solar projects are now paired with 3-hour storage to rescue low-value midday power and sell it during high-priced evening peaks. We also explore the concept of "storage as transmission" to ease regional grid congestion.

Renewable Energy Droughts: As variable renewables flood the system, utility planners must now prepare for multi-day weather events—like atmospheric rivers or snowstorms—that can drastically cut solar or wind output, requiring much longer-duration backup.

Beyond Lithium-Ion: We look at the commercial emergence of alternative long-duration technologies, including compressed air projects from Hydrostor, liquid CO2 systems from Energy Dome, and liquid air turbines from Highview Power.

The Form Energy Disruption: Finally, we discuss how Form Energy's 100-hour iron-air batteries could drastically alter Wood Mackenzie's future forecasts. With recent massive deals announced alongside Xcel Energy, Google, and Crusoe, just two projects account for 80% of last year's total US storage additions in terms of gigawatt-hours.

Join us as we explore what the next 500 gigawatt-hours of projected energy storage will look like between now and 2031

Transcript

Why Storage Took Off Fast

SPEAKER_00 0:03

Hi. This week we're going to talk energy storage. Some folks might remember Aliso Canyon and mark it as the beginning of the advent of utility scale energy storage. Back in 2016, the Aliso Canyon gas storage reservoir began leaking gas, which was needed to feed gas turbines that supplied Southern California's electricity during periods of peak demand. Within months after this challenge arose, and encouraged by California regulators, over 77 megawatts of battery storage was installed and commissioned. It was the fastest that new capacity of any type had ever been brought online at that scale, and it heralded a sea change in the storage industry. Today, lithium batteries cost a fraction of their price a decade ago, in large part bolstered by manufacturing economies of scale and the experience curve that resulted from massive adoption of batteries by the EV industry, principally in China. Within a short time after the Liso Canyon incident, leaders in the industry began referring to battery energy storage as the Swiss Army knife of electricity. That's because lithium batteries could be installed and deployed to provide a multitude of services. In the bulk power system, batteries could provide and be compensated for capacity in various ISOs and RTOs. They soon proved their metal as well in offering forward reserves and frequency regulation. In addition, as more solar energy flooded the system and crushed energy values midday, gigawatt hours of batteries were deployed to rescue nearly valueless energy generated by solar rays during midday and deliver that power into the evening hours when prices were often two to three times as high. These days, the Solar Energy Industry Association reports that nearly half of all utility-scale projects are hybridized with storage. The battery duration of these hybrids typically sits at about three hours. Batteries don't pair as well with wind energy resources because wind doesn't exhibit the same type of predictable output one normally sees from solar day in and day out. In the transmission system, a concept of storage as transmission soon arose as well. Under this model, batteries in transmission constrained areas started to be deployed to absorb energy when there were no transmission limitations, with the energy then released on the far side of the transmission constraints when it was needed. Storage increasingly found its way into the distribution system as well, supporting stressed grid assets during peak periods, and of course it's also found favor in residential and sometimes commercial markets. This is especially the case in California. Exports of rooftop solar back to the grid are valued at next to nothing, so it makes economic sense to store that energy and consume it later, avoiding paying over 30 cents per KWH on your retail power bill. In California, the attachment rates, where solar is sold with batteries as well, are north of 60%. There's also a new and rapidly growing market for batteries with a data center crowd. New data centers are increasingly finding it hard to connect to the grid. In many cases, there's no spare capacity left. But those capacity ceilings are hit less than 1% of the time. So data centers add on-site batteries and provision their loads from storage during system peaks, thus enabling faster interconnections and lower fees for capacity and associated supply and transmission infrastructure. This advantage may create a huge new market opportunity for storage. One analyst recently commented that the ability to accelerate the interconnection of one gigawatt of data centers for a single year would be worth$7 billion. That buys one a whole boatload of energy storage. So with that background in mind, what does the market look like these days and where might it be headed? Well, consulting from Wood Mackenzie, along with American Clean Power, recently issued its U.S. Energy Storage Monitor Report for Q1 of this year as well as a look back at 2025. It observed that since 2019, over 50 gigawatts, 50,000 megawatts, and 144 GW storage has been installed in the US. The report also found that a record 18.9 gigawatts and 51 gigawatt hours were installed in the US in 2025, growing 52% year over year. The average project duration stood at 2.7 hours. Q4 of 2025 saw a quarterly record. Q4 is always seems to be the quarter that ticks the crown, with a 5.8 gigawatt and 14.8 gigawatt hours added. The utility segment notched 4.9 gigawatts of that, with the commercial industrial sector coming in at just 77 megawatts, and the residential sector picked up a gigawatt hour of rooftop solar in the quarter in a race to deploy before federal tax credits ran out. They still remain in place for utility scale projects. Looking forward, always a perilous thing to do in such rapidly changing markets, WoodMack projects the country will see about 500 gigawatt hours of storage added between now and 2031, though the firm cautions there's a wide range of uncertainty largely influenced by federal guidelines concerning imported batteries and foreign entities of concern, the so-called Fiat rules. It forecasts a pretty significant cone of uncertainty with a delta of 52 gigawatts between its high installation and low installation scenarios by the end of that period. In the last decade, the energy storage technology added to our grids has all been lithium-ion. However, other technologies are evolving. For one, cheaper sodium batteries with much better cycle lives and even higher stability, no thermal runaway issues, are making their appearance. And as more variable renewables flood into the system, the challenge of resource adequacy, balancing growing demand with new supply resources, grows. When wind and especially solar begin to deliver tens of gigawatt hours of energy each day as they now do in markets such as California and Texas, a lack of available fuel, in this case sunlight or wind, over a period of days can begin to threaten system reliability. Utility planners must increasingly think about so-called renewable energy droughts, for example, a five-day atmospheric river that could deluge California and cut solar power by well over 50%, or a snowstorm that blankets solar panels for days in other areas of the country. The same goes for wind. If wind stops blowing for a few days, that can be a big issue in wind-dependent areas. Imports from other regions can help, as can carbon-intensive fossil fuel resources that have available fuel on hand. But if we want to add renewables and maintain reliability during these vulnerable periods, then we'll need longer duration storage to firm up the resources. Until recently, there had been little progress on this front. Longer duration flow batteries that were going to offer 8 to 12 hours generally failed to scale commercially, partly because cost-effective lithium batteries ripped out the underbelly of the best market opportunities, leaving little room for flow batteries to gain a foothold. There simply wasn't a big market for the additional 3 to 12 hours of duration most of the time. And lithium batteries with their higher efficiencies and more flexible operating properties effectively stole the first three high-value hours. Other technologies, compressed air, liquid CO2, liquid air, all of which require compressors and lose roughly 30% of the energy with each cycle, well, they're just starting to make it into the marketplace. They've finally perhaps begun to turn a corner, with commercial projects being announced in numerous markets around the world. In part, this is being aided by regulators pushing the technology. California, for example, has a specific initiative to support long-duration energy storage technologies with the Public Utilities Commission mid-term reliability mandates. In that state, HybridStore is moving forward on a compressed air energy storage project designed for 500 megawatts and 4,000 megawatt hours. Italian startup, Energy Dome, uses liquid CO2 that compress CO2 and liquefy it. And they have a standard module at 20 MW and 200 MW. Here in the U.S., Energy Dome recently signed a contract with Alliant Energy for a 20 megawatt, 10-hour duration project to start construction this year in Wisconsin, with commissioning expected next year. And it just announced in the first week of April an MOU with New Era Energy and Digital Inc. to support its Texas critical data center site in Odessa. Energy Dome also has an agreement with Google that will likely include multiple projects across the global footprint. Then there's High View Power, a company that liquefies air, which when warmed up expands and spins a turbine. Its projects generally sit in the six-hour range, with the first, a 50 megawatt, 300 megawatt hour project in Manchester, England, expected to start flowing power this year. A massive project except for Scotland will, if completed, deliver 300 megawatts and 3.2 gigawatt hours. There are other projects out there using mechanical energy and gravity, and some large pump hydro projects also in the works, but the latter take forever to permit and build, and none are expected online until the 2030s. None of these projects will significantly affect the Woodmack projections for either capacity or energy through 2031. However, as I discussed recently in another video, there is one company in technology that may do that, which is FormEnergy. That's the Iron Air Battery Company, with projects having 100 hours of duration, though they only have 40% round trip efficiency. Consider the announcement with Xcel Energy and Google for 300 megawatts and 30,000 megawatt hours, 30 gigawatt hours scheduled to come online in phases between 2028 and 2031. Add to that the recently announced deal with Crusoe for 120 megawatts and 12 gigawatt hours with delivery starting next year. Those two deals cover 80% of last year's storage editions in the US in terms of gigawatt hours. By 2028, Form expects to yield 500 megawatts and 50 gigawatt hours of product annually from its first factory. In past presentations, the company has stated that it could expand up to 10x to 500 gigawatt hours per year. Well, that's another beast indeed. If those heavy projections do come to pass and the company gets to its true form, Woodmack may have to change its forecasts.