An essential asset for the decarbonization of United States power grids has come of age: Large-scale battery stations — mostly lithium-ion systems with up to four hours of energy storage capacity — are growing by the gigawatts on an annual basis.

After adding 1,665 MW of resources in the first three quarters of 2021, energy storage developers plan to install more than 3,600 MW in the final quarter of the year, according to S&P Global Market Intelligence data.

That would result in roughly 5.3 GW of power storage capacity, marking by far the biggest year yet in the scale-up of alternatives to pumped hydroelectric storage. Although some projects may be delayed by battery supply chain challenges, expectations of a multigigawatt market in 2021 are widespread.

Research firm Wood Mackenzie, for instance, anticipates 4.7 GW of utility-scale storage will commence operations in 2021.

It could be just the start of a prolonged electrochemical storage surge in the U.S. Developers plan to deliver another nearly 9 GW in 2022 and over 10 GW in 2023, Market Intelligence data indicates.

"One of the main reasons is the costs have come down," Michael Berlinski, director of emerging technologies at energy advisory and services firm Customized Energy Solutions, said in an interview.

Berlinski, one of the industry's key representatives working to remove development barriers, credited Federal Energy Regulatory Commission's actions in recent years for helping to open wholesale markets to participation from large-scale and small-scale battery resources.

Another major driver is a federal investment tax credit that storage facilities can claim when charging directly from solar farms. The U.S. House of Representatives in November passed a $2 trillion budget reconciliation bill that would extend tax incentives to stand-alone storage projects as well. A draft of energy tax provisions under consideration in the Senate also includes tax credits for stand-alone systems.

"We could see gigawatts of [stand-alone storage] if the policies and incentives go that way," Berlinski said. "And if not, we will see gigawatts of storage, but I would expect a lot to be coupled with other generation."

Roughly 56% of the 5.3 GW of storage resources planned to come online in 2021 are co-located with power plants, largely solar facilities, according to Market Intelligence data. Of the approximately 19 GW planned to enter service in 2022 and 2023, 65% are colocated.

Projects galore in 2021

Heading into the final quarter of the year, developers AES Corp., Broad Reach Power LLC, Enel Green Power North America Inc., NextEra Energy Resources LLC, Vistra Corp. and others had already brought online more battery storage than in the prior several years combined.

Among the major additions were a series of adjacent projects totaling 523 MW/2,092 MWh that NextEra Energy Resources, the competitive generation arm of NextEra Energy Inc., added to an existing solar complex in eastern Riverside County, Calif. The four-hour battery storage facilities are under contract with Southern California Edison Co. and Pacific Gas and Electric Co.

California also saw the emergence of several major stand-alone projects in 2021, including Capital Dynamics Holding AG's 100-MW/400-MWh Saticoy Battery Storage Project, also known as the Ventura Energy Storage facility. Located in Oxnard, Calif., the project is under contract with Southern California Edison, an Edison International subsidiary, and was part of a community-led effort to find an alternative to building a new natural gas-fired power plant in the area.

Vistra Corp. this year added 100 MW/400 MWh at its Moss Landing Energy Storage Facility. However, a 300-MW/1,200-MWh initial phase of the project remained offline as of Dec. 13 because of "plant trouble," according to a California ISO report. Vistra experienced overheating batteries at the system in September.

Several large projects also emerged this year in Texas. Broad Reach Power in November said it completed its Bat Cave Energy Storage Project and North Fork Battery Storage Project, two 100-MW, one-hour storage systems.

Enel Green Power North America, an affiliate of Italian power company Enel SpA, completed a 50-MW battery system at its Lily Solar Farm, and Danish developer Ørsted A/S added 40 MW of storage to its 420-MW Eunice Solar Project. Also known as the Permian Energy Center, the Ørsted facility sells power to oil giant Exxon Mobil Corp. under a 12-year contract that started in May.

Florida Power & Light Co., a regulated utility of NextEra, on Dec. 13 announced the completion of a 409-MW/900-MWh battery system that is coupled with its existing FPL Manatee Solar Energy Center in Manatee County, Fla.

Focus on the Sun Belt

The vast majority of planned storage resources are in California and Texas, where development is supporting grid reliability and helping to integrate growing volumes of variable renewable energy resources into system operations. Nearly 13 GW of storage power capacity is planned in the two states combined, Market Intelligence data shows.

That represents the most visible — and largely the most advanced — portion of the broader project pipelines under study in grid operator interconnection queues.

Major projects are planned throughout the Southwest, especially in Arizona and Nevada. Other U.S. markets with significant development activity include New York, Utah, Hawaii, New Mexico, Florida and Massachusetts.

Developers are seizing their biggest opportunities to build front-of-the meter battery storage in California and the neighboring Desert Southwest because retail energy suppliers in the region are signing long-term contracts or buying equipment for their own projects, mainly to address resource adequacy, according to Berlinski of Customized Energy Solutions.

In Texas, the opportunity is the Electric Reliability Council of Texas Inc.'s "fundamental need for a large amount of fast and accurate ancillary services," Berlinski added. The state's wholesale power grid is essentially an island that cannot rely on imports when its own resources fail to deliver, as occurred during an intense winter storm in February.

The Northeast initially is seeing more development of smaller projects because they are often "pure or partial merchant opportunities" and are more easily financeable, Berlinski said.