Dive Brief:

  • The U.S. energy storage market added 4,235 MW of capacity in Q4 2023, a 101% increase from the previous quarter, according to a report released Wednesday by Wood Mackenzie and the American Clean Power Association.
  • Grid-scale storage deployments accounted for 3,983 MW in a 113% increase from the previous quarter and a 358% surge from Q4 2022, the report said. Residential as well as community, commercial and industrial, or CCI, storage deployments accounted for the remainder.
  • WoodMac projects more than 9 GW in new residential storage and 4 GW in new CCI storage through 2028 as virtual power plants gain favor and distributed energy stakeholders “get better at communicating the value of storage,” WoodMac U.S. Distributed Storage Analyst Hanna Nuttall told Utility Dive in an interview.

Dive Insight:

Grid-scale installations continue to dominate the U.S. energy storage market. The segment accounted for 90% of total storage installations in 2023, reaching 7.9 GW and 24 GWh for the full year, the WoodMac report said. WoodMac forecasts 30% growth in grid-scale deployments this year, driven by blockbuster announcements like LG’s plans for 10 GWh in 2024 capacity additions.

California and Texas accounted for 77% of U.S. grid-scale additions in Q4 2023. California alone accounted for 56% of grid-scale additions in watt-hour terms, and the 11.8 GWh brought online there represented a 105% increase from Q3, the report said.

The residential segment saw 219 MW or 489 MWh added in Q4 2023, driven by brisk growth in California. For the full year, Puerto Rico edged out California in total storage capacity added due to strong territorial incentives for solar-and-storage installations, the report said.

The effects of the NEM 3.0 solar tariff, which revamped California’s net metering framework to encourage residential storage, are beginning to show up in storage figures there, though the full impact might not be evident until late this year or early next, Nuttall said. The storage attachment rates for residential rooftop solar systems in California rose from 7% in Q2 2023 to 31% in Q4 2023, she said. WoodMac predicts further attachment-rate increases this year.

“We are starting to see liftoff in California,” she said. 

States with less supportive distributed energy policy also saw healthy storage additions in Q4 2023, despite accounting for a smaller share of the total than California and Puerto Rico, Nuttall said.

In Texas, “interest in resiliency” is a driving force behind residential storage growth, Nuttall said. Winter Storm Uri, the prolonged February 2021 cold snap that threw ERCOT’s grid reliability into question, was an inflection point.

“We saw a sharp quarter-over-quarter increase after Uri,” and the momentum has continued as Texas solar installers retrofit solar-only homes with batteries, Nuttall said. 

Arizona still has relatively low storage attachment rates, but the sheer size of its residential solar market means “a decent number of [home energy systems] include storage,” Nuttall said. She expects attachments to increase in Arizona as solar energy export compensation declines there.

The CCI market was “stagnant and highly concentrated” through 2023, with New York, California and Massachusetts accounting for the vast majority of the 34 MW in Q4 2023 installations. But WoodMac expects CCI installations to take off in the near term as customer education improves and distributed energy developers turn their focus from grid-scale to larger distributed systems, Nuttall said.

“Businesses don’t always have somebody [on staff] focusing on energy management, so it’s [challenging] for developers and software providers to sell projected bill savings,” she said. Now, “they’re beginning to ask, ‘How can we sell this product?’”