How the US battery boom is shifting the power mix

Good morning, and welcome back to Energy Source, coming to you from New York, where state governor Kathy Hochul has halted the controversial congestion pricing plan to charge motorists entering Manhattan.

The reversal has sparked fury from environmentalists and transport advocates who argued the policy — the first of its kind in the US which was scheduled to go into effect within weeks — would reduce the city’s air pollution while bringing in much-needed revenues into the ailing public transit system.

Today’s newsletter dives into the boom in US battery storage. The country is deploying battery storage systems on to the grid at a faster pace than solar and wind.

Then we take a look at the state of US solar panel manufacturing in Data Drill. Today marks the expiration of the two-year US moratorium on tariffs on Chinese solar companies found guilty in a Department of Commerce probe of rerouting imports through south-east Asia. The pause was ordered by President Joe Biden in 2022 to offer a temporary reprieve to developers who worried the additional duties would slow solar deployment due to the lack of a domestic supply chain. Two years later, solar manufacturing is booming but the country continues to import more panels than ever.

Thanks for reading,

Amanda

How the US battery boom is shifting the power mix

US developers are deploying batteries at a record pace, extending the limits of renewable generation as growing power demand threatens to slow grid decarbonisation.

On Tuesday, batteries delivered 2GW worth of power on to the Texas grid, the third highest on record, to help meet the peak in evening demand and offset the decline in solar generation when the sun goes down. In California, battery storage regularly supplies a fifth of power in the evening, according to data from GridStatus.io.

“We’re really getting to that hockey stick moment of exponential growth,” said Sergio Dueñas Melendez, the storage sector manager at the California Independent System Operator, the state’s grid operator, which has 9.2GW of storage installed. “Storage has managed to provide energy during the evening ramp . . . at lower cost than some fossil fuel assets.”

The two states are leading the US buildout of battery storage capacity, which is expected to nearly double its footprint this year to just under 30GW, according to the US Energy Information Administration.

“Storage is becoming increasingly significant, helping to stabilise renewable energy output and increase its ability to serve as a reliable base load resource,” said Jason Allen, chief executive of Leeward Renewable Energy, a large developer. On Tuesday, LRE signed an agreement with Pacific Gas & Electric to dispatch power from its Arizona battery project during times of peak demand.

President Biden’s landmark Inflation Reduction Act extended tax credits to battery storage developers for the first time, driving down costs for systems and helping turbocharge deployment to help meet the country’s goal of 100 per cent carbon-free electricity by 2035.

The addition of batteries is generating quick returns for developers while helping mitigate grid reliability concerns over renewable power. Batteries capture excess wind and solar energy and deploy it during parts of the day when generation is low, limiting the use of high-emitting “peaker” plants that deliver power quickly at times of high demand.

“[Developers] are recovering their investments in very short periods of time,” said Juan Arteaga, a senior associate at Enverus, adding that the role battery storage systems play on the grid varies widely depending on the market. While battery storage is making up a large share of generation in California, in Texas, it’s geared towards ancillary services, which covers contingencies and serves the grid during times of mismatch between supply and demand. 

Batteries could play an important role in meeting the surge in electricity demand anticipated from data centres used for the internet and artificial intelligence. Big Tech groups such as Microsoft and Google have made commitments to meet their power consumption with carbon-free sources by 2030, a target that’s difficult to achieve without batteries.

“It is likely that, in the future, batteries will be used not only for back-up power, but also as a buffer, as an energy reservoir, between AI compute and the grid,” said Colin Wessells, founder and co-chief executive of Natron Energy, a start-up developing a new chemistry of batteries known as sodium-ion to serve the data centre market.

But until battery storage systems achieve greater scale, analysts say burgeoning electricity demand will be met by fossil fuels. “There’s going to have to be a mix of generation used for sure,” said George Bilicic, managing director at Lazard. 

“There are certainly enough projects in the pipeline. I’m less sure if there are enough to line up with the timeframe,” said Brian Hayes, chief executive of Key Capture Energy, a battery storage developer. 

Other hurdles facing the battery storage sector are multiyear waiting times for grid connection and regulatory uncertainty. Last month, the Biden administration more than tripled Section 301 tariffs on grid batteries from China to 25 per cent starting in 2026, a move developers say will increase prices due to the lack of a domestic supply chain and China’s grip on the sector.

“When you combine the IRA with the 301 tariffs, you end up with a bit of a mixed bag,” said Andrew Waranch, chief executive of Spearmint Energy, which has battery operations in 11 states. “We would love to buy American, and when quality and price line up we certainly will.”

Data Drill

The US is increasing its production of solar panels. A new report from the Solar Energy Industries Association and Wood Mackenzie found that the US added a record 11GW of solar panel manufacturing in the first quarter. Capacity now exceeds 26GW, more than three times the capacity at the end of 2022.

The milestone comes at a pivotal moment for US solar power, the fastest-growing source of new electricity generation on the grid. Despite the growth in domestic manufacturing, the US is importing panels at record levels, and a group of manufacturers are calling for greater trade protections to safeguard the industry against a flood of cheap imports from Chinese companies, which have a large footprint in south-east Asia, where the US sources most of its supply.

Tomorrow, the US International Trade Commission will decide whether to investigate a petition filed by solar manufacturing giants, including First Solar and Qcells, calling for additional tariffs on south-east Asian solar imports, a move clean energy groups like the American Clean Power Association argue could slow US decarbonisation.

Job moves

• Anthony O’Neill has joined the board of Woodside as non-executive director.

• Wood Mackenzie appointed Xizhou Zhou to head the consultancy’s power and renewable business. Zhou joins from S&P Global.

• Iris Jancik will head International Battery Metals, a lithium producer, as chief executive.

• Andrew Shaw, a top Washington energy lobbyist, is joining Bracewell in its Policy Resolution Group as a partner.

• The Arab Energy Fund appointed Vicky Bhatia as chief financial officer of the financial institution.

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.