The U.S. energy storage market set a first-quarter record for capacity installed in Q1 2024, with 1,265 MW/3,512 MWh deployed across all segments. This marks the highest storage capacity installed in the U.S. in the first quarter, representing an 89% increase from Q1 2023.

In Q1, 993 MW/2,952 MWh of energy storage capacity was deployed in the grid-scale segment, up 101% year-over-year, with Nevada, Texas, and California accounting for 90% of the MW and MWh capacity, according to the latest report by Wood Mackenzie.

This represents the largest capacity installed in any Q1 to date. Additionally, more than 250 MW of residential storage was deployed in Q1, up 8% from Q4 2023.

California was the primary driver of this growth, adding 32 MW. California also led the commercial and industrial (C&I) segment, while New York and Massachusetts experienced one of their slowest C&I quarters in recent years.

The report mentioned that U.S. original equipment manufacturers (OEMs) are benefiting from new domestic content guidance and Section 301 tariffs. Storage prices from the cell to block level continue to decline due to lithium price drops and other factors in China, such as oversupply and intense competition.

OEMs and integrators were boosted by the recently released domestic content guidance, which altered the reporting structure to qualify for the 10% adder. This change allows developers to be eligible without including manufacturing costs from the OEM directly.

Nevada and Texas installed 38% and 35% of total Q1 capacity, respectively. However, in terms of MWh, Texas installed only 553 MWh, while Nevada saw 1,416 MWh installed. Texas led Q1 with 12 different storage projects, followed by California with 9.

The residential segment is growing quickly as the California market continues to expand. California tripled its number of installs between Q1 2023 and Q1 2024. With Q1 attachment rates at 41%, there is still much room for growth. High interest rates continue to affect the residential segment, increasing the share of third-party ownership installations.

C&I Segment Deployment Drops

The C&I segment had its worst quarterly deployment numbers in years. California’s commercial and industrial (C&I) storage deployments have remained stagnant, with most systems being interconnected under NEM 2.0.

New York and Massachusetts each had down quarters, which is not concerning given the C&I segment’s low quarterly number of installations. More projects are expected to come online in 2024 and 2025.

New capacity additions in 2024 are expected to surpass the 10 GW mark for the first time, with 75 GW forecasted across all segments through 2028.

2024 Forecast

In 2024, a capacity of 12.9 GW/35.8 GWh is expected to be deployed across all segments. The five-year grid-scale forecast increased by 5% quarter-over-quarter (QOQ) in MW terms due to an increased pipeline of announced projects.

This brings the cumulative new additions through 2028 to 62.2 GW. Over the next five years, over 10 GW of residential storage deployments are anticipated. The five-year residential forecast rose by 8% QoQ, largely due to declining system costs and emerging value streams in residential storage.

The five-year C&I forecast was reduced by 34% following the California Public Utilities Commission’s (CPUC) decision on community solar in May.

The report said the grid-scale segment is projected to see a 45% year-over-year increase with 11.1 GW/31.6 GWh installed, bringing the total cumulative volume to 62.6 GW/219 GWh in the next five years.

Growth is expected to flatten in 2025 and 2026 as project capacity is pushed into the later years of the forecast, largely due to early-stage development challenges such as permitting and siting, and interconnection queue timelines.

Over the next five years, 13 GW of distributed storage will be deployed, with the residential segment constituting 79% of distributed power capacity installations. The residential segment will install 10 GW of storage between 2024 and 2028 as storage becomes cheaper, the value of mid-day solar exports decreases, and new value-add opportunities emerge for distributed storage.

The report has forecasted that the C&I segment will install 2.6 GW of storage between 2024 and 2028, a 34% reduction from Wood Mackenzie’s previous forecast. The C&I segment continues to face the highest barriers to growth in the near term, but its strong value proposition and emerging value streams will make it an exciting growth segment in the later years of our ten-year forecast.

Wood Mackenzie and the American Clean Power Association reported breakneck growth for the U.S. energy market in 2023, shattering previous installation records across multiple segments, adding 8.7 GW of energy storage capacity.

A recent report by the International Energy Agency said energy storage infrastructure must expand by at least six times the current capacity if the world wants to triple renewables capacity by 2030 while maintaining electricity security.