The U.S. energy storage market saw breakneck growth in 2023, shattering previous installation records across multiple segments, as the country added 8.7 GW of new energy storage capacity.

Installations across all segments were up 90% compared to 2022, just shy of doubling year-over-year, according to a report by Wood Mackenzie and American Clean Power Association.

 

The grid-scale segment, comprising large utility-scale storage projects, spearheaded this growth, adding 7.9 GW and 24,000 MWh of new capacity in 2023 – a 98% increase over 2022. This segment accounted for 90% of all installations nationwide last year.

California and Texas were the frontrunners, contributing 77% of the grid-scale additions in the fourth quarter alone. California deployed 56% of the quarter’s capacity, bringing online 6,593 MWh.

Residential Storage Booms

The residential storage market surpassed 703 MW of installed capacity in 2023, rising 41% from last year. California became the first state to install over 100 MW of residential storage in the fourth quarter, setting a new record and accounting for 48% of total residential storage in the quarter.

Driven by a myriad of storage incentives, Puerto Rico narrowly edged out California to become the largest residential market in 2023, installing 287 MW.

The report forecasts that the residential segment will continue its upward trajectory, with over 9 GW of new capacity additions projected over the next five years.

CCI Segment Stagnates

While the grid-scale and residential segments soared, the community-scale, commercial, and industrial (CCI) segments remained relatively stagnant, increasing only 4% to 123 MW in 2023. Despite a strong fourth quarter in Massachusetts, the state failed to grow its annual CCI installations compared to 2022.

New York, however, emerged as the largest CCI market in Q4, deploying 12 MW of storage capacity. But it also failed to grow compared to last year.

 

Falling Prices

In the fourth quarter, battery prices saw a significant reduction, driven by subdued electric vehicle demand in both the EU and the U.S., coupled with an oversupply of battery-grade lithium raw materials.

At the same time, China-based original equipment manufacturers aggressively entered the market, offering direct current blocks at competitive rates to seize a larger market share. Despite this price competition, not all developers are swayed from the conventional full alternating current block solution typically provided by established integrators.

Wood Mackenzie anticipates continued growth, with 59 GW of new energy storage capacity additions projected across all segments from 2024 to 2028. The residential segment is expected to climb to 2.1 GW in annual installations by 2028, while the C&I segment is projected to reach 1.2 GW annually.

The global energy storage sector secured a record $9.2 billion in funding in 2023, up 59% from last year, according to Mercom Capital Group’s Annual and Q4 2023 Funding and M&A Report for Storage & Grid.

The U.S. Energy Information Administration predicts that solar power will emerge as the primary driver of electricity generation growth in 2024 and 2025, adding 36 GW and 43 GW of new solar capacity, respectively.