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Today in Energy

March 24, 2021

EIA’s AEO2021 shows growing use of batteries on the U.S. electricity grid

U.S. battery storage power capacity
Source: U.S. Energy Information Administration, Annual Energy Outlook 2021

In the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2021 (AEO2021), EIA projects a significant number of battery energy storage systems will be added to the U.S. power grid. In the AEO2021 Reference case, which reflects current laws and regulations, 59 gigawatts (GW) of battery storage will serve the power grid in 2050.

Battery storage systems store electricity produced by generators or pulled directly from the grid, and they redistribute that electricity later. They typically charge, or store, electricity during hours of the day with relatively high energy supply, low energy demand, and low power prices. The batteries are then available to discharge electricity during hours with low supply, high demand, high power prices, or when the grid needs backup capacity for reliability. Most battery storage systems currently installed in the United States are lithium-ion batteries. They help add flexibility to power grids with large amounts of non-dispatchable renewables, such as wind and solar.

In AEO2021, battery storage can either be built on a standalone basis to charge from the power grid, or as a co-located system that charges directly from an onsite solar photovoltaic (PV) power generator. Falling battery costs, growth in non-dispatchable renewables, and the application of the Investment Tax Credit to co-located storage systems are key drivers of AEO2021’s battery storage capacity projections.

AEO2021 includes alternative scenarios (called cases) that examine the sensitivity of results to changes in the costs of renewables and the availability of oil and natural gas resources. Of the projected battery storage capacity in 2050, in all cases, 16 GW come from historical builds, announced projects, and state policy mandates. The Low Oil and Gas Supply case and Low Renewables Cost case show the most growth in energy storage relative to the Reference case.

In the Low Oil and Gas Supply case, which assumes higher natural gas prices than the Reference case, natural gas combined-cycle electricity generation declines more than in the Reference case and is replaced by coal, nuclear, solar, and wind generation. To support this generation mix, 67 GW more battery storage capacity is built compared with the Reference case.

In the Low Renewables Cost case, which assumes a 40% reduction in the cost of renewables and energy storage compared with the Reference case, increased solar and wind generation replace coal, nuclear, and natural gas combined-cycle generation. Through 2050, 108 GW more battery storage capacity is added compared with the Reference case.

Principal contributor: Vikram Linga