Batteries are surging onto the grid. How are they being used?

Utilities now report that arbitrage is the primary use case for battery storage, according to EIA’s latest survey.

Utilities are increasingly using batteries for grid stability and arbitrage, or moving electricity from periods of low prices to periods of high prices, according to a new survey from the US Energy Information Administration (EIA).

EIA published an early release of data from its EIA-860, Annual Electric Generator Report, which includes new detailed information on battery storage applications, including information on use cases, generator configuration and other details on the energy capacity of planned batteries.

At the end of 2023, electric utilities in the United States reported operating 575 batteries with a collective capacity of 15,814MW. EIA expects US battery capacity will more than triple, adding 35,953MW by the end of 2028 based on plans reported to it by utilities.

Utilities now report that arbitrage is the primary use case for 10,487 MW of battery capacity, making it the most reported primary use. In arbitrage, utilities charge batteries by buying electricity during low-cost periods and then sell that electricity when electricity prices increase.

Utilities can also make use of batteries to improve grid reliability with services that support the transmission of electricity, known as ancillary services. One type of ancillary service is frequency regulation, which is the most common use case reported at least once for battery capacity, EIA said.

Most batteries are used in multiple ways and have been reported in prior data releases, but EIA recently began asking utilities to identify the primary purpose of the battery. The early release of the EIA-860 data is the first time it has published this data element.

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Investors have poured billions of dollars into battery storage development to cash in on the booming market, largely based on speculative opportunities. But there’s one problem: markets have been slow to evolve, leading to an uptick in consolidation and growing uncertainty about the path ahead.

In California, the battery boom can be attributed both to ambitious state procurement mandates as well as a market structure that allows batteries to support resource adequacy needs, like power generators, as opposed to being relegated to ancillary service programs with limited needs.

But while new markets are opening up, none are quite like California. The Golden State’s ambitious clean energy targets, paired with a deepening “duck curve” and favorable market structure, create a sound economic opportunity yet to develop anywhere else.

Meanwhile in Texas, the the second-largest battery storage market in the U.S., battery developers, backed by billions in private equity, have flocked to ERCOT, in part due to favorable permitting and interconnection rules that have made Texas a hotbed for clean energy growth.

But the market opportunity for battery storage is somewhat limited. The majority of battery systems in Texas range from 1-2 hours in energy capacity, and asset owners are battling over a finite amount of capacity set aside to support daily grid management needs, often referred to as ancillary services.

Originally published by Sean Wolfe on Power Grid International.