How the US battery boom is shifting the energy mix

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

The reversal has angered environmentalists and transportation advocates, who argued that the policy — the first of its kind in the U.S. that would go into effect within weeks — would reduce the city’s air pollution while providing much-needed revenue for the distressed public. transportation system.

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

Next, in Data Drill we look at the state of American solar panel production. Today marks the expiration of the two-year U.S. moratorium on tariffs on Chinese solar companies found guilty in a Commerce Department investigation into diverting imports through Southeast Asia. The pause was ordered by President Joe Biden in 2022 to provide a temporary reprieve for developers who worried the additional tasks would slow solar deployment due to the lack of a domestic supply chain. Two years later, solar energy production is booming, but the country continues to import more panels than ever.

Thank you for reading,

Amanda

How the US battery boom is shifting the energy mix

U.S. developers are deploying batteries at a record pace, pushing the boundaries of renewable generation as growing energy demand threatens to slow the decarbonization of the electric grid.

On Tuesday, batteries supplied 2GW of power to the Texas grid, the third most on record, to help meet peak evening demand and offset the drop in solar generation as the sun sets. In California, battery storage regularly provides a fifth of the power in the evening, according to data from GridStatus.io.

“We’re really getting to the 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 installed 9.2 GW of storage. “Storage managed to provide energy during the evening disaster. . . at a lower cost than some fossil fuels.”

According to the U.S. Energy Information Administration, the two states are leading the U.S. expansion of battery storage capacity, which is expected to nearly double its footprint to just under 30 GW this year.

“Storage is becoming increasingly important and helps stabilize renewable energy production and increase its ability to serve as a reliable baseload source,” said Jason Allen, CEO of Leeward Renewable Energy, a major developer. On Tuesday, LRE signed an agreement with Pacific Gas & Electric to supply power from its battery project in Arizona during times of peak demand.

President Biden’s landmark Inflation Reduction Act extended tax credits to battery storage developers for the first time, reducing costs for systems and promoting the deployment of turbochargers to help achieve the nation’s goal of 100 percent carbon-free electricity by 2035.

The addition of batteries generates rapid returns for developers and helps address concerns about grid reliability from renewable energy. Batteries capture excess wind and solar energy and deploy it during parts of the day when generation is low, limiting the use of high-radiation ‘peaker’ plants that provide power quickly during times of high demand.

“[Developers] recover their investments in a very short time,” said Juan Arteaga, a senior associate at Enverus, adding that the role that battery storage systems play on the electricity grid varies widely depending on the market. While battery storage makes up a large portion of generation in California, in Texas it is focused on ancillary services, covering unforeseen events and serving the grid during times of supply-demand mismatch.

Batteries can play an important role in meeting the expected increase in electricity demand from data centers used for internet and artificial intelligence. Big Tech groups like Microsoft and Google have made pledges to meet their energy consumption from carbon-free sources by 2030, a goal that would be difficult to achieve without batteries.

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

But until battery storage systems reach greater scale, analysts say growing demand for electricity will be met by fossil fuels. “There will definitely have to be a mix of generations,” said George Bilicic, general manager at Lazard.

“There are certainly enough projects in the pipeline. I’m not sure there will be enough to meet the time frame,” said Brian Hayes, CEO of Key Capture Energy, a battery storage developer.

Other hurdles facing the battery storage sector include years of wait 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 percent from 2026, a move that 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 rates, you get a bit of a mixed bag,” said Andrew Waranch, CEO of Spearmint Energy, which has battery projects in 11 states. “We would love to buy American, and if the quality and price align, we certainly will.”

Data exercise

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

The milestone comes at a pivotal time for U.S. solar, the fastest-growing source of new electricity generation on the grid. Despite growth in domestic production, the US is importing panels at record levels, and a group of manufacturers are calling for greater trade protections to shield the industry from a flood of cheap imports from Chinese companies, which have a large footprint in the country’s southeast. Asia, where the US gets most of its supply.

Tomorrow, the U.S. International Trade Commission will decide whether to consider a petition filed by solar energy giants including First Solar and Qcells calling for additional tariffs on solar energy imports from Southeast Asia, a move that clean energy groups as the American Clean Power Association argues. could delay US decarbonization.

Track moves

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

• Wooden Mackenzie appointed Xizhou Zhou to lead the consultancy’s energy and renewable activities. Zhou concurs S&P Global.

• Iris Jancik will suffer International Battery Metalsa lithium producer, as CEO.

• Andrew Shawa leading Washington energy lobbyist, agrees 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

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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 @FTEnergy. View previous editions of the newsletter here.