The U.S. energy storage market achieved a milestone in the first quarter of 2024, installing a total capacity of 1,265 megawatts (MW) across various segments. This represents the highest capacity ever recorded for a first quarter in the U.S. and marks an 84% increase compared to Q1 2023. 4l6y1i

The newly released US Energy Storage Monitor report by Wood Mackenzie and the American Clean Power Association (A) highlighted that the grid-scale segment contributed significantly, with 993 MW installed. This achievement set a new record for the grid-scale segment in a first quarter. Nevada, California, and Texas were responsible for 90% of the newly added grid-scale capacity.

John Hensley, Vice President of Markets and Policy Analysis at A, noted the rapid expansion of the energy storage industry as crucial, providing solutions to rising energy demands and increasingly variable weather conditions that stress the grid. He mentioned that a strong start in 2024 raises expectations for the rest of the year, with the industry aiming for its first year of double-digit installations and a close competition between California and Texas for the leading storage state.

The residential segment also set a new record with 250 MW installed in Q1, an 8% increase from the previous record set in Q4 2023. California was a significant driver of this growth, with a 24% increase in installations compared to the previous quarter.

In the community, commercial, and industrial (CCI) segment, California led with 19.4 MW installed, although this was a 43% decline quarter-on-quarter (QoQ). Both New York and Massachusetts experienced one of their slowest quarters in recent years for the CCI segment.

Growth in grid-scale segment sures last year’s Q1 installations

Despite seasonal installation patterns leading to a QoQ decline, the 993 MW added in Q1 for the grid-scale segment marked a 101% increase from Q1 2023. The grid-scale segment is expected to end 2024 with 11.1 GW installed, a 45% year-over-year increase. Texas is anticipated to sur California in of new capacity installed this year due to increasing price volatility, expanding renewables, and load growth in a less regulated market.

The residential segment also saw growth, with California tripling its residential energy storage installations between Q1 2023 and Q1 2024. With attachment rates at 46% in Q1, there remains significant room for further growth. Nationally, high interest rates continue to impact the residential segment, increasing the proportion of Third-Party Ownership (TPO) installations.

The CCI segment experienced a downturn, with storage deployments in California remaining stagnant as most systems interconnected under NEM 2.0. However, deployments are expected to increase as the full effects of NEM 3.0 become apparent in the coming years. While New York and Massachusetts had down quarters, this is attributed to the CCI segment’s low quarterly installation numbers and is expected to be mitigated by new projects coming online in 2024 and 2025.

Boost for U.S. original equipment manufacturers from new domestic content guidance

Storage costs, from cell to block level, continue to decline steadily due to factors such as decreasing lithium costs and global supply chain dynamics, including oversupply and market competition.

Vanessa Witte, a senior analyst with Wood Mackenzie’s energy storage team, pointed out that U.S. original equipment manufacturers (OEMs) and integrators benefited from the new Domestic Content guidance for the Inflation Reduction Act. This guidance changed the reporting structure to qualify for the 10% adder, allowing developers to declare their qualification without needing direct manufacturing costs from the OEM.

Future projections

The U.S. energy storage market is projected to deploy 12.9 gigawatts (GW) across all segments in 2024. New capacity additions are expected to sur the 10 GW mark for the first time, with a forecast of 75 GW across all segments by 2028.

Wood Mackenzie’s five-year grid-scale forecast increased by 5% QoQ in MW , driven largely by an expanded pipeline of announced projects. This increase brings the cumulative volume of new additions through 2028 to 62.2 GW.