The FDI angle

• Record $11.45bn pledged to US battery energy storage projects in the first half of 2024.
• California and Texas are the leading states with the most operating battery capacity and planned investment.

Why it matters: Bess investments are a critical part of the world's transition from fossil fuels to intermittent renewable energy sources like solar and wind.

Investment pledged to battery energy storage systems (Bess) across the US in the first half of 2024 has already surpassed any previous calendar year on record, as developers set out plans to help balance supply and demand on the energy grid as it becomes increasingly reliant on variable renewable sources such as wind and solar.

Between January and June 2024, fDi Markets tracked a record $11.45bn worth of greenfield investment pledges by domestic interstate and foreign companies across 35 standalone Bess projects in the US. This is already more than the $9bn worth of capital pledged in the whole of 2023 and surpasses the 25 standalone Bess projects recorded between 2011 and 2023.

Bess projects help ensure a stable supply of electricity by storing surplus energy during off-peak periods and discharging it when needed. They are often colocated and paired with green energy projects with intermittent generation patterns.

A June 2024 report by consultancy EY found that the US was the most attractive global market for Bess investments. It added that California and Texas are the states with the greatest Bess capacity and planned investment due to having real-time trading and dynamic pricing, which allows Bess developers to make higher returns by buying and storing energy when there is low demand and prices, and releasing it at times of higher demand and prices. 

According to the latest monthly estimates for July 2024 by the US Energy Information Administration (EIA), California, with 9916 megawatts (MW), and Texas, with 4827MW, are the two US states with the most operating battery capacity. The two states together account for more than three-quarters of the current capacity of 20.7 gigawatts (GW). The EIA forecast in January 2024 that, if all developers stick to their project timelines, US battery storage capacity will reach more than 30GW by the end of 2024.

Norway's state-owned energy giant Equinor is one of the major investors in the US Bess market, having entered it through the July 2022 acquisition of Texas-based Bess specialist East Point Energy. In April 2024, the company announced its first two projects in the Lone Star State with a total capacity of 110MW. The projects will sell energy back to the Electric Reliability Council of Texas (ERCOT), the electric grid operator for Texas, through a merchant basis agreement.

“Energy storage is essential to balance the supply with the increasing demand for energy in Texas,” Andrew Foukal, the CEO of East Point Energy said upon the project’s announcement. “Texas and the ERCOT market, in addition to the US East Coast, continue to be a strategic focus for future Bess projects. Our ownership in East Point Energy creates a solid basis for building a material and profitable battery storage position across attractive US power markets,” a spokesperson from Equinor said. 

Equinor’s Bess projects in the state will operate on a fully merchant basis. This differs from a conventional power purchase agreement, where a fixed price is agreed under a ‘pay-as-produced’ agreement. Instead, a merchant basis allows for the company to receive the fluctuating daily market price for energy produced from ERCOT, instead of a fixed one.

Oliver Kerr, the managing director at Aurora Energy Research, a power market analytics company, tells fDi that high electricity demand in Texas makes it a prime market for investments in battery storage projects. “One is that Texas is already building a lot of solar and we’ve seen it go from having hardly any solar a few years ago to being arguably the leading state for solar build out right now. If you add into that rising load with things like data centres, you have all of the right fundamentals in place for batteries.”

More on the energy transition:

• Inflation stalls nascent US offshore wind sector
• COP28: three FDI charts to grasp the tension between renewables and fossil fuels
• Opinion | China’s early decarbonisation holds lessons for world

Industrial growth across Texas has even resulted in Californian companies investing in the Texan Bess market. Santa Monica-based Cypress Creek Renewables announced in May 2024 that it had begun commercial operations at its hybrid solar and storage facility in Brackettville, Texas. Its pipeline of 24 projects in Texas has a total capacity of 6GW.

“Clean reliable power is critical to supporting the remarkable continuing growth happening in Texas,” the company’s CEO, Sarah Slusser, said in a statement, adding that the company’s solar and dispatchable energy batteries in Texas have “already proven vital to keeping the lights on and the air conditioning running when Texans need it most”. 

Bess growth is projected nationwide. “This is not a trend that’s isolated to Texas. We see similar trends across nearly every US market. California is a mature market for batteries. They’ve already experienced a lot of solar. Then the battery boom tends to come hot on the heels of that. Investors are now looking at where to go next,” Kerr said.

Analysts remain optimistic about future growth in Bess, despite threats from former president and Republican nominee Donald Trump that he would roll back climate policies if he is re-elected in November. “I don't think the industry is slowing down a great deal, no matter who’s in the White House,” Kerr concluded.

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Tárlach Russell is a research analyst for fDi Markets focused on North America.