Energy storage is now the fastest-growing segment in the battery sector, according to Iola Hughes, head of research at Benchmark Mineral Intelligence. Expectations at the company forecast market expansion by about 44%, almost doubling the growth rate of lithium-ion battery demand (projected at 25%).

At a conference in California, Hughes predicted that energy storage could account for 35%–40% of battery demand in the United States in the coming years. This will have a significant effect on the supply chain, chemistry choices and the priorities of policymakers and manufacturers.

The role of storage is growing while chemistry innovation (and cost) shapes how storage supports the grid at different durations. Currently, lithium iron phosphate (LFP) is the leader in 4-hour applications, but is beginning to contest flow batteries and sodium-sulfur batteries in the 4- to 10-hour segment, largely due to cost. It offers a lower cost and more opportunity for innovation, making it the favored chemistry for utility-scale battery storage. LFP also has advantages in the supply chain when compared with nickel, cobalt and manganese.

Falling prices could be behind the rapid growth of storage deployment. Together with China, the United States represents 87% of all global installations of grid storage, although Saudi Arabia is gaining ground.

It’s also about size. “Giga-scale” projects—those exceeding 1 gigawatt-hour—are changing demand patterns.

“This year, we’re expecting nine of these to come online, accounting for 20% of battery demand,” Hughes said. She believes 21 more are in the pipeline, accounting for nearly 40% of demand.

After 15 years of stagnation, electricity demand is rising at an incredible rate, due in part to data centers, electrified heating, electric vehicle sales and reshored industrial capacity. Hughes foresees 20%–30% growth in U.S. electricity demand by 2030.

That growth will affect the grid, energy security and storage. Bigger data centers require additional power, and more of them are relying on on-site battery storage.

“These large projects are the ones that are going to be having high requirements for batteries,” Hughes said. She thinks the United States may become the epicenter of A.I.-driven load growth.

As electricity demand rises and policies become stricter, battery systems have become a strategic necessity. For example, stricter sourcing rules for cells and systems written into the Inflation Reduction Act’s investment tax credit are driving the urgency to secure LFP supply, resulting in a 61% increase in LFP gigafactories last year. However, challenges in qualifying for the Section 45X production tax credit remain because cathode and precursor supply are dependent on China.