The US energy storage market reached a record in 2025, with 18.9 GW of battery energy storage systems installed across utility-scale, commercial and residential segments, marking a 52% increase compared with 2024, according to the latest US Energy Storage Monitor released by the American Clean Power Association (ACP) and Wood Mackenzie.

The fourth quarter of 2025 marked the strongest quarter on record, with 5.8 GW installed. Utility-scale projects accounted for the majority of deployments, adding 4.9 GW during the quarter, a 31% increase year-on-year. New projects were spread across 13 states, highlighting growing market diversification beyond California and Texas, which have historically dominated utility-scale battery deployments.

The residential segment also reached a quarterly milestone in Q4, with 1 GWh installed as looming tax incentive expirations accelerated demand. In total, the residential market deployed more than 800 MW in 2025, representing a 75% year-on-year increase.

California led growth in the residential segment, installing 700 MW more in 2025 than in 2024. The increase was driven by high retail electricity prices and the state’s net billing tariff, which incentivizes battery discharge during peak demand periods. Puerto Rico, Texas, Arizona and Illinois completed the top five markets for storage growth last year.

The community, commercial and industrial (CCI) segment also saw record activity, with 77 MW installed in Q4 as supportive state policies boosted deployments.

“The record-breaking energy storage growth seen in 2025 highlights how technology innovation is transforming America’s grid,” said John Hensley, Senior Vice President of Markets and Policy Analysis at ACP. “This momentum, driven by supportive policy and expanding market opportunities, demonstrates that large-scale storage is now a cornerstone of delivering affordable, reliable and American-made energy in communities nationwide.”

Installations expected to exceed 28 GW by 2031

Momentum in the US battery storage market is expected to continue over the coming years. Wood Mackenzie’s five-year outlook projects that the US will install around half a terawatt-hour (TWh) of storage between 2026 and 2031, a 250% increase compared with the previous five-year period.

Utility-scale installations are expected to lead growth, with annual additions projected to double between 2025 and 2030. A previously anticipated short-term slowdown in the segment is no longer expected, as a record number of projects began construction in 2025 in order to secure eligibility for the federal Investment Tax Credit (ITC).

Residential storage demand also surged in 2025 as consumers rushed to benefit from the expiring Section 25D tax credit. However, the segment is expected to contract by around 2% in 2026 following the expiration of the incentive.

Meanwhile, annual CCI installations are projected to grow by 39% between 2025 and 2030, supported by declining system costs and expanding policy support that is improving project economics.

“2025 was a banner year for the energy storage market,” said Allison Feeney, research analyst at Wood Mackenzie. “Declining system costs, supportive policies and growing revenue opportunities have all contributed to the impressive growth over the last six years.”

Policy uncertainty could affect future deployment

Despite strong growth prospects, Wood Mackenzie warns that regulatory uncertainty could affect future deployment, with around 52 GW of storage capacity potentially influenced by different policy and demand scenarios.

In a high-case scenario, around 36 GW of new battery storage could be deployed in 2031, driven by stronger electricity demand growth, federal permitting reforms and continued access to tax credits under the One Big Beautiful Bill Act (OBBBA).

However, in a low-case scenario, deployment could fall 17% below the base case if trade barriers increase system costs and electricity demand growth slows.

“The market trajectory is strongly upward, but large load buildout and federal policy will determine whether we reach the high case of 26 GW by 2031 or something more conservative,” said Allison Weis, Global Head of Storage at Wood Mackenzie.