2025 is set to be another record-breaking year for energy storage after the U.S. installed 12.9 GW in the first three quarters, surpassing 2024’s total installed capacity of 12.3 GW, according to a Tuesday report from the American Clean Power Association and Wood Mackenzie.
At the same time, prices for utility-scale battery systems have dropped 11% year-over-year, from $1,050/kW to $938/kW, the report found.
“Despite new federal policies and tariffs, the market fundamentals remain exceptionally strong,” said Allison Feeney, a research analyst at Wood Mackenzie, in a release. “Continued access to the ITC, cost-competitive domestic cell manufacturing, merchant revenue potential, state policy and load growth are driving our increased five-year outlook.”
2025 is on track to increase new capacity installments by 54% over last year, the report said. However, the market is still adapting to supply chain constraints that have emerged as the result of tariffs and the One Big Beautiful Bill Act’s new foreign entity of concern rules for claiming Inflation Reduction Act credits.
The OBBBA largely spared energy storage from the harshest cuts it made to the IRA’s clean energy tax credits. The report noted that its utility-scale five-year storage forecast “has increased 15% compared to pre-[OBBBA] projections, while the [community-scale, commercial and industrial] segment is projected to grow 23% from 2025 to 2029.”
Wood Mackenzie projects a 10% contraction in 2026 across all segments and another drop in 2027 before the storage sector rebounds with double-digit year-over-year growth projected for 2028 and 2029 as domestic manufacturing capacity comes online.
“The market is positioned for strong recovery,” it said.
Despite near-term year-over-year declines in the utility-scale and residential segments, the report projects 92.9 GW of storage will be installed in the U.S. over the next five years.
Residential storage is expected to deliver a record-breaking Q4 this year “driven by demand pull-in due to the expiration of the Section 25D [investment tax credit],” the report said. “In 2026, the residential market is expected to contract 6% and will transition toward third-party ownership models, which accounted for 57% of the residential storage market in Q3 2025.”
The utility-scale storage market is concentrated in California and Texas, with 82% of Q3’s new installations located in those states. California, Arizona, and Illinois led residential deployments “as attachment rates reached new highs,” the report said.
