The federal and certain state governments have created obstacles to wind and solar energy generation development at the same time the country is experiencing significant increase in electricity demand. However, a return to fossil fuels is not the only avenue of interest or viable solution. “Alternative Energy” sources, including nuclear, geothermal, biomass, fuel cells and battery storage systems can be important components of a diverse energy infrastructure and are experiencing increased opportunities to meet growing demands. This note on battery storage is part of a series reviewing recent and current federal and state initiatives to expand alternative energy resources.
Battery Energy Storage.
Energy storage in general is understood to be a critical component for a sustainable energy grid. Traditionally, storage was primarily in the form of pumped hydroelectric projects. More recently battery energy storage has made great strides. Batteries, and when in groups comprising a system – battery energy storage systems (“BESS”) – enable the storage (or “charge”) of energy, including but not limited to energy from renewable sources such as solar and wind, and allow such energy to be released (or “discharged”) when needed, especially during peak demand. This benefit of BESS makes the grid more stable, reducing disruptions and blackouts. BESS are also generally cost-effective, flexible, and scalable, with multiple regions deploying batteries to address transmission congestion and for the provision of fast-responding reliability services, in addition to supporting the integration of renewable resources to the grid.
Drivers which contribute to the growth of BESS include declining costs, the need for storage to support demand and decrease curtailments, maturing market rules, and supportive regulatory policies. Indeed, utility-scale battery storage capacity increased by 66% in 2024 and continued to lead planned capacity additions in the United States in 2025 according to the U.S. Energy Information Administration (“EIA”). Further, as demand stemming from artificial intelligence and data centers continues to grow, battery storage has been seen as a critical ally for such technological developments, also citing flexibility and instant load balancing in the context of pairing storage with solar for reliable power for data centers.
Federal Initiatives.
Following the enactment of the Inflation Reduction Act (“IRA”) in 2022, certain standalone energy storage systems were newly eligible to receive a 30% Investment Tax Credit (“ITC”) through 2032, which could be boosted with bonuses for domestic content, energy communities, or low-income projects. This was the first time energy storage technology, including battery storage, did not need to be paired with energy production, such as solar, to qualify for the ITC.
In July of 2025, Congress passed the One, Big, Beautiful Bill Act (“OBBBA”), which eliminated several energy credits and accelerated the phase-out for wind and solar facilities to 2027 for facilities which would begin construction after July 4, 2026 from a previous deadline of either 2033, 2034. While the OBBBA does not phase out energy storage credits until 2033, it does impose heightened Foreign Entity of Concern (“FEOC”) material assistance requirements, limiting the percentage of project costs associated with companies with ties to China, Russia, Iran, or North Korea.
In addition to tax credit associated incentives, the federal government is encouraging domestic battery production through grants. On March 13, 2026 the Department of Energy’s (“DOE”) Office of Critical Minerals and Energy Innovation announced a funding opportunity of up to $500 million to expand U.S. critical mineral and materials processing and derivative battery manufacturing and recycling. Projects sought included those which would help to increase the domestic manufacturing capacity for strategic battery materials, components, and technologies, and increase the U.S. processing capacity for critical minerals and materials for use in advanced batteries. Further, citing two Executive Orders issued by President Trump which called for unleashing American energy and the development of domestic mineral production, the U.S. energy storage industry announced on April 29, 2025 a commitment to invest $100 billion into building American-made grid batteries, expected to create about 350,000 jobs across the battery energy storage industry.
State Initiatives.
As of Fall 2025, California, Texas, and Arizona are leading the way in BESS growth, with the three states accounting for 75% of utility-scale BESS capacity in the U.S. In February 2026, Texas surpassed California to become the U.S. leader in battery storage capacity, based on Inside Climate News’ analysis of U.S. EIA data. However, as of April 2026, California continues to lead in megawatt-hours developed, i.e., the amount of electricity a battery system can discharge before needing to be recharged. This success has been attributed to California-specific policy encouraging the construction of four-hour systems in contrast to other jurisdictions which may not emphasize longer duration storage systems. For example, California Independent System Operator Corporation (“CAISO”) pushed for BESS installation after it was forced to institute rotating blackouts in the midst of a heat wave during the summer of 2020. Among other actions to better prepare for future heat waves, CAISO and the California Public Utilities Commission (“CPUC”) worked to ensure regulatory barriers and other interconnection issues would not prevent generation and battery storage projects from reaching completion. Battery storage has been credited for avoiding similar situations in subsequent years.
Policy tools, including the establishment of procurement targets, integrated resource plan requirements, demonstration programs, and financial incentives, have contributed to the growth of BESS and energy storage in individual states. As of March 2026, 17 states have adopted favorable energy storage policies encouraging the growth in BESS. California was the first state to adopt a procurement target with a goal of 1,825 MW by 2020, which was achieved. In February 2026, the CPUC issued an integrated resource planning decision requiring investor-owned utilities, electric service providers, and community choice aggregators to procure 6,000 MWs of new clean energy and storage net qualifying capacity by 2032, with at least 25% of such new procurement from clean, firm power or long-duration energy storage. In January 2026, Illinois became the most recent state to establish a procurement target with its Clean and Reliable Grid Affordability Act, directing the Illinois Power agency to procure 3,000 MW of energy storage by 2030. Massachusetts has provided $20 million in funding for storage projects to test different energy storage technologies and use cases through its Advancing Commonwealth Energy Storage Program. Though benefitting energy storage systems intended for use on residential or commercial property and not utility-scale deployment, in 2022 Maryland became the first state to establish a state income tax credit for energy storage available to residential and commercial taxpayers, the Maryland Energy Storage Income Tax Credit. Such tax credit was replaced at the close of 2024 by Maryland’s Residential and Commercial Energy Storage Program, providing grants to Maryland residents and commercial entities to purchase and install a battery energy storage system on their property.
Conclusion.
This limited series has discussed up and coming nuclear and geothermal energy proliferation, initiatives driving such expansion, and the value of such resources and technology for powering our grid efficiently and reliably. Coupled with the expansion of these alternatives to fossil fuels, the expansion of battery energy storage compounds important grid benefits. These developments play fundamental roles in meeting the rising energy demand in the United States while diversifying our resource portfolio amidst political pushback.
For more information, please contact R. Keith Gordon, Peter J. Scanlon, or Paige L. Punzalan.
