By Sarah Main

The U.S. energy storage market has entered a new era. In the past year, record-breaking deployment of battery energy storage systems (“BESS”), sweeping federal legislation, new state permitting regimes, and breakthrough chemistries have fundamentally reshaped the landscape for BESS developers, offtakers, and policymakers alike. In this issue of Climate Law Matters, we focus on BESS, the technology at the heart of the clean energy transition that has undergone remarkable market transformation over the last few years.

In the first quarter of 2026, the U.S. storage market installed a record 3.3 gigawatts (“GW”)/8.4 gigawatt-hours (“GWh”) of BESS. Of this, approximately 2.3 GW of capacity was attributable to utility-scale installations. The residential and commercial BESS sectors also saw record installations in Q1, largely due to pipeline projects coming online after priority projects that sought to meet tax incentive eligibility deadlines in the second half of 2025. This momentum is not likely to slow anytime soon. By 2031, installed BESS capacity in the U.S. is projected to grow by over 275%. Data centers, fleet electrification, domestic supply chain and manufacturing incentives, and the broader need to firm the grid and manage intermittent renewables are accelerating demand for BESS at a pace that was difficult to imagine just a few years ago. The current state of the market signals a bright spot for batteries in the clean energy future. 

At the same time, the policy and regulatory landscape surrounding BESS has shifted in fundamental ways. BESS emerged from the One Big Beautiful Bill Act (“OBBBA”) as a clear winner. The OBBBA preserved robust tax incentives for energy storage even as it pulled back support for other clean energy technologies like wind and solar. At the same time, the OBBBA introduced new challenges for BESS developers facing an already constrained supply chain for battery components. The OBBBA’s strict new Foreign Entity of Concern (“FEOC”) requirements are reshaping procurement and supply chain decisions for those seeking to qualify for tax credits. 

Meanwhile, states are advancing their own regulatory and siting frameworks to support the continued deployment of BESS. For instance, Massachusetts launched an entirely new, consolidated siting and permitting regime for storage projects, effective this month, that promises to reshape how BESS facilities move from concept to construction.

These market and regulatory forces are creating new opportunities, innovations, and challenges across the BESS value chain. Developers are navigating novel permitting pathways and community engagement mandates. Data centers and hyperscalers are an expansive new market for BESS, but one that is not unaffected by a changing state and local attitudes towards these projects and their massive appetite for power. Offtakers are structuring virtual power purchase agreements to secure storage capacity. Manufacturers of other battery chemistries, like sodium-ion batteries and compressed-air storage, are coming to market as solutions to address the thermal risks and supply chain vulnerabilities of the market-dominating lithium-ion technology. And regional transmission operators are exploring use cases for BESS to alleviate transmission constraints and address reliability needs, especially amid the new compliance requirements under FERC Order 1920, as we discuss below. The critical path to BESS deployment relies on market signals that appropriately value the many benefits that BESS can provide as a grid asset. 

In this issue, we examine the legal, regulatory, commercial, and technological dimensions of a storage market that is growing faster, and becoming more complex than ever before. 

Read the full report here.