Tuesday Dec 06, 2022

EIA Annual Energy Outlook 2022 – EIA


The Drivers for Standalone Battery Storage Deployment is based on the Annual Energy Outlook 2022 which reflects current laws and regulations as of November 2021. As such, it does not incorporate the recently enacted Inflation Reduction Act, which will be reflected in future editions of the AEO.

Executive Summary

Large-scale battery storage capacity on the U.S. electricity grid has steadily increased in recent years, and we expect the trend to continue.1,2 Battery systems have the technical flexibility to perform various applications for the electricity grid. They have fast response times in response to changing power grid conditions and can also store excess generation from the grid, allowing energy from solar or wind resources to be used during the time of highest value, not just when produced. However, the degree to which different applications will drive future battery storage deployment is uncertain.

This study evaluates the economics and future deployments of standalone battery storage across the United States, with a focus on the relative importance of storage providing energy arbitrage and capacity reserve services under three different scenarios drawn from the Annual Energy Outlook 2022 (AEO2022). The analysis focuses on the AEO2022 Reference case and side cases with relatively high deployment of battery storage through 2050. We assume that a battery storage facility can receive two sources of revenue payment: an energy payment (from selling electricity generation to the grid) and a capacity payment (from its contribution to grid reliability through capacity reserves). The availability and design of these capacity and energy markets currently vary across the United States, with some utilities relying on power exchanges, some on market mechanisms, and other utilities providing such services under regulatory constructs. Assessing the economic drivers of standalone battery storage deployment can allow regulators, policymakers, and market operators to evaluate the various roles of battery storage, particularly as more intermittent renewable generators are added to the power grid and competing storage technologies come into play. The fundamental drivers of energy storage value as evaluated in our analysis will be similar, regardless of whether the utility participates in a regional electricity market or is operating as a vertically integrated generator and distributor of electricity within a regulated service territory.

Our analysis of the economics of future standalone battery storage deployments suggests that combining revenue streams from different applications is important when evaluating future investment decisions. In addition, in some scenarios one application may be a larger economic driver than the other:

  • In the AEO2022 Reference case, battery storage is primarily deployed when receiving both energy and capacity payments.
  • In the Low Renewables Cost case, we assume lower capital costs for battery storage and renewable power plants compared to the Reference case. The lower capital costs result in battery storage being more competitive with natural gas units in the capacity market, even when receiving lower capacity credits. Greater penetration from intermittent resources also reduces marginal electricity prices, indicating that energy markets may be less important.
  • When electricity prices are higher, as in the Low Oil and Gas Supply case, the energy payment for battery storage applications can be a stronger driver for future battery storage deployment than the capacity payment.


Battery storage can provide flexible capacity and energy to the power grid, and can be used in a wide range of applications3 that we categorized into three primary types:

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