Battery storage systems in the US increasingly profit from price volatility

Battery storage systems have been expanding at an accelerating pace in many regions around the world in recent years, serving a range of functions in power systems. While initially they were used primarily to provide balancing services, they are now increasingly profiting from intraday price differences on short-term electricity markets. In the United States, price arbitrage is the primary objective of operators of nearly half of the installed capacity of large-scale battery storage systems.

With installed capacity at solar and wind power plants growing, and the associated increase in price volatility on short-term markets, battery storage operators have also been taking advantage of this trend in recent years. In addition to price arbitrage, battery storage systems can generate revenue by providing balancing services, storing surplus renewable energy, or reducing peak loads on the grid, for example.

In the United States, the government agency U.S. Energy Information Administration (EIA) regularly surveys battery storage operators. Since 2023, the agency has also asked operators to report the primary purpose of their battery storage systems. Price arbitrage peaked in 2024, when operators representing more than 40% of installed capacity reported it as their primary purpose. Overall, operators representing two-thirds of installed storage capacity cited price arbitrage as a use case.

The second most common primary purpose for operating storage systems is frequency regulation. However, the market in this segment is limited and could become saturated relatively quickly as battery storage expands rapidly. This purpose was previously the primary source of revenue for battery storage systems. Last year, however, operators representing just 24% of installed capacity cited frequency regulation as their primary use case.

In the United States, battery storage is distributed very unevenly across regions, with most capacity located in California and Texas. The high concentration of large-scale battery storage in these two states is no coincidence; it is linked to the high penetration of renewable energy sources.