May 18 (Reuters) – Battery energy storage companies in the United States are seeing a surge in interest in artificial intelligence data centers, but long lines to connect to the grid and a supply chain heavily dependent on China are hampering the sector’s ability to grow quickly.
Battery energy storage systems, which absorb energy when supplies are abundant and discharge it back to the grid when needed, have been increasingly deployed in regions with high renewable energy consumption, such as California, where they help meet demand at night when solar power begins to wane.
Now, they are emerging as a promising solution for data centers. When installed before the meter, they can smooth power demand and optimize transmission line capacity. Behind the meter, they can manage demand spikes, reduce energy consumption when the grid is overloaded, cover temporary power outages and decrease reliance on backup diesel generators.
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However, experts state that the sector still faces bottlenecks.
“Supply chain constraints and interconnection queues are two of the most important barriers,” said Harvest-Time Obadire, senior energy and renewables analyst at BMI, a unit of Fitch Solutions.
While data centers can be built in 18 to 24 months, connecting to the power grid can take three to seven years in parts of the U.S., he added.
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Demand may increase sharply
Data center power demand could reach 9% to 17% of U.S. electricity supply by 2030, or up to 790 terawatt-hours (TWh), compared with about 4% today, according to the Electric Power Research Institute.
Meanwhile, the U.S. added a record 57.6 GWh of new battery energy storage capacity in 2025, according to the Solar Energy Industries Association (SEIA), bringing total deployed capacity to 166.1 GWh.
The group projects that by 2030, annual battery storage deployments will reach 110 GWh, with a significant portion driven by data center demand.
These systems also pair well with natural gas generation, which is emerging as a key solution for energy-intensive data centers.
“Batteries will be an essential resource in data centers that rely on on-site gas generation, as gas generators are not fast enough to keep up with volatile AI data center demand,” said Ben Hertz-Shargel, global head of network transformation at Wood Mackenzie.
This demand is generating a wave of business. Energy storage company Fluence is involved in more than 30 GWh of data center-related projects around the world, with a significant portion in the US, Chief Executive Julian Nebreda said.
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Tesla made $430 million in revenue last year from the sale of its electricity storage systems to xAi, and Calibrant Energy agreed to supply a 31 MW/62 MWh battery system at an Aligned data center campus in the Pacific Northwest.
Meanwhile, battery storage companies are doubling down on efforts to expand domestic manufacturing and calibrate offerings specifically for AI companies.
Supply chain, interconnection challenges
However, there are challenges to quickly increasing the capacity of new battery installations.
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For example, although the US is expanding domestic manufacturing capacity for lithium-ion phosphate batteries, the supply chain for key materials remains heavily dependent on China, creating short-term bottlenecks.
“This is an opportunity to expand manufacturing in the U.S. that would otherwise have been priced out of the market, but the supply of materials from outside of China still needs to be further developed,” said Chris Dendrinos, an analyst at RBC Capital Markets.
Grid interconnection queues continue to pose bottlenecks for front-of-the-meter battery projects, which are connected to the grid, and can delay projects in markets across the country for several years.
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PJM Interconnection, the largest U.S. grid operator, effectively stopped processing new grid connection requests in 2022 after becoming overwhelmed with projects, before beginning to accept new requests several months ago.
“If it weren’t for multi-year interconnection queues, we could deploy a utility-scale battery storage system in less than a year to meet power grid needs,” said Nebreda.
