U.S. Energy Storage Market Sees Historic Growth in Early 2025 Amid Policy Uncertainty

The U.S. energy storage sector achieved unprecedented growth in the first quarter of 2025, signaling strong momentum despite looming policy challenges. According to the latest U.S. Energy Storage Monitor, released by Wood Mackenzie and the American Clean Power Association (ACP), installations surpassed 2 GW across all segments, setting a new Q1 record.

Utility-Scale Projects Lead the Charge

Utility-scale storage was the main driver behind this growth, contributing over 1.5 GW of new capacity in Q1—an impressive 57% rise compared to the same period last year. The sector is responding to rising electricity demand and grid stress by providing fast, flexible, and reliable solutions to support grid resilience.

“As energy demand soars, storage systems are stepping up to ensure stability and affordability,” said John Hensley, SVP of Markets and Policy Analysis at ACP. “Yet, uncertainty around long-term policies remains a key concern as the industry works to balance economic growth with a reliable power supply.”

Expansion Reaches New Territories

The report highlights expanding geographic diversity, with more states incorporating large-scale storage into their energy strategies. While California and Texas remain frontrunners, emerging markets such as Indiana are quickly gaining traction.

Thanks to favorable permitting processes and ample land availability, Indiana added 256 MW in Q1 2025—quadrupling its operational capacity. The state now ranks fifth nationally for storage projects in the interconnection queue, boasting over 10 GW of proposed capacity.

“States like Indiana are becoming storage hotspots,” said Noah Roberts, ACP Vice President of Energy Storage. “Meanwhile, traditional markets in the Southwest—such as Nevada and Arizona—are also seeing continuous growth. In fact, energy storage ranked as the second most deployed resource in Q1.”

Residential Storage Reaches New Heights

The residential segment also posted remarkable gains, adding 458 MW during the first quarter—its best performance on record. While California and Puerto Rico accounted for nearly three-quarters of this total, states like Illinois are beginning to establish their presence in the market.

Policy Uncertainty Casts a Shadow

Despite the sector's positive trajectory, the outlook beyond 2025 carries risks. The five-year forecast for utility-scale installations remains robust, but projections show a potential 29% decline in 2026 if proposed policy changes move forward.

The commercial, community, and industrial (CCI) segments have already seen a 42% drop in five-year expectations, challenged by tariff concerns and slower adoption of California’s NEM 3.0 framework.

Changes to federal tax incentives are also a significant concern. If access to the Investment Tax Credit (ITC) is limited as suggested in a recent reconciliation bill passed by the House, the report estimates an industry-wide buildout reduction of up to 27%. Distributed storage deployments would be hit hardest, facing a possible 46% contraction, while utility-scale projects could decline by 16 GW over the next five years.

Looking Ahead

For 2025, the report forecasts 15 GW / 49 GWh of energy storage additions across all sectors, with the utility-scale market expected to grow another 22% year-over-year.

As the U.S. energy transition accelerates, the success of energy storage will depend on ongoing innovation, robust infrastructure planning, and—crucially—stable, supportive policies.

“Q1 2025 has shown how integral storage is to managing a grid that’s seeing both increasing renewable input and overall demand,” said Allison Weis, Global Head of Energy Storage at Wood Mackenzie. “But the industry is at a pivotal point. We urge policymakers to recognize the value of regulatory consistency in maintaining momentum and unlocking future growth.”