US Energy Storage Installations Rise In Q3 2025, Outlook Mixed Amid Policy Uncertainty

The U.S. energy storage market continued to expand in the third quarter of 2025, with 5.3 gigawatts (GW) of capacity installed nationwide, lifting year-to-date additions above total installations recorded in all of 2024, according to the latest U.S. Energy Storage Monitor report released by the American Clean Power Association (ACP) and Wood Mackenzie.

Total installations rose 31% from a year earlier, though volumes fell 6% from the record levels seen in the second quarter. Utility-scale projects drove growth, accounting for 4.6 GW of capacity added in the quarter, up 27% year-on-year, with Texas and California together representing 82% of new installations.

Residential Storage On The Rise Too

Residential storage installations climbed for a sixth consecutive quarter, reaching 647 megawatts (MW), a 70% increase from a year earlier. California, Arizona and Illinois led deployments as attachment rates hit record levels. Wood Mackenzie expects the residential segment to set a new quarterly record in the fourth quarter as customers accelerate installations ahead of the expiration of the Section 25D tax credit.

The community, commercial and industrial (CCI) segment added 33 MW in the quarter, down 8% from a year earlier. California accounted for more than half of installations at 17.8 MW, while Illinois and Massachusetts emerged as growth markets, supported by state rebate programmes and community storage projects.

“Meeting rising demand and maintaining grid reliability increasingly requires energy storage,” said John Hensley, ACP’s senior vice president for markets and policy analysis.

Near-term slowdown expected 

Wood Mackenzie forecasts an 11% contraction in U.S. utility-scale storage installations in 2026 and an 8% decline in 2027, citing near-term supply chain adjustments as domestic battery manufacturing scales up to comply with new tariff rules and non-foreign entity of concern requirements linked to the Investment Tax Credit (ITC).

The market is expected to rebound from 2028, with double-digit annual growth projected in 2028 and 2029 as domestic manufacturing capacity comes online.

Overall, Wood Mackenzie estimates nearly 93 GW of energy storage capacity will be installed across the United States over the next five years. The firm has raised its five-year utility-scale storage forecast by 15% compared with projections made before the passage of the One Big Beautiful Bill Act, while the CCI segment is expected to grow 23% between 2025 and 2029.

Market Fundamentals Strong 

“Despite new federal policies and tariffs, market fundamentals remain strong,” said Allison Feeney, a research analyst at Wood Mackenzie, citing continued access to the ITC, cost-competitive domestic manufacturing, merchant revenue opportunities, state-level incentives and rising electricity demand.

State programmes are expected to cushion federal policy uncertainty, with California’s Net Billing Tariff, Massachusetts’ SMART 3.0 scheme and Illinois rebate programmes supporting steady CCI deployment through 2029. In the residential market, a shift toward third-party ownership – which accounted for 57% of installations in the third quarter – is helping offset the impact of the Section 25D tax credit expiry.

“Storage has evolved from an emerging technology into an essential grid resource,” said Allison Weis, Wood Mackenzie’s global head of storage.