US Storage Market Sets Q2 Record, But FEOC Rules Clouds Utility Outlook: Study

The United States (US) energy storage market set a record for quarterly growth in Q2 2025, with the installation of 5.6 gigawatts (GW), according to the latest US Energy Storage Monitor report. The report by the American Clean Power Association (ACP) and Wood Mackenzie showed that utility-scale market growth stood out, with 4.9 GW installed in Q2. This capacity is enough to power 3.7 million American homes during average peak demand. The move comes even as the push towards a greener grid faces one of its greatest challenges in the form of pushback from an administration that denies pretty much everything when it comes to the case for green energy. From climate change to carbon footprint to alleged subsidies and more. 

US Adds 608 MW Residential CCI Grows 38 MW

In the United States (US), the residential storage market, on the other hand, expanded by 608 megawatts (MW) in Q2. This represented a 132% year-over-year increase, with an 8% jump quarter-over-quarter.

Most of the growth was seen in California, Arizona, and Illinois, according to the report, which is driven by attachment rates hitting new highs and higher-capacity systems gaining market share. Community-scale, commercial, and industrial (CCI) storage expanded more modestly, adding 38 MW.

This represents an 11% year-over-year increase.

• California and New York led Q2 CCI storage installations, accounting for over 70% of total capacity, while Illinois gained traction.
• Community storage deployment remained limited due to high costs and policy constraints.

While early adopters continue leading in deployment, activity across the country shows clear demand for utility-scale energy storage as a solution to rising electricity prices and soaring energy demand. 

• Texas, California, and Arizona added more than 1 GW each.
• Markets such as the Southwest Power Pool (SPP) saw renewed activity, with three projects coming online in Oklahoma—the first in the region in three years.
• Florida and Georgia saw major forecast upgrades due to aggressive procurements by vertically integrated utilities.

FEOC Rules Threaten 10% Dip in US Utility Storage

The report evaluating the impact of the US policy shift anticipates the US storage will reach 87.8 GW by 2029, driven by residential and utility-scale segments amidst a constantly evolving policy environment. On the other hand, in the US, utility-scale storage installations are estimated to see a 10% drop year-over-year in 2027, largely due to uncertainty over pending Foreign Entity of Concern (FEOC) regulations on battery cell sourcing.

“Pricing and FEOC uncertainty, and slow community storage development are expected to limit CCI segment growth below 1 GW by 2029, though Massachusetts' SMART 3.0 may help boost future deployment,” said Allison Feeney, research analyst at Wood Mackenzie. “Residential storage is expected to outpace solar due to stronger policy resilience, high attachment rates in key markets like California and Puerto Rico, and continued ITC access through third-party ownership.”

Allison Weis, Global Head of Storage at Wood Mackenzie, noted that while the One Big Beautiful Bill Act (OBBBA) preserved the Investment Tax Credit for energy storage, headwinds remain, and the five-year buildout could be reduced by 16.5 GW.

“After 2025, utility-scale storage projects must comply with new, stringent battery sourcing requirements to receive the ITC,” said Weis. “While domestic cell supply is ramping up, supply chain shortages are possible, although developers are continuing to consider supply from China to fill in any gaps. A rush to start construction under the more certain near-term regulatory framework uplifts the near-term forecast. Projects that have not met certain milestones by the end of 2025 are at risk of exposure to changing regulations. There is additional downside risk if further permitting delays threaten solar and storage projects.”