Data Centers and the Future of Energy Storage | Switched On

Why It Matters

Data‑center‑driven storage growth creates a new, sizable market that can accelerate AI deployment while easing grid constraints and supporting broader decarbonization goals.

Key Takeaways

• AI data center boom drives new demand for longer‑duration batteries
• Falling lithium‑ion costs enable multi‑hour storage beyond UPS backup
• Batteries provide flexibility, reducing grid‑connection wait times for sites
• Around 30% of US storage growth may come from data centers
• Oversupplied EV battery market fuels stationary storage projects, avoiding shortages

Summary

The Bloomberg NEF "Switched On" podcast examines how the rapid expansion of AI‑driven data centers is reshaping the energy‑storage landscape. Operators are moving beyond traditional five‑minute UPS batteries toward multi‑hour lithium‑ion systems that can act as flexible resources, helping sites come online faster and manage complex power needs.

Falling battery prices and the need to bypass lengthy grid‑connection processes are the twin drivers of this shift. Bloomberg NEF estimates an addressable on‑site market of roughly 19.8 GWh, equivalent to a 30% uplift in U.S. storage capacity. About one‑third of tracked projects pair batteries with on‑site gas turbines, using the storage to smooth ramp‑up, improve fuel efficiency and provide grid‑forming services.

Concrete examples illustrate the trend: an Oregon data center avoided a 2030‑era grid upgrade by installing a battery that the utility can dispatch, while in Michigan utilities have struck deals with Google and Oracle that require matching battery capacity for new megawatt‑scale facilities. These arrangements demonstrate how batteries are being leveraged both at the facility gate and on the broader grid.

The implications are profound. Batteries are emerging as a strategic tool to de‑risk data‑center rollouts, reduce reliance on fossil‑fuel peakers, and open new revenue streams for storage developers. As the EV battery market experiences oversupply, manufacturers are pivoting to stationary storage, ensuring ample supply for this growing niche and potentially accelerating the decarbonization of high‑intensity compute workloads.

Original Description

The AI boom is ushering in a new era for energy storage. As data center buildout accelerates, batteries are evolving from short-duration backup tools into larger, more flexible systems that can help bring facilities online faster and manage complex power needs. In the US in particular, a growing pipeline of projects is emerging, with batteries increasingly paired with on-site generation or used to smooth demand and unlock faster connections to the grid. So how are data centers changing the energy storage market, and what role could these systems play in the power grid of the future? On today’s show, Tom Rowlands-Rees is joined by, Caitilín McManus, a technology and innovation associate at BloombergNEF, to discuss her recently released note “Data Centers’ Energy Storage Ramp Up: Project List Grows.”

Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEFGO on the Bloomberg Terminal or on bnef.com (https://www.bnef.com/)

Links to research notes from this episode:

Data Centers’ Energy Storage Ramp Up: Project List Grows - https://www.bnef.com/insights/39221 (https://www.bnef.com/insights/39221)

See omnystudio.com/listener (https://omnystudio.com/listener) for privacy information.

The future of energy, transport, sustainability and more, as told by BNEF analysts. Each week, Dana Perkins and Tom Rowlands-Rees sit down with BloombergNEF (BNEF) analysts to uncover the key findings and stories behind their latest research.

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