The United States is on track to reach 200GW and 655GWh of cumulative energy storage capacity by 2031, nearly four times today’s installed base, according to Wood Mackenzie’s Q2 2026 US Energy Storage Monitor.
The forecast underscores the sector’s rapid expansion but also reveals how tax incentives, domestic manufacturing requirements, and supply chain constraints are increasingly determining deployment patterns.
The industry added 3.3GW and 8.4GWh of storage capacity during the first quarter of 2026, establishing a new record for first quarter installations across utility scale, commercial and industrial, and residential markets. Yet much of that growth reflects decisions made months earlier, as developers accelerated construction activity in late 2025 to preserve eligibility for federal tax incentives.
Utility scale projects accounted for more than 2.3GW and 6.8GWh of deployments during the quarter. Texas, California, and Arizona remained the dominant markets, but states with vertically integrated utilities, including Michigan and Georgia, continued to expand their presence. The geographic diversification suggests that energy storage is evolving beyond traditional renewable energy hubs and becoming an integral component of broader grid planning strategies.
Wood Mackenzie expects utility scale storage to grow at an average annual rate of 7% through 2031, with stronger momentum emerging after 2028. The relatively moderate growth trajectory in the near term reflects structural constraints rather than weakening demand. Safe harbored projects have temporarily supported installation volumes, while limited availability of battery systems compliant with Foreign Entity of Concern requirements continues to restrict procurement options.
Those restrictions are accelerating a broader industrial shift toward domestic battery manufacturing. As US cell production capacity expands, storage developers are expected to gain greater access to compliant supply chains, reducing one of the most significant uncertainties facing utility scale deployment. The timing is critical as electricity demand forecasts rise, aging thermal assets retire, and renewable penetration increases across regional power markets.
Although Texas and California are expected to maintain their leadership positions, New York and Illinois are projected to experience faster relative growth over the coming years. Policy frameworks that combine clean energy mandates with storage specific incentives are reshaping investment patterns beyond the traditional Sun Belt markets.
The commercial and industrial segment posted 97.7MW of installations during the first quarter, representing a 27% increase from the previous quarter. California alone contributed 74MW, driven largely by the state’s Net Billing Tariff and Self Generation Incentive Program. These mechanisms continue to strengthen the economic case for behind the meter storage, particularly as commercial customers seek protection against rising electricity costs and grid reliability concerns.
Wood Mackenzie projects annual C&I installations will increase by 27% between 2026 and 2031. The expansion extends beyond California. Illinois, Maryland, Massachusetts, and New York collectively maintain a community storage pipeline exceeding 215MW, signaling growing interest in shared energy assets as utilities and regulators seek alternatives to traditional infrastructure investments.
The continued availability of the investment tax credit remains a central driver. Developers that historically focused on solar installations are increasingly integrating standalone and retrofit battery systems into their business models, reflecting a broader convergence between distributed generation and energy management services.
Residential storage presents a more complicated picture. The segment reached a record 1.3GWh in the first quarter, marking an 86% year over year increase and a 5% rise from the previous quarter. Much of the surge stemmed from consumers rushing to complete installations before the expiration of the Section 25D residential tax credit.
National attachment rates reached 45%, compared with 38% a year earlier. California, Texas, Hawaii, and Arizona recorded the largest increases in deployed residential storage capacity, reinforcing the connection between high electricity prices, grid reliability concerns, and consumer adoption.
Despite these gains, Wood Mackenzie expects residential installations to contract by 5% during 2026. The bankruptcy of major installer Freedom Forever, tightening tax equity conditions, and updated permitting data have collectively weakened near term expectations. The slowdown illustrates how dependent the residential segment remains on financing mechanisms and supportive policy structures.
The revised outlook also reflects a reassessment of earlier market expectations. Wood Mackenzie has withdrawn previous forecasts anticipating a sharper contraction in overall energy storage growth, citing the substantial volume of projects that entered construction during late 2025 to secure investment tax credit eligibility.
That policy driven acceleration raises a broader question about the sustainability of long term growth. Federal incentives have clearly expanded deployment, but the sector’s next phase will increasingly depend on domestic manufacturing capacity, permitting efficiency, interconnection reforms, and the ability to integrate storage into evolving electricity market designs.
If the forecast of 655GWh by 2031 materializes, energy storage will move from a supporting technology for renewable generation to a central pillar of grid reliability and resource adequacy planning across the United States.
