Energy storage facility at the Fraunhofer Institute in Magdeburg, Germany
Technical Summary

Utility-Scale Energy Storage

Project Drawdown defines utility-scale energy storage as new technologies and practices to store energy on a utility level. This solution does not replace a conventional practice, but is key to the development of variable renewable energy sources. 

Energy storage allows for power to be generated at a time different from when it is consumed (a process known as “time shift”). In a power system with significant amounts of large-scale energy storage, every type of generation can be used in the most optimal fashion. Large centralized generators can run at a steady rate, with no need to undergo inefficient cycling to respond to changes in demand. If the power generated by solar or wind installations exceeds demand, it can be stored for later use rather than rejected by the grid (or “curtailed”). The most rapidly responding forms of energy storage can account for fluctuations in demand in a second or less, far outpacing even the natural gas–fired plants currently used to respond to demand peaks. In addition, energy storage can provide a number of other valuable services. Storage can relieve congestion on transmission lines, increasing reliability and performance and allowing for the efficient use of existing infrastructure. Moreover, storage makes the power system more resilient, reducing outages and aiding in emergency preparedness.

While it is not possible to store energy in the form of electricity, it is possible to convert electrical energy to another form that can be stored. There are many possible forms in which the energy can be stored, including: (1) gravitational potential energy (pumped hydroelectric energy storage); (2) chemical energy (batteries); (3) mechanical energy (flywheels or compressed air energy storage); (4) thermal energy storage (molten salt); and (5) hydrogen storage.

According to the U.S. Department of Energy’s global energy storage databases (2019), there are currently 1687 large-scale energy storage operational systems worldwide, with 191 gigawatts. The vast majority (95 percent) of this capacity is composed of pumped hydroelectric technology, followed by thermal storage (1.7 percent) and electromechanical (1.4 percent). In 2017, lithium-ion batteries accounted for nearly 90% of large-scale battery storage additions (IEA, 2018).

Of all the storage options, only pumped hydroelectric is classified as a mature technology, with more than 350 large projects installed worldwide. The majority of this technology is installed in China, Japan, and the United States. Other countries, such as Italy, Spain, Germany, France, Switzerland, and India, have less installed capacity. Hydrogen storage technology is still in the demonstration phases, with less than 15 megawatts installed mainly in Germany, since it has low round-trip conversion efficiency compared with other technologies. Utility-scale batteries (lithium ion, advanced lead acid, sodium nickel chloride, and sodium ion) are mainly installed in the United Sttes and Japan, while the compressed air and flywheel technologies are mainly found in Germany and the United States. The molten salt thermal storage, which is associated with concentrated solar power (CSP), is mainly installed in the United States and Spain.

The primary use of energy storage at present is power arbitrage (time shift): pumped hydropower facilities buy electricity at night when prices are low and use it to pump water from a low reservoir to an elevated one. During the day, when prices are high, the stored water is allowed to run downhill through turbines, generating electricity that can then be sold back to the grid. This has been the primary mechanism through which energy storage projects earn revenue. Currently, more than 94 percent of this technology’s capacity is used for the time shift application. The remaining energy storage technologies are used to enable penetration of variable renewable generation sources: 25 percent of the compressed air installation capacity is used for wind energy application, 28 percent of the batteries’ capacity is used for solar, and 100 percent of molten salt storage is used for concentrated solar power.


This solution is key for integrating variable renewable generation sources into the electricity grid, balancing the supply and demand for electricity, replacing natural gas peaking plants, allowing increased reliance on base load generation, and avoiding the need to cycle baseload units. Without storage, variable renewable energy technologies face high curtailment rates; thus, storage is a crucial aspect of enabling a low-carbon grid.

To avoid double counting, the climate impact of the bulk of the technologies under the utility scale energy storage solution is accounted for in the adoption of distributed electricity generation technologies such as wind and solar. Molten salt storage is accounted for in the impact of increased adoption of concentrated solar power.


Current and future investments in utility-scale energy storage units are important when considered in the context of the infrastructure, including transmission and distribution upgrades, expansion of natural gas-fired peaking capacity that storage can replace, and the revenue streams available to storage operators both now and under prospective policy frameworks.

Utility-scale energy storage transforms the way we produce, deliver, and consume electricity toward a cleaner and more efficient energy mix. While energy storage increases energy demand due to its inefficiency, the increased efficiency of the grid offsets this, meaning that all carbon savings from the use of clean, renewable variable generation sources can be fully realized.

In addition, energy storage increases the flexibility and resilience of the grid. The numerous benefits of energy storage indicate that is a key component of the future of the energy system, particularly under significantly increased electrification. At present, regulatory agencies are in the process of determining pricing models for the many other benefits of storage. Upon the adoption of such price signals, it can be expected that the financial incentive for the development of large-scale storage will increase significantly, leading to a sharp upswing in storage capacity. Indeed, a number of other energy storage technologies—such as compressed air, batteries, and flywheels—are rapidly undergoing technological development and proving, and their costs are decreasing.

Appropriate remuneration for the many benefits of storage would allow these technologies to reach a profitable price much faster, again increasing the rate at which storage is added to the grid. A number of governments have recognized the importance of energy storage in a modern power grid that incorporates decarbonized generation and smart grid technologies. Japan, the states of California and Texas, and several European countries have agreed to subsidize demonstration-scale plants or have requisitioned a certain level of storage capacity to be installed in the near future.