​​This article sets out ten reasons why global power systems need batteries, drawing on Modo Energy's research across the United States, Great Britain, Europe, and Australia.

Have questions on this topic? Contact the author at zach.williams@modoenergy.com

The global power system has reached an inflection point. For 15 years, electricity demand in advanced economies stagnated. That era is over.

Electrification is accelerating. Data centres alone will account for nearly half of US demand growth this decade. Add EVs and heat pumps, and over the next three years, global electricity demand will grow by 3,500 TWh. The equivalent of adding a Japan every year.

Renewables are scaling to meet it. Solar generation has doubled in three years. This year, solar and wind met all new demand growth and overtook coal for the first time.

But the grid wasn't built for this. Solar peaks at noon. Demand peaks in the evening. Wind follows weather, not load.

Now more than ever, the world needs flexibility. Demand response, smart charging, interconnectors, and dispatchable clean energy will all help reshape when and where power flows.

But none are as versatile as battery energy storage systems (BESS). They can shift energy, stabilise the grid, and relieve network constraints from a single asset that deploys in 1-2 years.

1. Batteries shift renewable energy and cut system cost

As renewables scale, the mismatch between when power is produced and when it is needed creates two structural problems:

• Oversupply: when renewable generation floods the system, pushing prices to zero or below.
• Scarcity: when that output disappears, but demand remains elevated and prices spike.

In CAISO, batteries bridge this gap by shifting 5 GW of midday supply into the evening peak.

When batteries discharge during scarcity, they displace the most expensive generation on the system - typically gas peakers.

In Australia's NEM, batteries discharged into evening price spikes on 12th June. But after two hours, most systems ran out of charge. Peaking gas took over, pushing prices to the $17,500/MWh market cap.

As battery fleets grow and durations extend, storage displaces the scarcity hours when gas would otherwise set the price.

2. Batteries absorb steep solar ramps

High solar penetration creates steep ramps that require fast flexibility. The famous ‘duck curve’ problem.

In California’s CAISO, the evening ramp is one of the system’s defining challenges. Net load rises 15–20 GW in the three hours between the solar peak and the evening peak.

Most thermal plants ramp slowly and can't drop below 40% load without shutting down entirely.

​Batteries reach full output in under a second and can instantly reverse direction, making them more effective at tracking daily solar ramps.

Wind markets face similar but less predictable swings. At high wind speeds, turbines cut out and output can fall to zero.

3. Batteries correct forecast errors in real time

Most power markets clear supply and demand in the day-ahead market. But wind and solar forecasts regularly miss by 5–10% between day-ahead and real-time delivery. As renewables grow, these errors become large in absolute terms.

For Great Britain’s 20 GW solar fleet, a 10% forecast error means a 2 GW shortfall or surplus hitting the Balancing Mechanism.

Batteries provide the intra-day flexibility that keeps the system in balance as forecasts update throughout the day.

4. Batteries relieve grid congestion where it's needed most

The grid was built to move power from a few large thermal stations into demand centres. But wind and solar connect where resources are strongest, often far from load.

Supply has shifted. The grid hasn't. The result is network constraints and curtailment.

In Germany, redispatch and curtailment exceed 9.4 TWh a year, with costs of around €400/MWh. Much of this is spent managing power flows across constrained north–south transmission corridors.

​Redispatch using batteries is two-thirds cheaper.

BESS eases these constraints by charging behind congested boundaries and discharging when capacity is available, deferring transmission upgrades that can take a decade or more.

Two market mechanisms signal where flexibility is needed:

Dynamic grid fees reward batteries for relieving congestion

Under France’s TURPE 7 grid tariffs, batteries can earn bonuses of up to €69/MWh for relieving congestion during peak solar hours.

A two-hour system could earn €12,000/MW/year from dynamic grid fees, rewarding flexibility where the network is most constrained.

​Locational pricing reward flexibility in constrained areas

​In the US, markets like ERCOT and PJM price electricity at thousands of individual nodes. When a local constraint binds, node prices diverge from the region.

Russek Street, wedged between a 600 MW wind farm and a frequently binding constraint, sees 2.5× higher 2-hour spreads.

Italy’s wholesale market is separated into seven price zones. Southern zones, where solar output and curtailment is highest, show up to 34% higher spreads.

Batteries can earn more where the grid is tightest, and these locational signals become stronger as regional renewable penetration increases.

5. Batteries stabilise frequency within seconds

Frequency response

When a large generator trips, grid frequency drops. Batteries inject or absorb power to stabilise the system before the imbalance cascades. In Europe, the primary frequency response service (FCR) activates within 2 seconds.

Germany procures just 600 MW of FCR. GB's equivalent services (Dynamic Containment, Moderation, and Regulation) total around 1.5 GW.

These markets are lucrative, but shallow.

In 2023, frequency response revenues in GB fell by 73% as BESS capacity exceeded procurement. The same dynamic will play out elsewhere as battery fleets grow.

Reserve services

Reserve services restore frequency after the initial response, delivering sustained energy over minutes rather than seconds.

In Europe, automatic Frequency Restoration Reserve (aFRR) reaches full power within 5 minutes. In Great Britain, Quick Reserve and Balancing Reserve serve equivalent functions.

​Batteries cross-optimise between them and wholesale markets, making more efficient use of the energy on the system. In GB, Quick Reserve accounts for 7-17% of the battery revenue stack.

6. Batteries provide system strength as thermal plants retire

Inertia services: grid-forming inverters resist frequency swings

As synchronous generators retire, grids lose inertia: the kinetic buffer that slows frequency changes after a fault.

With less inertia, frequency deviations become sharper.

Batteries with grid-forming inverters can provide synthetic inertia, injecting power without needing to burn fuel.

The opportunity is larger than the frequency response. Germany will need grid-forming capacity equivalent to 30 GW of batteries by 2027, rising to 72 GW by 2037 as renewables scale.

Voltage support: BESS manages reactive power as renewables grow

Renewables cause larger voltage fluctuations that were once naturally absorbed by synchronous generators.

• Solar pushes voltages higher at midday.
• Wind regions see voltage sags on long transmission lines.

Since Spain’s voltage-related blackout in 2025, it has increasingly dispatched CCGTs solely for voltage control.

Monthly gas-for-voltage volumes rose from around 125 GWh early in the year to nearly 500 GWh after the blackout, at costs of €150–200/MWh.

Grid-forming batteries can provide reactive power even when idle. From 2026, Spain will pay batteries for voltage support, reducing reliance on thermal units running purely for system strength.

Black start: batteries restore power after a blackout

After a total shutdown, someone has to go first. Several countries are now testing battery-led restoration but Australia is furthest ahead. Research from CSIRO found that grid-forming batteries can restart larger areas of the network more reliably than thermal plants. As coal and gas plants retire, Australia will need around 2 GW of grid-forming batteries by 2028 just to maintain it’s restart capability.

7. Colocation de-risks renewable investment

As solar generation grows, output concentrates in the same hours, and capture rates collapse. This is solar cannibalisation.

In Spain, May capture prices dropped from €13/MWh in 2024 to €2/MWh in 2025 and around 23% of solar generation occurred during negative-priced hours.

Co-located battery storage reshapes the revenue profile. Pairing solar with a 4-hour system could lift revenues by around 85%.

The flatter, less volatile profile reduces merchant risk. Hybrid solar-storage projects can secure flexible power purchase agreements (PPAs) at materially higher leverage than standalone solar, turning otherwise unbankable projects into financeable assets.

8. Behind-the-meter batteries bypass grid queues and reshape demand

​Behind-the-meter storage serves a facility's load directly, bypassing the grid connection queue.

Data centres are the fastest-growing application. AI is driving explosive demand, but grids can't connect new load fast enough. In Texas, ERCOT forecasts 35 GW of new data centre demand by 2035. State legislation requires large loads over 75 MW to self-supply their power.

The conventional solution is gas turbines, but global manufacturing slots are sold out until 2028.

​Google's $20 billion partnership with Intersect Power shows the alternative: hybrid sites combining generation, storage, and load behind a single connection.

The same model applies to other large loads: mining, industrial manufacturing, and EV charging hubs are exploring behind-the-meter storage to flatten demand and avoid grid bottlenecks.

9. Batteries reduce the cost of reliability in capacity markets

Capacity markets pay generators to be available during peak demand.

Batteries can't cover multi-day wind droughts, that requires long-duration storage or firm generation. But they reduce the firm capacity requirements, and lower the cost of maintaining supply during scarcity events.

​Capacity accreditation factors in the US Southwest Power Pool (SPP) show how this works in practice.

Eight-hour batteries qualify for full accreditation in summer, when stress comes from sharp evening peaks. Winter accreditation is lower. Cold snaps and wind lulls elevate load for 12 hours or more, beyond what duration-limited storage can sustain.

​Batteries compete with gas for capacity contracts. In Great Britain's T-4 capacity auction for 2028/29, batteries won 6.2 GW of connection capacity, 46% of all new-build contracts.

10. Batteries enable 24/7 carbon-free energy

Batteries absorb low-carbon energy and release it when the marginal unit is more carbon-intensive.

In Great Britain, carbon intensity ranges from 0 kgCO₂/MWh during the cleanest midday hours to 445 kgCO₂/MWh in the early evening.

As UK Carbon costs grow from ~£55/tonne today to £125/tonne by 2035, the spread between low-carbon and high-carbon periods widens, meaning batteries capture more value simply by shifting energy across those hours.

Bottom line: why power grids need battery energy storage systems

The world is adding a Japan's worth of electricity demand every year. Renewables are scaling to meet it. But without flexibility, that growth stalls. Bottlenecked by grid queues, curtailment, and the thermal backup no one wants to build.

Grid-scale batteries ease all of these problems. They shift energy, stabilise frequency, relieve constraints, and deploy quickly using private capital.

The markets that reward these services will build the fastest.