​​This article sets out the 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 from surplus to scarcity
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.
2. Displacing gas: how batteries reduce system costs
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, a reminder that today's fleet is duration-limited. 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.
3. Solar ramps: BESS tracks 15–20 GW swings in minutes
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 units must run at a minimum load of 40–60% and have limited ramp speeds of up to an hour.
Batteries reach full output in under a second and can instantly reverse direction, making them more effective at tracking steep solar ramps.
4. Forecast error: batteries rebalance supply 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 renewable fleets grow rises, 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.
5. Grid congestion: batteries defer transmission investment
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, but the grid has not. Resulting in network constraints, curtailment, and rising redispatch costs.
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.
BESS eases these constraints by charging behind congested boundaries and discharging when capacity becomes available - deferring transmission upgrades that can take a decade or more.
Markets use two main mechanisms to signal where flexibility is needed:
Locational grid fees
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.
Market-based signals
Italy’s wholesale market is separated into eight price zones, a form of locational marginal pricing that exposes batteries to regional price differences.
Southern zones, where solar output and curtailment is highest, show up to 34% higher spreads than those in the North.
Batteries can earn more where the grid is tightest, and these locational signals become stronger as regional renewable penetration increases.
6. Frequency response, inertia, and voltage: ancillary services from batteries
Frequency response
When a large generator trips, grid frequency drops within seconds. Batteries inject or absorb power to stabilise the system before the imbalance cascades.
In Europe, the primary response service (FCR) activates within 2 seconds.
Germany procures just 600 MW of FCR, a small market that batteries have largely saturated.
GB's equivalent services (Dynamic Containment, Moderation, and Regulation) total around 1.5 GW.
These markets are lucrative, but shallow. In 2023, frequency response services in GB fell by 73% as BESS capacity exceeded procurement. The same dynamic will play out elsewhere as 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.
In GB, Quick Reserve accounts for 7-17% of the battery revenue stack.
Inertia services: grid-forming inverters resist frequency deviations
As synchronous generators retire, grids lose inertia: the kinetic buffer that slows frequency changes after a fault.
With less inertia, frequency deviations become sharper, and system strength declines.
Batteries with grid-forming inverters can provide synthetic inertia, injecting power within milliseconds 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 thermal retirements continue and 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 inject or absorb 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 today's restart capability.
7. Batteries protect solar revenues and unlock capital
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. 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 and is easier to underwrite. 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 for data centres
Behind-the-meter storage sits on the customer's side of the grid connection bypassing the connection queue and transmission charges
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.
In December 2024, Google partnered with Intersect Power on a $20 billion programme to build co-located solar, BESS, and data centres, with the first project online by 2027.
The same model applies to other large loads: mining, industrial manufacturing, and EV charging hubs are all exploring behind-the-meter storage to avoid grid bottlenecks.
9. Capacity markets: batteries reduce the cost of reliability
Capacity markets pay generators to be available during peak demand, ensuring security of supply even when renewable output is low. Batteries can't cover multi-day wind droughts, that requires firm generation or long-duration storage. But they reduce the cost of maintaining supply security.
In NYISO, New York City's transmission limits have kept clearing prices 250% above statewide levels since 2023.
Today, only 14 MW of battery capacity participates. As that grows toward the 2 GW expected by 2030, competitive pressure on clearing prices will increase.
During actual scarcity events, batteries optimise around thermal generation, shaving the peak load that firm capacity must cover.
10. 24/7 carbon-free energy: batteries enable hourly matching
Batteries absorb low-carbon energy and release it when the marginal unit is far more carbon-intensive.
In the data below, carbon intensity ranges from 0 kgCOâ‚‚/MWh during the cleanest midday hours to 445 kgCOâ‚‚/MWh in the early evening as thermal units are marginal.
As UK Carbon costs grow from ~£55/tonne today to a projected £125/tonne by 2035, the spread between low-carbon off-peak prices and high-carbon evening prices widens, meaning batteries capture more value simply by shifting energy across those hours.
Bottom line
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 solve for all of it. They shift energy, stabilise frequency, relieve constraints, and deploy in months using private capital.
The markets that reward these services will build the fastest.
