Behind-the-meter (BTM) energy storage systems, located at residential, commercial, & industrial consumer sites, are primarily implemented for customer-centric contexts to reduce energy costs. However, this technology is broadly capable of providing a variety of grid services, extending beyond simple cost savings to include functions that support the electric grid stability, reliability, & operation. Join us as we explore these capabilites!
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The electric grid is undergoing a significant transformation. As renewable energy becomes more widespread and electricity demand patterns shift and increase, utilities are under increasing pressure to find flexible, resilient solutions that can maintain stability while keeping costs in check. One of the most promising developments in this space is the rapid growth of Behind-the-Meter (BTM) energy storage systems, or batteries and other technologies installed on the customer side of the meter.
While historically energy storage was centralized and utility-owned, BTM systems are changing the game by decentralizing capacity and giving consumers a more active role in the energy ecosystem. These systems don’t just benefit the individual users who install them: they can provide a wide array of valuable services to the grid as a whole, meaning that we are all beneficiaries of BTM assets.
As these on-site energy storage technologies gain traction, they’re not just reshaping how energy is consumed and stored: they’re also prompting a broader rethinking of grid design and market operations. Understanding the potential of BTM and utility-scale storage working in tandem helps to examine real-world deployments that showcase their impact on grid resilience, flexibility, and efficiency.
Texas provides a particularly compelling case study.¹ At present, Texas leads the country in both dispatchable natural gas electricity generation and intermittent renewable energy production. However, one of the challenges Texas faces is how to align renewable generation with demand, as these intermittent power sources often go offline while demand peaks. This misalignment can lead to extreme price volatility and can make maintaining grid reliability more complex and challenging. Renewable energy also adds more unpredictability to the grid because power output from these resources fluctuates considerably. Utility-scale BESS has offered a tangible solution for grid stabilization in the state.
Between September 2020 and September 2024, Texas’s utility-scale battery capacity surged by an astounding 4,100 percent, reaching 5,707 MW. This explosive growth has made Texas the fastest-growing battery storage market in the United States, now ranking second only to California in total installed capacity. When these large energy storage systems were integrated into the grid, they released stored energy, providing greater reliability and stability to the Electric Reliability Council of Texas (ERCOT) system. Another perk was that batteries can also be quickly deployed in emergencies to shore up grid stability, making it a win-win.
In the Texas use case, these large-scale battery systems support the grid primarily through ancillary services and energy arbitrage: two mechanisms that enhance grid reliability and economic efficiency. Generally speaking, ancillary services help stabilize the grid by providing dispatchable capacity during periods of high demand or supply shortfalls. Energy arbitrage, on the other hand, involves buying electricity when prices are low and selling it when prices spike. In Texas specifically, during a record heatwave in September 2023, stored energy from battery energy storage systems (BESS) prevented potential grid failure and powered roughly 434,000 homes. As Texas continues to expand its grid-scale storage and the market for ancillary services becomes more saturated, driving prices down, energy arbitrage is expected to emerge as the primary revenue source for batteries in the ERCOT market. The growing price volatility in ERCOT, fueled by increasing demand and the expansion of variable renewable energy sources, creates ideal conditions for battery systems to capitalize on tight grid situations through energy arbitrage.
But let’s return to a discussion of ancillary services and how BTM energy storage can play a complementary role by delivering fast-response support at the distribution level, thereby relieving stress on transmission infrastructure and enhancing local grid resilience. Below is a table that lists various ancillary services, the system size needed for said services, along with other contextualizing information that grounds these capabilities in real-world applications, highlighting where energy storage can provide real value.
As the energy system grows more complex, coupled with domestic energy needs rising sharply, the role of distributed, intelligent storage becomes increasingly significant. BTM energy storage systems are not just helping users save money—they’re becoming essential grid assets that foster overall stability & resiliency.
Table 1.
Now, let’s have an expanded discussion on energy arbitrage to complement our more in-depth look at ancillary services. Simply put, energy arbitrage is a strategy where battery storage systems buy electricity from the grid when prices are low and sell stored electricity back to the grid when prices are high, aiming to profit from the price difference. This process is also closely linked to load shifting, which involves moving electricity consumption or supply from high-demand, high-price periods to low-demand, low-price periods.
Returning to our Texas use case, the Electric Reliability Council of Texas (ERCOT) market has seen significant price volatility, partly due to the increasing amount of intermittent renewable energy sources like wind and solar, whose output doesn’t always align with peak demand. Battery systems are uniquely suited for this strategy because of their controllability and ability to store and discharge energy quickly. Battery operators in ERCOT can charge their systems when renewable generation is high and prices are low (e.g., midday) and discharge the stored energy during periods when renewable output declines and demand and prices rise (e.g., evenings). This not only serves the goal of maximizing profits through arbitrage but also helps smooth peak demand and can lower energy costs across the board. While historical data from 2021-2023 showed ancillary services were the primary revenue source for battery storage in ERCOT, particularly during tight grid conditions, it is projected that energy arbitrage will likely become its main revenue stream as more storage is deployed. Experts note that the design of the ERCOT market is particularly accommodating to the flexibility of battery energy storage for energy arbitrage, again, making it a model for other domestic grid, making it a model for other domestic grid operators seeking to integrate storage technologies and enhance market responsiveness in the face of growing renewable penetration and demand volatility.
Comparison of Battery Technologies across Grid Services
In 2020, the Department of Energy published an overview of high-power/high-capacity batteries and evaluated their use on the grid. The table below provides a summary of the alignment of various energy storage technologies vs. grid services.²
Table 2.³
In the past 5 years, advancements in new technologies, particularly as they relate to sodium-ion, necessitate an updated perspective on technology and grid service fit. It is common for battery cell manufacturers to produce cells that are marketed as either energy-dense or power-dense. Often, power-dense cells have either higher price points or reduced longevity (i.e, cycle life) vs. energy-dense cells. As the upfront cost and longevity drive energy storage total cost of ownership, it is beneficial to compare technologies on an apples-to-apples basis. For context, below is a chart of COTS available 32140 cells and their discharge rate capability.
Table 3.
As shown, LFP, which has become the chemistry of choice for BESS technology, lags behind the alternatives. LTO (lithium titanate) has more promising power capabilities; however, this cell chemistry is very costly compared to sodium-ion. As evidenced above, grid services focus primarily on quick power needs, which places a premium on high power density and fast response times. Thus, it stands to reason that batteries with more robust power capabilities allow for greater value capture.
What makes BTM storage particularly compelling, especially as related to grid services, is the ability to “stack” multiple value streams. A single battery system can simultaneously provide demand charge reduction, energy arbitrage, frequency regulation, and resilience, which, ultimately, delivers both customer-side savings and system-wide benefits. However, realizing these benefits at scale often requires enabling infrastructure such as advanced metering, new operational models, and modernized compensation mechanisms that fairly reward distributed resources for the services they provide. Regulatory efforts like FERC Order 2222 in the U.S. are helping pave the way by allowing aggregated BTM systems to participate in wholesale markets. As these market reforms take hold, they are expected to unlock new revenue opportunities for distributed storage and accelerate its integration into broader grid planning and operations.
A Resilient, Decentralized Energy Future
As the energy system grows more complex, coupled with domestic energy needs rising sharply, the role of distributed, intelligent storage becomes increasingly significant. BTM energy storage systems are not just helping users save money—they’re becoming essential grid assets that foster overall stability and resiliency. And with the arrival of sodium-ion technology, the barriers to widespread adoption are coming down, offering a more affordable, safer, and sustainable alternative to lithium-based chemistries and opening the door for greater deployment of BTM systems across residential, commercial, and industrial sectors. Together, BTM architecture and sodium-ion chemistry could unlock a new era of decentralized resilience, enabling a cleaner, more affordable, and more reliable grid for everyone.
Footnotes:
1. See https://comptroller.texas.gov/economy/fiscal-notes/infrastructure/2024/battery-store/
2. See https://www.energy.gov/oe/articles/potential-benefits-high-power-high-capacity-batteries-january-2020
3. Again, see p. 8: https://www.energy.gov/oe/articles/potential-benefits-high-power-high-capacity-batteries-january-2020