Understand Energy Storage

Happy September! This edition of Stanford University’s Understand Energy Learning Hub Energy Spotlight covers energy storage for the electricity grid. Next month, we’ll take a deeper look at lithium-ion batteries, the fastest growing energy storage technology. If you like what you see, please share widely and encourage others to subscribe. You can also check out all of our past issues!

What you need to know

Significance: Energy storage provides many benefits to the electricity grid, and it’s growing fast. It’s an increasingly valuable tool for a grid that is becoming more variable (e.g., intermittent renewables), more congested (e.g., load growth due to AI data centers and electrification), and more fragile (e.g., severe weather disruptions due to climate change). Energy storage can support decarbonization, improve grid reliability, reduce costs, provide revenue streams, and increase safety.

The main energy storage technologies used to support the grid today are pumped hydro and batteries (electrochemical). Pumped hydro is only growing modestly. Battery storage, mainly lithium-ion batteries, is growing rapidly.

What is it? Energy storage allows energy to be saved for use at a later time. When people talk about energy storage, they typically mean storing energy for our electricity grids. Energy storage is not an energy resource – it actually provides net negative electricity supply due to losses that occur when converting electricity to other forms of energy and then back to electricity again. However, the benefits of using energy storage can significantly outweigh those net supply losses.

Bar chart (not to scale) with x and y axes. Y axis is energy. First bar shows negative energy for charging, a second slightly shorter bar shows positive energy for discharging, and a third smaller bar the size of the difference between the first two bars shows net negative electricity generation. — Image source: EIA.

Where is it used? China leads the world in both battery and pumped hydro energy storage capacity.

China also dominates energy storage growth, representing half of new battery and over 90% of new pumped hydro power capacity added between 2020 and 2025.

How it works: Energy storage projects are rated on power capacity (e.g., MW) and energy capacity (e.g., MWh). The duration of an energy storage project is calculated by dividing the amount of stored energy by the power supplied.

$$Duration = {Energy\over Power}$$

As you can see in the illustration below, energy storage projects with the same energy capacity can have different durations. Likewise, projects with different energy capacities can have the same duration.

Water tank analogy for energy storage duration

Three water tanks with flowing spigots. Tank 1 holds up to 4 liters and discharges at a max rate of 1 liter/hour. Its duration is 4 hours. Tank 2 holds up to 12 liters and discharges at a max rate of 1 liter/hour. Its duration is 12 hours. Tank 3 holds up to 12 liters and discharges at a max rate of 3 liters/hour. Its duration is 4 hours.

The duration of an energy storage project is a decision based on economics and is not a fundamental property of the energy storage technology. Duration falls into three categories:

Short-duration storage refers to charging and discharging energy storage over a single day to several days.
Long-duration storage refers to charging and discharging energy storage over several days to weeks.
Seasonal storage refers to charging energy storage in one season and discharging it several months later in another season (e.g., soaking up summer solar photovoltaic [PV] and using it in the winter).

Energy storage projects today typically operate as short-duration storage because it’s more economic. An energy storage project that charges and discharges daily gets paid for the price difference every day; whereas long-duration and seasonal storage projects sit fully charged for weeks to months before discharging and getting paid for providing electricity.

However, having more long-duration and seasonal energy storage projects would help decarbonize the grid, because intermittent renewable resources like solar and wind could be stored when plentiful and used during weeks or seasons when it's cloudy, it’s not windy, or the days are shorter.

Many different technologies are being investigated as economic storage options for the electricity grid.

Examples of energy storage technologies

Mechanical	Electrochemical	Thermal	Electrical	Chemical
Pumped hydro (PHES) Compressed air (CAES) Gravity storage Flywheels	Organic Alkali-ion: Li-ion, Na-ion Aqueous enclosed: Lead-acid, Zn-MnO₂ Molten salt/metal: NaS, ZEBRA, Ca-Sb Flow batteries: VRFB, ZnBr, FeCl₂ Metal-air batteries: Fe-O₂, Zn-O₂	Molten salt Hot bricks	Supercapacitors	Power-to-X (Hydrogen, NH₃, etc.)

Mechanical

Electrochemical

Thermal

Electrical

Chemical

Pumped hydro (PHES)

Compressed air (CAES)

Gravity storage

Flywheels

Organic Alkali-ion:
Li-ion, Na-ion

Aqueous enclosed:
Lead-acid, Zn-MnO₂

Molten salt/metal:
NaS, ZEBRA, Ca-Sb

Flow batteries:
VRFB, ZnBr, FeCl₂

Metal-air batteries:
Fe-O₂, Zn-O₂

Molten salt

Hot bricks

Supercapacitors

Power-to-X
(Hydrogen, NH₃, etc.)

We plan to cover many of these technologies in future Energy Spotlights. We covered pumped hydro in our April 2026 edition.

How does energy storage help the grid? Grid reliability is dependent on real-time balancing of electricity supply with electricity demand. Because energy storage decouples when electricity is generated from when electricity demand occurs, it can provide many essential services to help keep the grid stable and affordable.

Energy arbitrage refers to buying electricity when the price is low and selling it when the price is high for energy storage systems participating in wholesale spot markets. For example, in grids with high solar PV penetration like California, battery storage can charge with low-cost midday solar PV and discharge during evening demand peaks. In addition to being economic, this lowers the carbon intensity of the grid by optimizing the use of solar PV and reducing the need for natural gas peaker plants.

California ISO electricity supply by resource and net demand on 06/24/2026

Area chart showing batteries charging midday when the solar electricity supply exceeds demand and discharging in the evening when the sun sets and electricity demand peaks. — CAISO. Today's Outlook. June 2026.

Frequency control: Storage systems can instantly inject or absorb power to maintain electricity grids at their required frequencies (e.g., U.S. grids operate at 60 Hz) and prevent blackouts.
Capacity services: Extreme events such as heat waves (which are increasing in duration and frequency due to climate change) can dramatically increase electricity demand (e.g., air-conditioning loads). Energy storage can provide additional electricity when demand exceeds supply, avoiding rolling blackouts. For example, California has been able to use battery energy storage to ride out several heat waves.
Ramping services: Energy storage can quickly ramp up or down to balance sudden supply changes, such as solar output dropping off at sunset or clouds passing over solar farms.

Line chart showing a sample day’s solar output. Overcast = low solar output between 7:30am and 8pm; patchy clouds = medium and highly fluctuating solar output between 7am and 8pm; clear skies = high solar output that gradually increases from 6am, peaks at noon, and gradually decreases until 8pm. — Solar output varies based on weather conditions. Energy storage can be used to accommodate sudden supply changes.

Transmission and distribution upgrade deferrals: Energy storage can be used to reduce congestion (when a transmission or distribution line is at its electricity load carrying limit) and defer expensive upgrades (e.g., new wires or substation equipment) to transmission and distribution systems. With load growth from electrification and data center demand, the grid is becoming more congested and constrained.

Energy can be stored when the load is low and discharged when the load profile is high. Load profile from Australian Energy Market Operator.

How can you use energy storage? Energy storage systems for homes and businesses provide numerous benefit opportunities.

Energy arbitrage: Residential and commercial customers who have time-of-use pricing and are allowed to sell electricity back to the grid can earn additional revenue while increasing utilization of clean renewable resources like solar and wind.
Virtual power plants (VPPs): Energy storage can give a commercial or residential customer the opportunity to participate in VPPs and be compensated for providing grid services.
Backup power: Energy storage can provide backup power for residential and commercial customers during grid outages. With climate change increasing the frequency of extreme weather events that cause grid outages, backup power is becoming even more essential for electricity reliability.
Demand response: Commercial and residential customers can be compensated for providing demand response services to the grid (e.g., curtailing their grid demand to manage wholesale/utility prices or in emergency situations). Switching to energy storage can allow for uninterrupted power for the commercial or residential customer during the demand response event.
Demand charge reduction: Energy storage can help businesses shave their peak loads, lowering their monthly demand charges and reducing electricity bills.

Current and future trends

For both the world and the U.S., energy storage is mostly battery (lithium-ion) by power capacity and mostly pumped hydro by energy capacity. Pumped hydro has been the primary technology for grid-scale energy storage for decades, but has siting and permitting challenges that limit its growth.

Battery storage surpassed pumped hydro in power capacity in 2025. Battery growth is largely due to falling costs, modular design, and flexibility. Lithium-ion batteries can be deployed almost anywhere, are able to respond in milliseconds to grid needs, and are expanding rapidly across residential, commercial, and utility-scale applications.

In the news

News: A new study by researchers at the Australian National University shows that Australia can use pumped hydro and battery storage instead of planned gas-powered generator capacity additions (17GW by 2050) for supporting grid reliability.

"A persistent narrative suggests that this gas is essential for balancing solar and wind beyond 2050, but our new study shows that long-duration pumped hydro plus batteries can do the same job at the same cost, minus the carbon emissions," said lead author Timothy Weber, of Australian National University Center for Energy Systems.

Tumut 3 Power Station (pumped hydro) in New South Wales. Image Source: Thennicke, CC BY-SA 4.0, via Wikimedia Commons

Context: These study results inform the debate on how much firm dispatchable electricity generation (e.g., natural gas) is needed to balance supply and demand on the grid. Multiple options are available for maintaining reliability when decarbonizing electricity grids, including a mix of short- and long-duration storage (like in this study), zero-carbon dispatchable electricity generation (e.g., geothermal, natural gas with carbon capture), and keeping natural gas plants but rarely operating them. As electricity demand increases with additional loads from data centers and electrification of end use services, energy storage can help countries like Australia reach net-zero goals faster and at no additional cost.

Fun Fact

MIT researchers have created tiny batteries we can eat!

Made from materials safe for human consumption, these batteries have the potential to be used to power ingestible medical devices like wireless medication tracking tags and gastrointestinal monitors that require a power source. Currently, ingestible devices are powered from an external source that wirelessly transmits power, use harvested power from the GI tract, or use small coin batteries that typically contain lithium, silver oxide, or other metals and could pose a safety risk.