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How does battery storage work, and how much does it cost?

Updated

General information, not a substitute for the advice of an attorney.

Short answer: A grid battery charges when power is cheap or plentiful and discharges when it is scarce, returning about 85% of the energy put in (NREL ATB 2024). NREL's 2025 cost update puts the 2024 overnight capital cost of a 4-hour utility-scale lithium-ion system at $334 per kWh in 2024 dollars (NREL, Cost Projections for Utility-Scale Battery Storage: 2025 Update). Texas developers planned 7.0 GW of battery additions in 2025 alone (EIA).

How it works

A battery energy storage system (BESS) has two ratings. Power, in MW, is how fast it can charge or discharge; energy, in MWh, is how much it holds. Dividing energy by power gives duration. NREL's reference plant is a 60 MW system modeled at 2-, 4-, 6-, 8-, and 10-hour durations (NREL ATB 2024). Round-trip efficiency, the share of charged energy that comes back out, is 85% in NREL's assumptions, and the system is assumed to last 15 years with fixed operations and maintenance of 2.5% of capital cost per year (NREL ATB 2024). Inverters convert the battery's DC to grid AC and back.

What it costs

  • Cost splits into an energy part and a power part: total cost in $/kW equals battery pack cost in $/kWh times duration in hours, plus balance-of-system cost in $/kW (NREL ATB 2024).
  • NREL's 2024 fit of system cost against duration gives an energy cost of $241 per kWh and a power cost of $372 per kW (NREL 2025 Update). Our arithmetic from that fit: a 4-hour system is 4 x $241 + $372 = $1,336 per kW, which matches $334 per kWh x 4 hours.
  • Projected 4-hour costs in 2024 dollars: $207 to $354 per kWh in 2030 (mid $279) and $147 to $339 per kWh in 2035 (mid $243) (NREL 2025 Update).

How much is being built

EIA reports 5.9 GW of utility-scale battery capacity added in the first half of 2025, 26% of all capacity additions, with about half in Arizona and California combined; Texas developers reported 7.0 GW planned for 2025, much of it in the second half (EIA Today in Energy, August 20, 2025). We did not open a cumulative national or Texas installed-capacity figure this session, so we do not state one.

See Texas battery storage fire safety, how much land battery storage needs, the ERCOT queue, and grid interconnection by market.

General information from the sources linked above, not legal, tax, or financial advice.

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