Distributed energy storage is becoming grid critical as there is an increase in variable renewable energy like wind and solar. These energy sources require storage to balance supply and demand.

The International Energy Agency estimates that 1650 GW of renewable generation capacity is in advanced development and waiting for grid connection globally. Energy storage projects face similar queue congestion, delaying deployment and revenue realization.

BloombergNEF provides a capacity-based perspective that highlights deployment speed:

  • By 2025: about 94 GW / 247 GWh of new energy storage additions globally (excluding pumped hydro)
  • By 2035: annual additions rising to 220 GW / 972 GWh, representing a 14.7% CAGR until 2035

 

Credit: BloombergNEF

 

Now, the grid faces three simultaneous challenges. They are integrating intermittent renewables, serving new electrified loads such as EVs and heating, and remaining reliable under climate-driven disruptions.

Transmission and distribution upgrades often lag behind these demands. This makes distributed storage technologies such as lithium-ion storage, grid-forming inverters, microgrids, and AI-enabled energy management systems the fastest deployable flexibility layer.

Technologies Transforming Distributed Energy Storage

Lithium-ion & LFP

Lithium-ion batteries remain the primary technology in distributed energy storage. Declining costs, established supply chains, and confidence in financing support their widespread use.

According to McKinsey, Lithium Iron Phosphate (LFP) batteries anchor most new stationary storage projects. LFP offers a balance of cost, safety, and cycle life. It has increasingly replaced Nickel Manganese Cobalt (NMC) chemistries in stationary applications where durability and thermal stability matter more than energy density.

Further, BloombergNEF reports that global lithium-ion battery pack prices fell to about USD 108/kWh in 2025. In some markets, stationary storage cells approached USD 70/kWh in early 2025. These declines enable stronger economics for distributed storage, especially in commercial, industrial, and residential segments.

McKinsey estimates that typical LFP systems achieve about 4000-8000 cycles. This performance makes them suitable for daily cycling in peak shaving, solar self-consumption, and grid services.

Alternative Storage Technologies

Several alternative storage technologies are advancing rapidly, but their adoption in distributed settings remains uneven.

Sodium-ion is a potential alternative to lithium-ion. Key metrics include:

  • Cycle life: about 2000-4000 cycles
  • Energy density: 120-160 Wh/kg, lower than LFP
  • Cost potential: up to 20% cheaper than LFP once scaled

Also, flow batteries offer long-duration cycling and thermal safety advantages. Yet, their large footprint and higher upfront costs limit use in space-constrained environments such as commercial buildings and residential sites.

Second-life batteries are discussed as a cost-reduction pathway. Variability in degradation profiles and warranty complexity remain barriers to wider deployment, especially where insurance underwriting is required.

Grid-Forming & Power Electronics

This layer in a DESS includes the power conversion system and inverter controls. These components turn battery DC into grid-quality AC and define how the storage asset behaves electrically at the point of interconnection.

Unlike grid-following inverters that rely on an existing waveform, grid-forming control allows the DESS to establish and regulate voltage and frequency. This capability is especially useful in weak grids and islanded or microgrid operations.

The Grid-Forming and Power Electronics layer upgrades storage from simple energy shifting to active grid support. It uses advanced control software, high-performance switching hardware, and coordinated modeling and protection.

With this, DESS provides stability services such as voltage and frequency regulation, improved resilience, and potential black-start or restoration support.

Virtual Power Plants

Distributed storage gains value when digitally orchestrated. Fleets of batteries act as a single grid resource, participating in peak reduction, flexibility services, and aggregation models such as virtual power plants.

Federal Energy Regulatory Commission (FERC)’s Order 2222 places new requirements on orchestration and aggregation functions. These include telemetry, metering, and coordination with retail programs. The wholesale market participation depends on these rules working in practice.

Where permitted, distributed batteries are pooled into VPPs, and they participate in wholesale markets, capacity auctions, or flexibility services. It transforms small, localized assets into grid-scale resources without centralized infrastructure.

Also, VPP software provider Lunar Energy raised a total of USD 232 million across Series C and D rounds, including USD 102 million in Series D. Its Gridshare platform manages 650 MW of distributed energy devices.

VPPs amplify the value of distributed storage by aggregating small assets into dispatchable fleets. In the US, Sunrun’s VPPs delivered 80 MW of peak power to the California grid during summer 2024.

Moreover, the global virtual power plant market is expected to reach USD 6.4 billion by the end of 2031, at a compound annual growth rate (CAGR) of 20% during the forecast period from 2024 to 2031.

Companies and startups are working on solutions that are advancing renewable energy integration and increasing grid stability. Alongside, they are reducing reliance on centralized power to address the variability of solar and wind energy.

 

 

Discover Distributed Energy Storage Innovators

Explore the DESS startups that are working on innovations ranging from AI-driven energy intelligence to agile solar battery, and more.

Teplore facilitates Sustainable Distributed Energy Storage

Chinese startup Teplore creates distributed energy storage systems based on LFP battery technology for commercial, industrial, utility-scale, and microgrid applications.

The startup integrates battery cells, a multi-layered battery management system (BMS), high-voltage control, and fire-fighting systems. Further, it involves environmental management, power conversion systems, AC or DC coupling, and local controllers in the Tensorpack T, A, S, and M series for plug-and-play deployment.

Teplore’s product supports time-of-use optimization, demand charge management, PV consumption, emergency backup, grid-forming microgrids, islanded operation, and dynamic load balancing across AC- and DC-coupled setups.

In addition, certification, resilient string architecture, optimized lifecycle cost, flexible scalability, and extended warranties enable reliable operation in both grid and off-grid environments.

SkyTerra Power enables Large-Scale Battery Mobility

US-based startup SkyTerra Power develops a distributed battery mobility and energy transmission platform that delivers electricity to high-demand locations.

The startup operates a storage network that charges batteries at low-cost energy sites and transports them to metropolitan or high-demand areas. It discharges electricity before returning the batteries for recharging in a charge-transport-discharge cycle.

SkyTerra Power’s value optimization platform analyzes price signals, demand patterns, and location data to identify optimal charging and discharging sites across the network. It also functions as a mobile transmission layer, compartmentalizing electricity.

Enough Energy builds Battery-Boosted EV Charging Systems

UK-based startup Enough Energy makes battery energy storage and power control systems that deliver high-power electricity in areas with limited grid capacity.

It combines electronics, software, and battery management directly into modular battery systems. These systems natively output AC or DC at configurable voltages and currents without external inverters.

This architecture reduces power conversion hardware, lowers system cost and footprint, and enables battery-boosted EV charging. It transforms 7-22 kW grid connections into a charging capacity of up to 150 kW.

Besides, Enough Energy applies automotive-grade engineering to design scalable, plug-and-play systems for fleet depots, urban charging hubs, highways, emergency services, and off-grid sites.

Empower Energy advances Agile Solar Battery

Australian startup Empower Energy provides ElektroBank 14, an AI-optimized solar battery and home energy management platform for residential users.

The platform combines a solar PV inverter, battery storage, backup power, EV charging, and water heating. It forecasts energy usage, solar generation, and electricity prices every five minutes over a 48-hour horizon to schedule charging and discharging.

Empower Energy’s platform responds in real time to weather, market, and demand changes using patented optimization algorithms and high-speed power control hardware. It also supports wholesale pricing, time-of-use tariffs, and grid outages.

Further, it offers features such as modular battery architecture, built-in thermal management, virtual power plant readiness, and app-based control, which improve reliability, safety, and user visibility.

Zmart NetZero offers AI-Driven Energy Intelligence

Danish startup Zmart NetZero develops an AI-driven energy intelligence platform that optimizes electricity consumption and emissions across industrial, commercial, and public infrastructure.

The startup deploys Energibot plug-and-play IoT sensors to capture high-frequency AC and DC energy data at the equipment and facility level. Energipilot then processes this data with a digital energy twin that analyzes performance, forecasts demand, and automates control actions.

The platform enables real-time visibility, anomaly detection, smart appliance and battery control, and automated baselining aligned with dynamic electricity prices and carbon intensity.

In addition, it offers non-intrusive installation, scalable hardware, ESG and CSRD-ready reporting, and multi-site integration support fast deployment and regulatory compliance.

Capital Flows & Strategic Investment Activity

Corporate funding for energy storage reached USD 17.6 billion in the first nine months of 2024, a 15% increase year-over-year. Moreover, 18 major M&A transactions were recorded in the sector.

Customer concentration risk is becoming visible for large integrators and utility-facing providers. Public filings from Fluence Energy show that 41% of the company’s revenue came from two major customers. The same disclosures note 6.8 GW deployed, a USD 5.3 billion backlog, and a 128.8 GW pipeline.

Moreover, Energy-as-a-Service has emerged as a scaling mechanism, particularly for commercial and industrial customers that face capital constraints or prefer operating expense models.

Additionally, Research and Markets estimates the global EaaS market to reach USD 160.68 billion by 2032 at a 11.84% CAGR.

Research Methodology & Data Scope

This distributed energy storage analysis uses innovation data from StartUs Insights Discovery Platform. This AI-powered platform gives access to over 9 million global companies, 25K+ technologies and trends, and more than 190 million patents, news articles, and market reports to spot innovation.

This study focuses on technologies related to distributed battery energy storage, virtual power plants, energy management systems, grid-forming inverters, and storage-enabled EV charging infrastructure. It ensures that the insights reflect both technological readiness and commercialization momentum in distributed energy storage.