Battery storage advances in data centers amid challenges

Data center operators are rethinking the role of batteries, shifting from emergency backup to utility-scale energy storage systems (BESS) that address peak demand, grid reliability, and on-site generation. This transition is driven by the surge in AI infrastructure and utility constraints, but adoption remains uneven due to cost, performance, and integration challenges.

BESS deployments are gaining traction among hyperscalers and colocation providers. DataBank has installed utility-scale systems at multiple facilities, using them to reduce peak demand and participate in virtual power plants (VPPs). Google and Meta are also testing storage solutions, with Google announcing a 300 MW iron-air battery project in Minnesota and a 100 MW VPP partnership in the PJM grid region. Other operators, including Aligned, Iron Mountain, and Crusoe, are exploring similar initiatives to enhance reliability and grid support.

Technical and economic hurdles

Despite progress, operators face significant barriers. Cost remains a primary concern, with DataBank noting that BESS expenses are high but declining. Physical footprint is another limitation, as large installations require substantial space, often complicating deployment in urban or constrained sites. Public opposition has also emerged as a challenge, with community concerns over safety and aesthetics delaying approvals for some projects.

Performance and reliability questions further complicate adoption. DataBank emphasized that systems must meet specific operational requirements, such as rapid response times for voltage fluctuations or load oscillations. Allison Weis of Wood Mackenzie highlighted that most BESS failures stem from balance-of-system (BOS) components like inverters or HVAC systems, rather than the batteries themselves. This underscores the importance of robust supporting infrastructure in large-scale deployments.

Battery chemistry is another point of debate. While lithium iron phosphate (LFP) systems dominate the market, alternatives like sodium-ion are emerging. Peak Energy, in partnership with General Motors, is developing sodium-ion batteries that eliminate active cooling, reducing auxiliary power consumption and maintenance needs. CEO Landon Mossburg argued that simpler architectures could lower costs and improve reliability, though Wood Mackenzie cautioned that sodium-ion economics remain unproven.

AI workloads and future demand

The rise of AI infrastructure is accelerating interest in BESS, as GPU-driven workloads create rapid power fluctuations that strain grid stability. Weis noted that these spikes occur on second timescales, potentially requiring hybrid solutions combining batteries with shorter-duration technologies like supercapacitors. DataBank, however, treats storage as a tool for specific use cases rather than a standard component of data center design.

Public acceptance and regulatory factors may also shape adoption. DataBank reported growing community resistance to BESS projects, despite improvements in battery safety. Utilities, meanwhile, are increasingly relying on storage to manage large loads, particularly in regions with constrained interconnection processes. This dynamic could push operators to adopt BESS as a condition for new data center approvals, though widespread standardization remains unlikely in the near term.

What to watch

The next 12-18 months will clarify whether sodium-ion and other alternative chemistries can deliver on cost and performance promises. Operators will also be watching how utilities integrate BESS into grid planning, particularly in high-demand regions like PJM. If community opposition persists, it could delay or derail projects, even as technical and economic barriers recede. For now, BESS remains a niche solution, deployed where it solves a defined problem rather than as a universal feature of data center design.