Is BESS the key to data center energy demand?

As data center power density and uptime expectations rise, it's predicted that we'll see a rapid growth in the use of battery energy storage systems (BESS) in the next three to five years.

While there are utilities working on flexible load tariffs for which data center operators could use storage when called upon instead of curtailing, many are turning to off-grid solutions because interconnection for new loads is taking too long, says Allison Weis, Global Head of Energy Storage, Power, and Renewables at Wood Mackenzie.

For on-site power generation, liquid natural gas (LNG) is expected to be the power source of choice in the short-term. However, operators are also implementing geothermal, wind, and solar solutions. Then there's small modular reactors (SMRs), which may come out top in the long-term. The variability associated with renewable sources is a key driver for BESS, as fluctuations will need to be balanced. Therefore, solar and wind need to be paired with storage to increase their availability throughout the day.

"Batteries are well suited for shifting energy across short timeframes – hours rather than days. That makes them effective at absorbing excess renewable output," says Dr Denis Phares, professor at the University of Nevada and CEO of Dragonfly Energy, adding that they're also good for handling short-time oversupply from firm generation and reducing the need for fast ramping or curtailment.

Whatever sources an operator chooses for a data center's power generation, storage will be an essential part of the mix, says Weis. This is because data center operators recognize that battery storage is no longer just about backup power but about securing the 'license to operate' in a constrained market.

Stacey Yin, Senior Director Analyst at Gartner, says the most compelling reasons for adoption are now grounded in four drivers: enhanced resilience, cost optimization through peak shaving, improved sustainability and, most importantly, mitigating current grid limitations.

"In many regions the utility grid simply cannot supply the requested capacity without the buffer BESS provides."

Falling costs fuel growth

BESS have become more viable solutions due to battery costs coming down by more than 90% since 2010, notes Max Schoenfisch, Power Sector Modeler at the International Energy Agency (IEA). This has led to a growth in demand both for utility scale and behind the meter storage, especially in the US, China and Europe – and particularly the UK – but he expects this will broaden in coming years.

"In the Middle East we're already seeing Saudi Arabia emerging as a major player. We're also seeing a lot of development in Chile, which we expect will broaden to other South American markets in the future. India will also become an important country for battery storage over the next couple of years."

Data center use cases

When it comes to data centers, the highest impact use cases of BESS have graduated from passive backup to active grid participation and hybrid power architectures, says Yin. However, currently, Gartner's mainly seeing a move towards hybrid backup, where BESS reduces reliance on diesel generators.

"For example, at Google's facility in St. Ghislain, Belgium, it replaced traditional diesel generators with a large-scale battery system. This not only provides back-up power, but also enables the facility to operate as a carbon-free asset during outages," she explains.

Other use cases include AI power smoothing. With rack densities hitting 100kW+ for AI training, BESS can be deployed to handle massive, millisecond-level power spikes (transients) that AI clusters generate, acting as a 'shock absorber' to protect the grid connection, says Yin.

"What a BESS could do well is manage any peaks in compute – and therefore energy – demand, if such peaks exist. The presence of spikes depends on the type of data center and the operations being carried out. AI training is 'bulky', but when the system reaches certain checkpoints, the demand drops to near zero, and a BESS could help smooth this variable profile," adds Bogi Hojgaard, Energy System Expert at The Carbon Trust consultancy.

"Inference – when the model is already trained and responding to customers – is more likely to correlate with daytime working or daylight hours, which could lend itself to a BESS shaving benefit. The purpose of this shaving goes beyond optimizing electricity costs, which could also be addressed in part by onsite generation coupled with BESS."

Then there's also frequency regulation and revenue generation. "BESS assets are now being used to provide ancillary services, such as frequency response, to the grid. For example, Microsoft's Dublin facility successfully piloted a grid-interactive BESS that provides backup while interacting with Ireland's grid to balance wind intermittency," notes Yin.

BESS storage duration

In terms of the amount of storage BESS can currently offer, most solutions provide two, four, or eight hours. While these are lithium ion, sodium ion may take a piece of this market in the future, notes Schoenfisch, "particularly if lithium prices rise again, as sodium is so abundant. However ongoing technical development would be needed for it to take a bigger share of the market."

While there is interest in longer duration BESS, such as vanadium or zinc-air flow batteries, and thermal storage, Schoenfisch questions how competitive that would be on a cost basis.

"They would be competing with options such as pumped-storage hydro and other flexible, low-emissions generation technologies, so there are still some uncertainties."

According to Weis, BESS are still very expensive for solving 48-hour backup at 99.999% uptime guarantees, even mixed with renewables "as you could have a renewable lull for two days." Therefore, "the traditional datacenter application that demands 'five 9's' will not use storage yet as an alternative to backup diesel or gas. However, the big tech companies continue to invest in alternative long duration storage that may get to a cheaper price point eventually," she says.

A future-ready energy strategy

While there are still some questions to be answered, many analysts agree that BESS is evolving from a transitional solution to a core asset for data centers.

"While BESS initially served to bridge the gap between unreliable grids and decentralized renewables, it's now indispensable," says Yin. "Intelligent simulation technologies and digital twin integrations are accelerating this transition, proving that BESS is required not just for 'green' targets, but for fundamental operational resilience."

For product leaders and IT decision-makers, this convergence of operational resilience, cost benefits and grid limitations underscores the importance of investing and integrating BESS technologies immediately, she says, as doing so safeguards operations against unplanned outages and positions the facility at the forefront of a modern, future ready energy strategy.