The Battery Energy Storage (BESS) market is going through a coming-of-age moment, having grown exponentially over recent years. According to Wood Mackenzie, it has seen a 44 percent expansion in 2024, with more than 69GW of new BESS capacity installed globally.

Despite the growth, the role of BESS within data center architecture remains in the nascent stage, with debate raging on how it can be best utilized within the sector. For some, BESS offers a potential clean energy replacement for diesel generators, which remain a crucial backup failsafe for the vast majority of data centers in the event of outages.For others, BESS at scale is seen as a potential primary power source for data centers and a crucial component in changing the perception of data centers from net consumers to net contributors to the grid.

Against this backdrop, data center operators are beginning to explore the use of BESS as a core component of data center energy architecture, with several interesting test cases already underway.

What is BESS?

Batteries already play an integral role in data center architecture, in the form of uninterruptible power supply (UPS) systems. Most UPSs have an average capacity of 50 to 300kW, providing around 20-30 minutes of backup power in case of sudden outages.

Comparatively, BESS units are, on average, much larger than UPS systems, capable of scaling into the hundreds of megawatts. Lithium-ion batteries are the dominant player, holding around a 90 percent market share in the utility-scale market. They offer an average storage duration of between two to six hours, which has mainly led them to be used in grid balancing roles, especially when tied to intermittent renewable assets.

Despite the market’s growth, data center operators have been reluctant to integrate the technology within their architecture. This is due to concerns over short storage capacity, high costs, and fire risks, with lithium-ion being more prone to combustion due to overheating.

However, in recent years, several companies have taken the plunge and announced deployments of BESS at their data center sites, with each example providing an interesting test case on how the future of BESS in the data center could look.

BESS as a backup option

One of the most notable deployments of BESS within the data center sector is at Microsoft’s Stackbo data center in Gävleborg, Sweden.

In a first-of-its-kind pilot initiated in 2022, Microsoft partnered with Saft, the battery subsidiary of TotalEnergies, to deploy four independent containerized lithium-ion BESS units, each with 4.6MWh of storage and a peak output of 3MW at the Stackbo data center.

The deployment’s main aim was to test the applicability of replacing diesel backup generators with BESS.

“The question was, can we install a system that is 100 percent capable of replacing the diesel generator, from a technical, safety, and operational point of view, with full compliance to regulations and grid codes,” Michael Lippert, director of innovations and solutions for energy at Saft, says.

To achieve this, Microsoft approached the project with an open mind, going against the prevailing consensus that data centers should have at least 48 hours’ worth of backup capacity available at all times.

Instead, at Stackbo, the BESS backup units were designed for only 80 minutes of backup capacity. The decision was based on extensive studies of the local grid, with Microsoft concluding that due to its high resilience, the Swedish grid was highly unlikely to face prolonged outages. Therefore, Microsoft and Saft calculated that an 80-minute backup would be sufficient to mitigate the risk of service disruption, with an acceptably low probability of a longer outage occurring.

In approaching the question of backup on a case-by-case basis, Lippert says that the project proved that the requirement for 48 hours of backup is not always a technical necessity. “With backup ranging from two to six hours, you would most likely be able to cover a very high level of reliability,” he contends.

According to Lippert, this approach not only replaces diesel generators from a safety and operational standpoint but also enables advanced functionalities like black start capability- an ability to re-energize the system from a complete power-down state without external grid support – and grid-forming operation.

“Technically speaking, that means you can operate the data center on a microgrid,” Lippert says. “The battery forms the grid, and then you can add generators or other devices on top.”

As a result, at Stackbo, BESS is positioned not only as a backup option but also as an active participant in the energy ecosystem, providing voltage control, frequency regulation, and even supporting greater integration of renewable assets.

For Saft, the Stackbo model is considered extremely replicable globally, with slight tweaks to the duration of the BESS system depending on regional variations in grid codes and renewable access. “What we’ve done in Sweden can be applied elsewhere,” says Lippert. “Each location has its constraints… but the core principles remain: replace diesel with batteries, use the battery as a grid-forming resource, and design the system to scale.”

Therefore, use of BESS, especially in locations with resilient grid infrastructure, is only likely to become more widespread if it continues to prove its reliability across multiple deployments. This could shift industry standards and regulatory expectations toward more tailored, data-driven approaches rather than blanket duration requirements.

However, given the recent high-profile mass outages across the Iberian Peninsula, which lasted upwards of 18 hours in some places, the sole reliance on BESS without further redundancy could place operators under significant risk, stifling the repeatability of this model.

Dual value

In contrast to Microsoft’s approach, Keppel DC REIT’s deployment at two of its Dublin data centers represents a distinctly different model.

Led by GridBeyond, a grid enhancement firm, the project involves two separate installations: a 2 x 2MW/2.2MWh system at Keppel’s Citywest data center and a 4MW/6.1MWh system at its Ballycoolin facility.

The BESS system is designed to complement the existing UPS and standby diesel generators. To mitigate fire risk, it sits outside the resilient pack ring, which GridBeyond CEO, Michael Phelan, says allows Keppel to explore interesting energy use cases that previously could have conflicted with customer resilience requirements.

“By placing the battery outside the ring, it can enable both carbon reduction and support for grid flexibility — things customers increasingly value,” Phelan says.

Again, the nature of the market made a significant impact on the deployment, with Dublin currently subject to a data center moratorium due to its outsized impact on the grid, consuming up to 20 percent of the country’s power output.

A point made clear by Phelan, who states: “[The BESS units] allow data centers to store energy during non-peak hours, reducing reliance on the grid during peak demand. This not only reduces carbon emissions but also contributes to grid stability.”

The Keppel deployment aims to illustrate how BESS can provide dual value to data center operators in locations where the grid is facing challenges, not only enhancing sustainability but also accelerating development timelines for data centers.

To achieve this, Keppel has connected the BESS to an AI-powered energy management platform that enables dynamic demand response, helping to stabilize the grid during peak periods.

“By integrating battery storage, data centers can discharge during peak hours, allowing utilities to allocate energy elsewhere. This flexibility makes it possible to build data centers more quickly while ensuring grid reliability,” says Phelan.

Therefore, unlike Stackbo, the batteries do not entirely replace diesel generators but supplement them, creating a hybrid system that is more resilient and efficient, according to Phelan. As a result, the model has the potential to grow in popularity, especially within areas where securing a grid connection is a much more difficult process.

BESS as a primary power option

One company pushing the boundaries of BESS use in data centers is Energy Vault. Earlier this year, the company partnered with RackScale Data Centers (RSDC) to deploy its novel B-Nest system across multiple RSDC campuses in the US.

Unlike at Stackbo and Keppel, Energy Vault’s BESS will not be a supplementary or even backup solution, but rather a primary power source for the facilities. Energy Vault aims to achieve this through a vertical, modular design capable of storing up to 1.6GWh per acre. According to the company, this multi-story configuration allows data centers to conserve horizontal space for core computing infrastructure while maintaining energy autonomy.

“The innovation here is in the form factor and how we stack the batteries vertically over multiple stories to maximize energy density and reduce land footprint. That’s what’s new, and that’s what’s tailored to the data center world,” says Marco Terruzzin, Energy Vault’s chief commercial and product officer.

Scheduled for deployment in 2026, the B-Nest system aims to deliver 2GW/20GWh of storage across multiple campuses, which the company claims could provide more than ten hours of power at full load operation. Energy Vault argues that by implementing BESS infrastructure up front, RSDC can ensure reliable power from day one, independent of the pace of utility build-outs.

Terruzzin emphasizes that in today’s market, energy storage is as much about accelerating project timelines and maximizing land use as it is about decarbonization. Batteries are usually prioritized for connection over other power generation projects, due to their fast-to-connect interconnection and the volatility of most electrical markets, increasing the attractiveness of the technology for utilities as a balancing tool.

This, the company claims, will allow data center operators the ability to secure a grid connection at a much faster rate. The focus on the US market reflects this, with the US grid facing significant constraints amidst the surge of AI-driven demand, which has led to severe delays for data center operators. Reframing the utility of BESS makes particular sense in the US, where anything considered green or low carbon has been thrown to the sidelines.

Therefore, by framing the use of BESS as a way for data centers to achieve their operations in an expedited time frame, Energy Vault hopes to attract greater numbers of operators to trial its system.

However, the deployment, efficacy, and scalability of the model remain to be seen. Concerns include its high capital costs, large space requirements, and questions over grid integration. In addition, it seems like the model may rely on some form of onsite baseload power, which ultimately could be in the form of thermal gas generation, and would harm its sustainability credentials.

Giving back

A company taking a small-scale, sustainability-minded approach to BESS deployment is Scandinavian Data Centers (SDC), which this year installed a BESS unit at its ScandiDC I, in Eskilstuna, Sweden.

The deployment was predicated on a “responsibility to give back,” says Svante Horn, CEO of SDC. “As a company, we view power as a privilege, not a right. Since we were granted a 10MW [grid] connection, set to be ramped up to 15MW, installing batteries allowed us to support and stabilize the grid while making use of a capacity we pay for regardless of utilization.”

At present, the BESS isn’t being used as a backup solution. However, going forward, the company intends to use the batteries intermittently to prevent the need to run its diesel generators, unless there is an extensive fault in the system.

Therefore, the company envisions BESS as not only a potential backup solution but also as a net positive for the grid, with Horn explaining: “We want our UPS and our batteries to help stabilize the grid… [and] have proper discussions with grid operators about our backup power being auxiliary resources for the grid.”

For SDC, the utilization of BESS is part of a broader concept of “data center 3.0, where everything’s behind the meter: renewable energy production, battery storage, and heat reuse, creating a fully integrated, flexible energy system.”

Looking further afield, Horn sees Europe as leading the charge for BESS deployments within the data center market, especially in countries with high renewable integration, such as Spain. However, the onus is very much on the hyperscalers to take the lead in building the batteries, says Horn. “When the economics start making sense… large sites can have industrial battery deployments and data center deployments at the same time. But we are not there yet.”

Watt’s next?

Lithium-ion BESS systems have so far made up the bulk of deployments at data centers, as seen with the examples mentioned.

However, while effective as a short-term option for storage, several concerns are notable in their applicability to the sector. Major concerns include the aforementioned fire risk, as well as a heavily constrained supply chain, with the Chinese market representing more than 70 percent of global production.

As a result, long-duration storage technology (LDES) is increasingly being touted as a potential solution to lithium-ion’s shortcomings. Two prominent examples are thermal and flow batteries, whose proponents argue offer greater flexibility in deployment and significantly longer duration of storage, in addition to no risk of combustion.

One LDES company explicitly targeting the data center sector is Exowatt, a US-based firm developing a thermal self-contained battery. The system dubbed P3 uses optical collectors to capture solar energy, stores it in a solid block of material as “sensible heat,” and then converts it to electricity via a modular heat engine. Unlike most other batteries, the thermal storage medium does not degrade over time and is highly modular, allowing for significant scalability.

For its CEO, Hannan Happi, the solution offers a much more efficient form of energy storage for data centers due to its simplicity. “There’s no fire risk, no degradation, no active cooling — it’s a simple system designed for a 30-year service life,” he says.

Exowatt is positioning itself as a prime or hybrid power source for the data center market, supporting new builds by avoiding the costly delays associated with waiting for a grid connection.

“We can energize a greenfield site immediately, which often creates the incentive for utilities to follow and build substations.”

Exowatt has already begun commercial deployment in the US and is working to scale manufacturing toward 10–100GWh of annual capacity. With no rare earths and a US-based supply chain, Happi believes the company is well-positioned.

“This isn’t natural gas or nuclear. There are no major regulatory hurdles — just land, sunlight, and a willingness to rethink how we store energy,” Happi states.

Given its reliance on solar power, the solution is more constrained in terms of effective deployment, with Exowatt initially targeting the Sun Belt states of the US and the Middle East due to their high solar potential. Happi admits, “You could run it in the UK, but only during a few summer months — and at much higher cost.”

In addition, due to the significant order backlog, widespread deployment will require substantial capital and supply chain coordination.

“We’re not looking internationally yet — we’re very backlogged in the US,” says Happi. “But as we expand, we’ll need decentralized manufacturing to avoid shipping heavy modules globally.”

Despite these constraints, the solution offers an interesting alternative. And while it might not be a universal fix, could be extremely effective in locations with high solar potential.

Go with the flow

Another LDES player to emerge is XL Batteries, an organic flow battery developer. In May, the company partnered with Prometheus Hyperscale to deploy a 333kW demonstration project at one of its data centers by 2027. Following this, Prometheus plans to acquire a 12.5MW/125MWh commercial-scale system in 2028, with another identical system to follow in 2029.

XL’s solution differs from traditional flow batteries, which rely on vanadium, a rare earth metal, and instead uses non-flammable, pH-neutral organic chemistry built around globally available petrochemical feedstocks. By sidestepping vanadium, XL says it avoids the rare earth metals supply chain and, as a result, can offer a safer, cheaper, and more scalable energy storage solution for the sector.

For Thomas Sisto, CEO of XL, flow batteries have several advantages over lithium-ion when it comes to their applicability to the data center market. He argues that while lithium is compact and energy dense, making it ideal for short bursts or mobile applications, it is much less suited for long-duration scenarios, which are emerging as crucial, especially for AI data centers.

“We view lithium-ion as optimized for zero to six-hour applications,” Sisto explains. “It starts to fall apart beyond that. Our system can provide power from minutes to multiple days.”

This, Sisto contends, makes the battery much more flexible in its use. Unlike traditional storage systems, which excel in fast response or sustained output, XL’s system can act as a “shock absorber,” capable of smoothing unexpected load surges while also supporting overnight or multi-day operations when renewables aren’t generating. This is especially useful for inference workloads where sudden surges are much more common.

In addition, the battery has the potential to act as a long-term backup solution, potentially displacing diesel generators, as well as being a key part of a hybrid power solution for data centers, acting as a connective actor between distributed energy sources.

The technology does have some drawbacks, with a much larger physical footprint required and a supply chain that remains somewhat in its infancy. However, with data centers increasingly targeting greenfield development, space is often available, which would allow for the deployment of a larger number of batteries if necessary.

The Prometheus deal is only the starting point for XL’s solution, with the company saying it is already in talks with a range of data center customers. With deployment expected before the end of the decade, we will soon see whether flow batteries could be the perfect fit for data centers.

As Sisto argues, there is no one-size-fits-all solution for battery storage in the data center sector, with a range of battery chemistries and solutions all with a potential role to play. Going forward, it’s likely that we will see increased diversity in deployments, as companies continue to explore how batteries can best complement both the sector and the grid at large.

“We’re not trying to be the one battery to rule them all, but we do believe there’s a massive opportunity in the six to 100 hour range — and right now, almost no one is addressing that space well.”