Analysis examines the competitive economics of battery energy storage systems (BESS) for powering and stabilizing AI datacenters.

The Volta Foundation’s July 2026 report, *Where Batteries Can Win in Data Center Applications*, outlines two areas where battery energy storage systems (BESS) are winning, four where they are competing, and two where they are losing ground to alternative technologies in the data center market.

The standout advantages of BESS for data center developers are now well established. Leading vendors—including Energy Vault, Eolian, Fluence, Hithium, and ZincFive—are actively supplying storage systems to the sector. On the demand side, AI hyperscalers such as Alibaba, Tencent, ByteDance, Meta, Google, and Microsoft have significantly increased their investments in BESS.

Speed-to-power and lower cost per megawatt-hour compared to natural gas represent the two primary areas where BESS excels. These findings were highlighted in the Volta Foundation’s report, authored by its AI & Data Center Infrastructure committee, which systematically evaluated where, how, and why batteries are either attractive or unattractive for data center applications.

“BESS earns its place alongside firm generation,” the report states, emphasizing that flexibility remains the battery’s primary advantage for both data center operators and grid managers. Beyond its clear strengths, the foundation identified four areas where BESS is competing but has not yet won, and two where it is currently losing out to competing technologies.

“BESS wins the jobs that reward speed and daily cycling: peak shaving against demand charges, and bridge power as the battery layer of a gas-or-engine hybrid,” the report notes. While batteries cannot address every challenge, they are uniquely positioned to resolve several of the industry’s most urgent operational needs.

In peak shaving and demand-charge management, for instance, BESS can discharge during high-cost periods. However, this economic benefit is entirely dependent on regional rate structures; in markets without demand charges, the financial advantage vanishes.

BESS also delivers temporary, or “bridge,” power to data center assets waiting in interconnection queues—a critical speed-to-power function. Standalone batteries rarely handle bridge duties alone, however, and the report identifies fuel cells as a direct competitor in this space.

Meanwhile, BESS faces stiff competition in areas where software tools and power electronics have matured, including curtailment flexibility, uninterruptible power supply (UPS) ride-through, grid services, and sub-second power quality management.

Despite these strengths, large-scale batteries remain uncompetitive in applications requiring sustained energy delivery, long-duration backup, and continuous prime power. Backup requirements exceeding four hours typically default to diesel generators, while continuous prime power remains the domain of gas turbines and fuel cells.

The Volta Foundation noted that regulatory emphasis on grid flexibility could further accelerate BESS adoption. Additionally, evolving internal data center power architectures and ongoing gas turbine supply chain constraints are increasingly driving operators toward battery solutions.

With global data center deployment set to expand over the coming years, the foundation’s AI & Data Center Infrastructure committee is urging greater collaboration among developers, battery manufacturers, integrators, and grid operators to establish standardized load profiles for future infrastructure design.

The report highlights that limited load visibility remains a major obstacle for power suppliers attempting to meet data center demands. Improved transparency into facility power requirements would allow batteries to deliver value more effectively.

Furthermore, the absence of a standardized integration framework introduces uncertainty and investment risk. Deployment-related issues typically surface during commissioning and within the first two years of operation, with integration complexity, control systems, and dispatch governance cited as primary failure points rather than cell chemistry.

Looking ahead, the report warns that the next two to three years will determine whether BESS is viewed as a temporary bridge the industry crossed or a permanent fixture it built.

“If curtailment-based interconnection becomes the norm and duration economics keep improving, then installed BESS also earns a standing operational role in shaping load, shaving peaks, and selling grid services for the life of the facility,” the report states. “However, if queues clear faster than expected and gas supply loosens, more of it reverts to idle backup,” the authors caution.

Regardless of market conditions, batteries deliver value independent of traditional arbitrage economics by functioning as a facility’s core power management layer. Realizing this full potential, however, hinges on coordinated next steps from both industry stakeholders and regulators.

Hyperscalers such as Google and xAI appear to favor vertically integrated storage solutions. If this trend persists and data center operators become the largest purchasers of grid-scale batteries, it could fundamentally alter how systems are specified and financed. The United States is poised to become the largest BESS data center market and is actively rewriting the interconnection rules governing these loads.

The Volta Foundation concluded with targeted recommendations for key stakeholders. For data center developers and hyperscalers, the report advises designing hybrid power architectures from inception and specifying batteries for daily operational duty, allowing backup capability to emerge as a byproduct. Given that speed determines project viability, hyperscalers should evaluate power options based on both time-to-power and levelized cost.

Grid operators and policymakers should standardize curtailment-based interconnection processes. Clearer dispatch rates, defined market participation pathways for batteries serving large loads, and standardized large-load tariffs are essential to prevent confusion and project delays.

Finally, battery manufacturers and integration firms should shift focus upstream and develop products tailored to specific load archetypes. Certain applications require high-power cells, while others prioritize energy density.

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