Wärtsilä navigates the future of energy storage in the US, ‘paying attention, waiting for the dust to settle’

Wärtsilä ES&O has a global energy storage portfolio of 13GWh, with operations in the US, UK, Belgium, the Netherlands, Australia, Chile, Taiwan, and the Caribbean. In the US, the largest markets include:

• Texas: 2.2 GWh
• California: 1.9 GWh
• Georgia: 340 MWh
• Hawaii: 300 MWh

Energy-Storage.news: What is Wärtsilä’s supply chain like for its current technology?

Adam Atkinson-Lewis: Our cells come primarily from China, and we’re in the process of diversifying our cell suppliers right now, including, like everybody else, working to procure cells in the US or US-manufactured cells if the Inflation Reduction Act (IRA) stays in place, and to incentivise that.

Our most recently announced product is the Quantum3, but that won’t ship until early 2026. The Quantum2 is the actively manufactured, new product that’s about to be shipped for the first time in either late Q1 or early Q2 of this year, and that is integrated together with our manufacturing partner in China, RCT Power, and we have a variety of other suppliers for other sub-components of our systems.

ESN Premium notes: US president Donald Trump’s executive order on “Unleashing American Energy” announced plans to revoke an executive order on the “Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022.”

The implications of this order and the administration’s ability to change the IRA in part or in full are still not known. However, the decision and the continued review of both government agencies and funds which would benefit US cell procurement and manufacturing does indicate a less friendly if not hostile stance.

Can you provide more insight into the tech inside the box in both the current and planned technologies?

Lithium-ion (Li-ion) is far and away the most established chemical energy storage solution in the world. I say that to differentiate it from storage, because hydro has been around for a lot longer than batteries. The industry migrated a while ago from the nickel cobalt aluminium (NCA) nickel manganese cobalt (NMC) technologies to lithium iron phosphate (LFP), that’s, by and large, the industry standard at this point.

LFP cells are a little bit less energy-dense, cheaper than some of the other technologies, and significantly safer from a thermal runaway perspective. What we’re seeing in that space is a variety of new cell dimensions and capacities being rolled out. We’re seeing them get bigger, and that’s leading to the ability to put more megawatt-hours into a standard 20-foot container. The products that we’re announcing continue to go up in megawatt-hour count as well.

I think of it as being like the megapixel race on phone cameras. At a certain point, is it worth it to have more megapixels, and at a certain point, is it worth it to have more megawatt hours? This also happened with wind turbines too. They could make them bigger and bigger and bigger, and then the capacity of turbines kind of plateaued—for the ones on land, at least. We’re seeing this trend of larger cell sizes, larger capacities. My view is that there is a natural limit to that, or that the market forks and that has a lot to do with just the sheer shipping weight.

The other thing that comes when you have a cell changing dimensions and capacity and just getting a lot bigger, is that the thermal characteristics are different. That’s something that we’re paying a lot of attention to, because we significantly prioritise fire safety in our designs.

ESN Premium notes: According to BloombergNEF’s Energy Storage System Cost Survey 2024, the prices of turnkey energy storage systems fell 40% year-on-year from 2023 to a global average of US$165/kWh. Larger battery cell sizes and higher energy density containers are a significant contributor to these falling costs.

Increased energy density solutions also come with fire safety considerations and a growing concern around the amount of noise produced by the cooling systems. In a 2024 story from Energy-Storage.news, several sources spoke to these fire and noise considerations, especially as they relate to BESS projects in densely populated countries.

What is Wärtsilä’s domestic content strategy?

We are focused on building up a domestic content compliant scope of supply. We have found it very difficult to procure cells in the US. We’re working on the other elements of the total integration scope. First and foremost, even though our business has a limited role in this, we are ensuring that we are compliant with the prevailing wage and apprenticeship standards (PWA). That presents the highest value to our customers.

That’s what you need to do to get that 30% and then we are also working on that incremental 10%. We have been working with suppliers in the US for the enclosure and for other elements of the scope of supply. At the moment, we’re pretty limited on the cell front as our many of our kind of peers and competitors.

We think that the shifting geopolitical dynamics, plus what I call the maturation of energy storage markets, wanting multiple types of solutions. It’s no longer one size fits all. We’re meeting that by looking to have a variety of suppliers and to be able to be flexible with our supply scope and what goes into our products, all while ensuring quality and safety that stand behind the name.

ESN Premium notes: Energy storage projects in the US need to be 40% US-made to qualify for the ITC domestic content adder, rising to 55% from 2027 onwards. The IRS recently released an amended cost breakdown of BESS to be used for calculating if a product qualifies for domestic content tax credit incentives, with an increase in US suppliers in the coming quarters.

With the energy executive order that came in from Donald Trump, what does that look like in practice, and how is Wärtsilä approaching it?

We are paying a lot of attention to it, waiting for some of the dust to settle. There are a lot of announcements, a lot of executive orders, a lot of things happening, and we’re going to find that some of them are enforceable and legal. Some of them are not.

Some of them may take a while to figure it out in court. That’s all to say we’re not trying to draw any conclusions. The most recent announcements, it sounds like, will most strongly affect the ability for domestic manufacturing facilities to get guaranteed loans to be built in the US, and that will, of course, likely affect our scope of supply for that kind of investment tax credit (ITC) qualification.

As I understand it, the ITC will be harder to change, because it’s already enshrined in law and doesn’t take any sort of active administrative action. It’s an enforcement action rather than a provision action. I think what gives me optimism about the US market is that it comes down to fundamental economics, and the fact that we’re about to go through this AI-driven demand boom, power-demand boom, that everybody’s talking about.

If you look at what is the fastest type of new energy supply you can get, it’s either through energy storage that’s pulling off the grid at other hours of the day, or a hybrid project with solar. It’s the fastest, and in many places, the most economical way to provide energy. I think the sheer economics, plus the expected rapid increase in energy demand is going to keep things still pretty good for energy storage in the US market.

ESN Premium notes: Writing for Energy-Storage.news, William Derasmo, partner at US law firm Troutman Pepper Locke highlighted the need to secure 24/7 dispatchable clean energy to prepare the grid for the demands of the hyperscale data centre boom and how grid-scale storage could play a key role.

Derasmo noted that according to the Electric Power Research Institute, data centres are expected to make up 9% of the power demand in the US in five years’ time. AI uses a significant amount of electricity, leading to a greater demand for data centres and in turn, a demand for reliable energy, which could be provided by grid-scale BESS projects.

This article has been updated from its original version to properly reflect Adam Atkinson-Lewis’ role as director of strategic market development for Wärtsilä ES&O.