Battery Energy Storage Systems (BESS) and Grid Modernization: Unlocking Value in the IRA Era

The Expanding Role of Battery Storage in Utility Portfolios

The U.S. energy sector is undergoing a profound transformation, driven by ambitious decarbonization mandates, rapid renewables expansion, and the game-changing provisions of the Inflation Reduction Act (IRA). At the heart of this transformation is the accelerating deployment of Battery Energy Storage Systems (BESS), which are fast becoming indispensable assets for utilities seeking to balance reliability, manage volatility, and unlock new value streams in a modernized grid.

IRA Provisions: A Catalyst for BESS Deployment

The IRA represents a historic shift in federal energy policy, fundamentally altering the economics of clean energy investment. For the first time, utilities can fully leverage tax credits for storage, thanks to key provisions such as:

Tax normalization exemptions for storage: Utilities can now develop storage projects without the constraints of tax normalization, removing a major barrier to investment.
Transferability and bonus credits: The ability to transfer tax credits and stack bonuses—especially for projects in energy communities—creates powerful incentives for utilities to maximize BESS investments.
Expanded eligibility: Production tax credits for solar and storage, previously unavailable to many utilities, are now accessible, leveling the playing field with independent power producers.

These changes have unleashed a wave of capital into BESS projects, positioning storage as a core pillar of utility portfolios and grid modernization strategies.

Best Practices for Integrating BESS into Capital Planning

As utilities scale up BESS investments, the complexity of capital planning increases. Traditional, static planning cycles are no longer sufficient. Instead, leading utilities are adopting dynamic capital planning (DCP)—an integrated, continuous process that connects operational, financial, and regulatory data in real time. Key best practices include:

Integrate Data Across Silos: Break down barriers between finance, operations, and regulatory teams. A unified digital platform should consolidate data from project management, financial systems, and regulatory commitments, creating a single source of truth for capital planning.
Adopt Agile, Low-Code Solutions: Rather than waiting for large-scale system overhauls, deploy low-code platforms that are scalable, adaptable, and quick to implement. These solutions accelerate time-to-value and improve transparency.
Enable Real-Time Monitoring and Reforecasting: Dynamic platforms allow for frequent reforecasting, helping utilities stay ahead of capital variances and adjust plans proactively as project scopes, costs, and regulatory requirements evolve.
Prioritize Portfolio Optimization: Use advanced analytics to assess and prioritize projects based on risk, value, and regulatory impact. This ensures capital is allocated to initiatives that deliver the greatest benefit to both the grid and shareholders.
Enhance Regulatory Traceability: Digital tools provide detailed audit trails and reporting, making it easier to demonstrate compliance and justify investments to regulators—an increasingly important capability as regulatory scrutiny intensifies.

Optimizing BESS for Price Arbitrage and Reliability

BESS are no longer limited to ancillary services like frequency regulation. Their role has expanded dramatically, especially in markets such as CAISO and ERCOT, where renewables penetration and price volatility are high. Today, batteries are central to:

Price arbitrage: Charging during periods of low prices and discharging during peaks, batteries capture significant value from intraday price swings. In some cases, price arbitrage now accounts for the majority of BESS revenue.
Grid reliability: BESS provide critical flexibility, supporting the grid during demand spikes, supply disruptions, or renewable intermittency. They are essential for peak shaving, load balancing, and mitigating the risk of blackouts during extreme weather events.
Revenue diversification: By participating in multiple markets—capacity, spinning reserves, load management—BESS diversify revenue streams and improve project economics.

To maximize these opportunities, utilities need agile systems that can respond to volatile markets, integrated trading and analytics platforms for fast decision-making, and risk management frameworks that account for the unique operational characteristics of storage assets.

Leveraging Digital Platforms for Real-Time Analytics and Risk Management

The complexity of BESS operations demands a robust digital ecosystem. Modern utilities are investing in cloud-based platforms and AI-driven analytics that:

Automate business process workflows
Accelerate decision-making with real-time data
Unlock new value pools, such as price arbitrage and ancillary services
Support advanced use cases, including demand response and distributed energy resource (DER) integration

These platforms enable utilities to monitor BESS performance, forecast market conditions, and optimize dispatch strategies in real time. They also provide the transparency and traceability needed to satisfy regulatory requirements and stakeholder expectations.

Operational and Financial Challenges of Scaling Storage

While the IRA has removed many barriers, scaling BESS alongside renewables introduces new challenges:

Interconnection bottlenecks: The surge in renewables and storage projects has led to congested interconnection queues and transmission constraints, slowing deployment and increasing basis risk.
Supply chain and labor shortages: Heightened competition for resources can erode project economics and delay schedules.
Market volatility: Increased renewables penetration drives price volatility and negative pricing, complicating revenue forecasting and risk management.
Regulatory complexity: Utilities must navigate a patchwork of federal, state, and local regulations, with evolving requirements for compliance, reporting, and stakeholder engagement.

Addressing these challenges requires disciplined, data-driven capital planning, agile digital solutions, and a commitment to operational excellence.

The Path Forward: BESS as a Strategic Lever for Grid Modernization

Grid modernization and storage investments are not just technical upgrades—they are strategic levers for growth and value creation. By adopting dynamic capital planning and leveraging digital tools, utilities can:

Maximize authorized rates of return for shareholders
Ensure disciplined, transparent, and compliant investment processes
Build a more resilient, flexible, and customer-centric grid

As the energy transition accelerates, utilities that invest in dynamic, digitally enabled capital planning and BESS integration will be best positioned to deliver on their dual mandate: powering the future reliably and profitably.

Publicis Sapient partners with leading utilities to design and implement dynamic capital planning and digital solutions that drive transformation and unlock shareholder value. Connect with us to learn how your organization can thrive in the era of the IRA and grid modernization.