Battery Storage Firms Chase AI Demand but Face Key Hurdles

Artificial intelligence's rapid growth has generated many demands across a variety of industries, with battery storage companies existing to fill a role at an important point in the story of AI infrastructure. The logic behind this connection seems sound: AI requires a lot of energy, and as demand will continue to increase, energy storage options will need to be reliable and flexible.

Battery storage companies want to capture part of this market opportunity; however, the challenges between opportunities and realities are substantial. One of those issues involves the infrastructure assets supporting the grid. Because AI-related electricity demand is increasing at a rapid rate, grid infrastructure will be unable to modernize and expand as quickly as AI-related energy demand is increasing, so many battery storage companies will not be able to address this bottleneck alone.

Another challenge is supply-chain restrictions. Lithium, cobalt and nickel are the primary materials used to make batteries; they all come from very few locations in the world. The same geopolitical issues/disruptions that have complicated semiconductor supply chains also complicate the supply of the materials needed to produce large quantities of batteries. Companies who are trying to meet the increasing demand for artificial intelligence-generating businesses are finding that the inputs/commodities that they need are not available in the quantity or at the price they anticipated in a normal business plan.

The strategic rationale for battery storage remains intact despite these challenges. Solar and wind are increasingly being produced at a competitive price; however, they are also intermittent - therefore, battery storage acts as the bridge between generation and transmission of clean power and will only become more important, as e-commerce businesses require uninterrupted access to electricity 24 hours a day.

Companies capable of successfully navigating the power grid and supply chain issues discussed above will find themselves operating directly in the intersection of two of the biggest investment stories over the next 10 years. Success will require both time and capital to develop solutions that are much bigger than just having the technology.