Batteries are used in data centers as part of uninterruptible power supply systems (UPS) to prevent data loss and to cover critical loads. However, as AI data centers become more prevalent, as does the need to manage the volatility in their power loads. While Li-ion batteries are the incumbent and dominant battery energy storage system (BESS) globally, they may not offer the best long-term solution, amidst their observed degradation and safety risks for this application. Other battery storage technologies may emerge offering more robust solutions, amongst a breadth of technical considerations. Moreover, longer duration variations of these energy storage technologies may be adopted in the long-term to reduce reliance on diesel generators and to support grid stability. This article from IDTechEx examines emerging battery technology trends for data centers.
With the boom of AI data centers, comes increasing demand for battery energy storage systems (BESS) to be used on-site to support this new infrastructure. The existing dominance and supply chains of Li-ion BESS technologies in grid-scale markets makes this technology a straightforward early contender. However, Li-ion degradation and safety risks are creating opportunities for alternative battery storage technologies to emerge in data center applications.
Demand for longer duration BESS technologies in AI data centers may also emerge, to reduce reliance on on-site diesel generators and to allow utility operators to balance grid electricity supply and demand more reliably. BESS demand for data centers will contribute significantly to the overall commercial and industrial (C&I) BESS market, which, as written in IDTechEx's market report "Battery Storage for Data Centers, Commercial & Industrial Applications 2026-2036: Market, Forecasts, Players, Technology", is forecast to reach US$21B in value by 2036.
Battery Applications in Data Centers
A battery system in a data center needs to cover the critical load (MW) to provide continuous power in the event of a blackout. This is generally less than the total data center power demand. The critical load refers to the essential IT equipment, including servers, storage, and network gear, that must remain operational to prevent data loss or service disruption. This will typically see the battery be connected as part of an uninterruptible power supply (UPS) system, and are used when power outages should be prevented, i.e., to maintain continuous operation or to avoid data loss (e.g. prevent data corruption at a data center).
Batteries in data centers can also be used to peak shave electricity from the grid. This brings electricity optimization costs for the data center operator, and is a typical behind-the-meter mechanism that C&I end-users adopt.
Critically, an emerging application for batteries in data centers is to manage volatile AI loads. MW-scale swings in load can be difficult to manage, and the data center may run extra calculations such that it can operate at a continuous, yet higher, power from the grid. However, this arguably wastes electricity, and so battery technologies could be used to provide extra, short bursts of power to the data center load when needed, allowing the data center to run at an underlying lower continuous power from the grid. These MW-scale fluctuations could occur several times per minute. Equally, batteries could be charged using excess power from the grid if the data center load suddenly drops.
The Shortfalls of Li-ion and Upsides of Alternative Battery Technologies
Typically, valve-regulated lead acid (VRLA) batteries and Li-ion battery (LIB) technologies have been adopted for UPS applications in data centers due to low cost. However, the volatile swings in load can rapidly degrade LIBs; with reports suggesting that some LIBs have retired in as early as six months from data centers for this reason. In contrast, BESS installed on the grid may only be cycled once per day at lower C-rates, helping to extend the lifetime of these batteries. More rapid degradation also brings increased safety risk, and LIB fires at data centers have not gone unnoticed. Data center operators may indeed see increased insurance premiums or declined coverage on LIB technologies as a result.
Battery storage technology evolution in data centers. Source: IDTechEx.
Instead, alternative battery storage technologies may emerge which combat these issues. For example, redox flow batteries (RFB) exhibit non-flammable electrolyte, minimal degradation, and have claimed cycle lives of 20,000+. The technology readiness of less expensive non-vanadium chemistries is still a key consideration for wider commercial uptake, though the technology promises these key advantages for data center applications. Key players XL Batteries and FlexBase are developing commercial-scale RFB-data center projects in both the US and Europe, respectively.
Longer duration RFB technologies could be adopted to reduce reliance on diesel generators, and to prevent large drop-offs in grid electricity demand after a blackout. Once a blackout occurs, a data center operator may be hesitant to switch their temporary electricity supply from an on-site diesel generator back to the utility supply. By implementing a larger, longer duration BESS on-site, load demand can be managed more predictably for the utility operator, since the BESS can be charged with grid electricity over a longer period until the data center operator is confident it can switch its supply back to the grid. This helps the utility operator to balance electricity supply and demand more reliably, rather than dealing with a large drop-off in demand which could otherwise cause grid instability.
Na-ion technologies may also be considered a viable technology option for managing volatile AI loads in data centers, due to potentially possessing both high C-rate and power density capabilities. Tiamat Energy has a strategic partnership with Endeavour, and is developing a Na-ion BESS technology (with a claimed 60 C-rate) for Endeavour's data centers, with an initial target on the European target.
IDTechEx Outlook on Batteries for Data Centers
Li-ion BESS technologies are likely to continue being adopted in data centers in the short-term, with these potentially being lower-cost LFP solutions given their vast availability in grid-scale markets. Spatially constrained data centers may adopt NMC technologies due to this LIB chemistry exhibiting higher energy density. However, recent LIB fires and their fast retirement in AI data centers in commercial settings have exposed the technologies' weaknesses for this application.
Alternative battery storage technologies such as flow batteries and Na-ion BESS may offer unique advantages for this application, across key improved performance metrics such as less degradation, non-flammability, power density, and C-rate. Longer duration variations of these technologies will be useful to reduce reliance on diesel generators at data centers, and also to support utility operators in balancing electricity supply and demand in a more predictable fashion.
For more information on battery storage technologies, projects, trends, cost benefit analysis, and developments for data centers, among many other commercial and industrial applications, with coverage on technology costs and key player interviews, please refer to the IDTechEx report: "Battery Storage for Data Centers, Commercial & Industrial Applications 2026-2036: Market, Forecasts, Players, Technology".
The report also includes key research on C&I BESS technology benchmarking, C&I BESS cost breakdown by component, and quantitative analysis of manufacturing LFP cells in the US vs importing these from China (with impact of existing tariffs, tax credits, and the OBBBA considered).
For more information on this report, including downloadable sample pages, please visit www.IDTechEx.com/BS4DC, or for the full portfolio of related research available from IDTechEx, see www.IDTechEx.com.
