Longer-duration BESS is gaining traction as falling ancillary revenues and new market rules reshape storage economics.
BESS is shifting toward longer durations, driven by both the erosion of legacy revenue streams for short-duration assets and the rise of multi-billion-dollar markets that reward assets capable of sustained output. Together, these forces are accelerating the industry’s next phase, elevating BESS from a niche solution to a core resource that is critical to grid reliability.
In markets like ERCOT, developers are effectively being pushed away from an ancillary services-focused strategy as revenues from providing such services decline due to market saturation. As a result, BESS developers are turning to alternative value streams – particularly energy arbitrage – that benefit from longer operating durations.
In ERCOT’s Houston Hub, for example, the theoretical maximum arbitrage potential of BESS increases at longer durations, reaching 12.33 USD/kW-month for a six-hour battery over a five-year term, according to analysis from Pexapark. That revenue potential is nearly 60% higher than that of a two-hour battery over the same term.
At the same time, evolving market design is creating a complementary pull toward longer-duration BESS. Grid operators and policymakers, responding to rising demand from data centers and a heightened focus on grid reliability, are placing greater emphasis on resource adequacy, or the ability of the grid to meet peak demand. As these frameworks advance, duration is becoming a critical metric, with new rules and incentives increasingly favoring assets capable of sustained output over longer periods.
“As ancillary revenues decline, battery owners commonly re-optimize toward other value streams – energy arbitrage, capacity markets, bilateral tolling or offtake contracts, and non-market payments such as resilience or transmission and distribution deferral,” the interest group GridLab noted in a recent report. “This shift requires more sophisticated strategies and longer-duration assets (2+ hours), marking the end of the ‘ancillary-only’ era for grid-scale storage.”
In major U.S. wholesale markets with capacity auctions, such as PJM, four hours has effectively become the benchmark for receiving capacity credit. Given that capacity payments are a significant revenue source alongside energy markets, and with auction clearing prices at or near record levels, this requirement alone serves as an incentive for developers to build projects with at least four-hour duration.
New regulations are also accelerating the trend. Under ERCOT’s Real-Time Co-Optimization and BESS (RTC+B) rules, released in December 2025, the grid operator now has visibility into a BESS’s state of charge (SOC) and factors these directly into market awards. As a result, facilities must maintain sufficient charge to meet all their commitments simultaneously.
Additional rules are further favoring longer duration. Under ERCOT’s Dispatchable Reliability Reserve Service (DRRS), for example, resources must be able to inject power within two hours of dispatch and sustain maximum output for at least four hours to qualify. That program is estimated to provide annual revenue of about USD 1.7 billion to dispatchable generators, including BESS and gas-fired generators. Other ERCOT ancillary services, such as Non-Spinning Reserve Service, already have a duration requirement of four hours.
The shift toward longer-duration BESS is starting to become evident in project pipelines. In PJM, 6 GW of four-hour BESS and 1.7 GW of six-hour BESS have advanced positions in the PJM interconnection queue, according to analysis from Pexapark. More than half of this capacity is projected to come online over the next five years. This marks a significant shift for a market that currently has only about 400 MW of mostly short-duration BESS capacity.
According to the consultancy Brattle, four-hour BESS will be critical for PJM to meet resource adequacy needs amid rising data center demand, with 16 GW required by 2032. Brattle identified BESS as among the most cost-effective resources. In 2025, the 20-year levelized total cost of a four-hour BESS system in PJM was about 212 kUSD/MW-year, lower than all other resource types except natural gas combustion turbines, according to data from watchdog Monitoring Analytics.
In ERCOT, as of the end of 2024, average BESS duration reached 1.6 hours, roughly double earlier levels. However, shorter-duration systems still dominate. Rapid load growth from data centers and new market regulations may further accelerate the shift toward longer-duration assets.
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