Trend watch: grid modernization & storage in 2026

The clean-energy transition is accelerating, and with it the stresses on power grids are mounting. Electricity demand is rising as heat pumps, electric vehicles and data centers proliferate, while decarbonization goals require connecting hundreds of gigawatts of new renewable energy and storage. Yet grid infrastructure has not kept pace. In both the United States and the United Kingdom, interconnection queues now stretch well over two thousand gigawatts of generation and storage capacity, leaving shovel-ready projects idle for years. Grid planners increasingly recognise that simply building more lines will not be enough; reforms, technology upgrades and new business models are needed to unlock value. This trend analysis explores the fastest-moving subsegments of grid modernization and storage to watch in 2026, explains why they matter and offers practical guidance for procurement teams.

Why it matters

Backlogs and rising demand threaten progress

Interconnection bottlenecks are delaying the decarbonization agenda. Tens of thousands of projects are waiting for approval in North America alone, representing more than two terawatts of prospective generation and storage capacity. Only a fraction of projects make it through the queue to commercial operation, and the median time from request to commissioning has climbed above four years. Great Britain faces similar challenges; its queue has swelled to multiple times the capacity needed to meet 2030 targets.

At the same time, electrification and data-center growth are driving unprecedented demand. The U.S. Department of Energy estimates that by 2030 the country will need to add resources to serve roughly 200 gigawatts of new peak demand. If transmission interconnection continues to experience multi-year delays, grid operators may be forced to rely on fossil-fuel plants to fill the gap. The stakes are high: the International Energy Agency warns that more than eighty million kilometres of power lines will need to be added or replaced worldwide by 2040, and investment must more than double to over six hundred billion dollars per year by 2030.

New technologies create alternatives to traditional buildout

While building new transmission is essential, a host of innovations can expand capacity more quickly and at lower cost. Grid-enhancing technologies such as dynamic line rating use sensors and real-time analytics to safely increase the current carrying capacity of existing lines. Pilot projects have shown that these tools can boost capacity by tens of percent on congested corridors, postponing costly upgrades. Virtual power plants (VPPs) aggregate distributed resources--rooftop solar, home batteries, electric vehicles and smart appliances--into dispatchable capacity that can ease peak demand. Analysis by the U.S. Department of Energy suggests that tripling VPP capacity by the end of the decade could supply a significant share of peak load and save billions of dollars in avoided generation and transmission costs. Battery energy storage is scaling rapidly: U.S. power providers installed a record volume of storage in 2024 and plan to nearly double that deployment in 2025. Globally, grid-scale storage must expand many times over to stay on track with net-zero pathways.

Digital twins and advanced analytics are emerging as indispensable tools for testing grid upgrades and managing complexity. New York Power Authority's AGILe laboratory has built a high-fidelity digital replica of the entire state grid that allows engineers to simulate events in real time and synchronise data across transmission and distribution. Meanwhile, supply-chain accountability is rising: the European Union's battery regulation requires that by February 2027 all industrial and electric-vehicle batteries above two kilowatt-hours must carry a digital passport with data on carbon footprint, material composition, performance and recycling potential. Traceability will soon extend beyond batteries as digital product passports roll out to other sectors.

These parallel forces--regulatory reform, grid-enhancing technologies, distributed resource aggregation, storage scale-up, digital twins and traceability--define the frontier of grid modernization in 2026. The sections below unpack each subsegment, illustrate what is working and what isn't, and offer a framework for procurement teams to prioritise investments.

Key trends and concepts

Interconnection reforms: from "first come" to "first ready"

Interconnection queues are the biggest bottleneck to renewable deployment. To clear them, regulators are moving away from a "first come, first served" approach--which incentivised developers to secure queue positions even before projects were ready--toward a "first ready, first served" or clustered study model. In the United States, the Federal Energy Regulatory Commission (FERC) finalised a sweeping interconnection rule that requires transmission providers to study projects in batches, imposes strict financial readiness criteria and withdrawal penalties, and sets firm deadlines for completing studies. The rule also introduces temporary fast-track pathways for projects that deliver reliability benefits. In the United Kingdom, the National Energy System Operator adopted a "ready and needed" framework that not only prioritises commercially ready projects but also aligns them with national policy objectives such as the Clean Power Action Plan.

What's working: Early reforms are starting to filter out speculative projects and prioritise shovel-ready projects. FERC's temporary pathways have cleared tens of gigawatts of generation projects while protecting grid reliability. Some regions are automating interconnection studies using artificial intelligence; grid operators in the Midwest and Southwest are piloting automated queue management. In Britain, the grid operator has re-ordered its queue to prioritise projects with delivery dates before 2030 and remove dormant entries.

What isn't: Even with reforms, backlogs remain large. The United States still has well over two terawatts of capacity waiting in interconnection queues, and the median wait time remains over four years. Readiness requirements may disadvantage smaller developers or community projects that struggle to post large financial deposits. Fast-track programmes have also been criticised for prioritising natural gas projects over renewables. Procurement teams should engage early with transmission providers to ensure renewable and storage projects meet readiness criteria and to advocate for equitable access.

Grid-enhancing technologies: squeezing more from existing lines

Static ratings for transmission lines assume worst-case weather conditions, which underutilise capacity for most hours of the year. Dynamic line rating (DLR) systems install sensor "neurons" on power lines to measure real-time conditions such as conductor temperature, wind speed and sag. By analysing these data, utilities can determine the actual safe current-carrying capacity of a line, which is often substantially higher than the conservative static rating. Pilots in North America have recorded capacity increases of around fifty percent on congested lines, allowing operators to postpone expensive upgrades. In general, DLR can safely increase capacity by ten to forty percent. At least sixteen U.S. states have enacted laws encouraging grid-enhancing technologies, including DLR, topology optimisation and high-performance conductors, with several states passing such policies in 2025.

Advanced power-flow control devices and topology-optimisation software can also reroute electricity to under-utilised corridors by automatically opening and closing circuit breakers. These tools complement DLR by addressing congestion at nodes and interfaces. Adoption is accelerating as regulators allow utilities to earn returns on efficiency investments.

What's working: DLR has moved from pilot to scale. Utilities that achieved promising results have deployed sensors on multiple lines within months. Combining physical sensors with virtual models allows continuous learning and incremental improvements. Some jurisdictions provide performance-based incentives for utilities that adopt grid-enhancing technologies.

What isn't: Widespread deployment requires regulatory support and standardised guidelines. Operators must verify that real-time ratings do not compromise safety. Installing sensors can be logistically challenging on older lines, and data integration with system operators may require upgrades to control-room software. Procurement contracts should address hardware durability, cybersecurity and integration with energy management systems.

Virtual power plants: distributed resources at scale

A virtual power plant aggregates behind-the-meter assets--rooftop photovoltaic systems, home batteries, electric vehicles and smart thermostats--and dispatches them as a unified resource. VPPs provide services such as peak shaving, frequency regulation and capacity deferral. Analysis by the U.S. Department of Energy suggests that scaling VPP capacity to between eighty and one hundred and sixty gigawatts by 2030 could meet a tenth to a fifth of peak demand and save roughly ten billion dollars annually. The industry is still nascent: U.S. VPP capacity was estimated at about thirty-three gigawatts across thirty states in 2024. European markets are seeing similar growth; companies such as sonnen and Flexitricity have aggregated tens of thousands of home batteries and other flexible assets.

What's working: Regulatory momentum is building. The Inflation Reduction Act and state policies offer incentives for customers to adopt distributed energy technologies that are VPP-compatible. Utilities are recognising the value of VPPs for deferring transmission upgrades, and some system operators are creating market participation rules for aggregations. Managed charging programmes, for example, have prevented spikes in peak load by shifting electric-vehicle charging to off-peak hours.

What isn't: Market rules remain patchwork. In many regions, distributed resources cannot participate in wholesale markets or are limited to demand-response programmes. Data privacy and cybersecurity are concerns when aggregating customer devices. Customer engagement is critical; programmes must be simple and transparent to attract participation. Procurement teams should seek solutions with robust customer portals and ensure that devices support open standards for interoperability.

Battery storage and traceability: scaling rapidly with new requirements

Battery storage has moved from niche to mainstream. U.S. power providers added more than ten gigawatts of utility-scale battery capacity in 2024 and plan to add over eighteen gigawatts in 2025. States such as California, Texas, Arizona, Nevada and New York lead deployment. Globally, grid-scale battery capacity must increase many-fold to nearly a terawatt by 2030 to achieve net-zero pathways, requiring average annual additions of around one hundred and twenty gigawatts. This expansion will generate strong procurement demand for cells, inverters, control systems and operations services.

Alongside growth comes scrutiny of supply chains. The European Union's battery regulation mandates that by February 2027 all industrial and electric-vehicle batteries above two kilowatt-hours carry a digital battery passport providing information on carbon footprint, material composition, performance indicators and recycling potential. The passport must be accessible via a QR code and maintained throughout the battery's lifecycle. Requirements also include mandatory recycled-content targets and due-diligence obligations for critical minerals. Such transparency will soon expand to other products as digital product passports roll out across the European Green Deal. Procurement professionals should build traceability compliance into supplier requirements and consider partnering with technology providers that offer blockchain-based tracking and lifecycle analytics.

What's working: Battery costs have fallen dramatically over the past decade, and policies such as the Inflation Reduction Act provide investment tax credits for stand-alone storage. The market is diversifying into long-duration technologies such as flow batteries and iron-air systems to support multi-hour applications. Manufacturers are preparing for passport compliance by integrating data collection into battery management systems.

What isn't: Supply-chain constraints and permitting delays persist. Lithium and other critical minerals are subject to geopolitical risks and price volatility. Interconnection backlogs mean that storage projects are often queued behind generation projects. Procurement teams should diversify supply chains, include recycled-material targets and evaluate long-duration storage solutions to hedge against mineral shortages.

Digital twins and advanced analytics: a smarter grid

A digital twin is a high-fidelity virtual replica of a physical grid or component that mirrors its behaviour in real time. Network twins model electrical flows and capacity, while asset twins monitor the condition of individual equipment. Digital twins integrate real-time data and simulations to analyse performance, forecast impacts and test new technologies before field deployment. New York Power Authority's AGILe laboratory has created a digital twin of the entire New York grid, enabling engineers to import data sets from the grid operator, create multi-year snapshots and test how events in the distribution network affect transmission stability. The platform allows real-time co-simulation of electrical and communication systems and even cyberattack scenarios. It serves as a single source of truth across departments, improving data quality and coordination.

Why it matters: As grids become more complex with bidirectional flows and distributed resources, digital twins help operators manage uncertainty and optimise investments. They support risk-based planning, allowing utilities to prioritise upgrades that deliver the greatest resilience improvements. For procurement teams, digital twins provide evidence-based insights when evaluating competing products and help optimise maintenance schedules.

Challenges and opportunities: Building and maintaining a digital twin requires high-quality data and collaboration across organisational silos. Many utilities still rely on siloed models and inconsistent data sets. Procurement teams should prioritise vendors that offer interoperable data platforms and ensure alignment between operational technology and IT departments. Skills development is also important; engineers must understand both power systems and data science to leverage digital twins effectively.

Where the value lies: a quick framework for procurement

1. Assess project readiness. Map prospective generation and storage projects against interconnection reforms. Prioritise those that meet readiness criteria and have a clear path through clustered studies. Engage early with transmission providers to understand deposit requirements and study timelines. Advocate for transparent queue data and equitable access.
2. Leverage existing assets. Deploy grid-enhancing technologies like dynamic line rating and topology optimisation to extract more value from existing lines. Seek performance-based agreements that tie compensation to demonstrable capacity increases and reliability benefits. Ensure sensors and control devices comply with cybersecurity standards and can integrate into existing control systems.
3. Integrate distributed resources. Encourage vendors and customers to enrol devices in virtual power plants. Evaluate aggregators based on track record, customer engagement capabilities and interoperability with metering and billing systems. Align procurement contracts with incentive programmes to maximise value from demand flexibility.
4. Embrace traceability. Incorporate digital passport requirements into battery and equipment contracts. Require suppliers to provide data on carbon footprint, material sourcing and recyclability. Consider distributed ledger solutions for secure data sharing. Align procurement with circular-economy goals by specifying recycled content and end-of-life recovery obligations.
5. Plan with digital twins. Invest in modelling platforms that unify transmission and distribution data. Use digital twins to stress-test technologies, optimise asset maintenance schedules and evaluate the impact of new loads such as electric-vehicle charging. Ensure that data governance and cybersecurity protocols support cross-departmental collaboration.

Fast-moving segments to watch

• High-impact reforms in North America and Europe: Adoption of FERC's cluster-based interconnection process and Britain's "ready and needed" approach will accelerate queue processing. Watch for further rulemakings in 2026 that extend cluster studies to distribution-level projects and incorporate automated studies using artificial intelligence.
• Sensor-driven capacity upgrades: Expect utilities to move from pilots to fleet-wide deployment of dynamic line rating sensors and other grid-enhancing technologies. Vendors are bundling sensors with software subscriptions and offering as-a-service models. Procurement teams should anticipate multi-year service contracts and evaluate total cost of ownership.
• VPP consolidation and standardisation: As dozens of small aggregators operate across jurisdictions, consolidation is likely. Regulators will define standards for resource participation, measurement and verification, and market compensation. Companies that can provide unified platforms across multiple jurisdictions will gain an advantage.
• Battery passport roll-out and software integration: With the 2027 deadline approaching, expect a surge in software solutions that manage battery passport data. Early movers integrating passport data into enterprise resource planning systems will reduce compliance risk.
• Digital twin adoption in grid planning: More utilities will invest in digital twins, often tied to funding from infrastructure bills or innovation programmes. Expect partnerships between utilities, research labs and technology companies to accelerate deployment.

What to do next: checklist for procurement teams

Readiness and queue management

• Review your project portfolio against interconnection readiness criteria. Create a timeline for each project's study milestones.
• Engage with regional transmission organisations or distribution utilities to understand cluster study windows and deposit schedules.
• Advocate for transparent queue data so you can monitor your position and adjust strategies.

Grid-enhancing technologies

• Audit existing transmission assets to identify lines that could benefit from dynamic line rating or topology optimisation.
• Evaluate sensor suppliers based on field experience, safety records and integration capabilities.
• Include performance benchmarks in contracts (for example, minimum percentage increase in transfer capacity).

Distributed resources and VPPs

• Identify opportunities to participate in VPP programmes or demand-response markets. Incorporate VPP requirements into distributed asset procurements.
• Develop customer engagement strategies to encourage participation; emphasise bill savings and resilience benefits.
• Ensure data privacy policies are in place and choose aggregators with strong cybersecurity practices.

Storage and traceability

• Diversify battery suppliers to mitigate mineral supply risks. Evaluate long-duration technologies for specific use cases.
• Require digital passport compliance and recycled-content disclosures in purchase agreements.
• Plan for end-of-life logistics, including collection and recycling partnerships.

Digital twins and analytics

• Assess your organisation's data maturity and identify gaps in sensor coverage and data quality.
• Start with pilot digital twins for critical substations or feeders before scaling up.
• Invest in cross-disciplinary training so engineers can leverage simulation tools effectively.

Frequently asked questions

What is the difference between "first come, first served" and "first ready, first served" interconnection?

Under the old system, projects were studied one by one in the order applications were received, leading to long waits and encouraging speculative queue entries. A "first ready, first served" or cluster-study model groups projects and requires developers to demonstrate commercial readiness through deposits and site control, allowing grid operators to study multiple projects simultaneously. This approach reduces cascading delays when one project withdraws and prioritises projects that are likely to be built.

How does dynamic line rating work?

Dynamic line rating uses sensors to measure real-time conductor temperature, wind speed and sag. By analysing these conditions, utilities can determine the actual safe current-carrying capacity of a line, which is often higher than the conservative static rating used under worst-case assumptions. Pilot projects have shown that DLR can increase line capacity by ten to forty percent, and some pilots have achieved even greater gains.

What is a virtual power plant, and why are VPPs important for grid modernization?

A virtual power plant aggregates distributed energy resources--such as rooftop solar, home batteries, electric vehicles and smart thermostats--into a single, dispatchable resource that can provide grid services like peak shaving and frequency regulation. Analysis suggests that scaling VPP capacity to tens of gigawatts by 2030 could supply a significant share of peak demand and deliver substantial cost savings. VPPs provide flexibility without new transmission lines, making them a critical tool for managing electrification growth.

What is a digital battery passport, and how does it affect procurement?

The European Union's battery regulation requires that by February 2027 all industrial and electric-vehicle batteries above two kilowatt-hours sold in the EU carry a digital passport accessible via a QR code, containing information on carbon footprint, material composition, performance indicators and recycling potential. Procurement teams must ensure that suppliers provide this data and that internal systems can store and share passport information. Similar requirements are likely to emerge in other regions and product categories.

Why are digital twins relevant to procurement?

Digital twins allow utilities and large energy users to model the performance of assets under various scenarios, test the impact of new technologies or loads, and identify vulnerabilities before making capital investments. For procurement teams, digital twins provide evidence-based insights when evaluating competing products and help optimise maintenance schedules.

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