If there was a renewable energy generation race in 2025, solar would have won it. The U.S. added 43 GW of new solar power generation capacity last year, and for the fifth consecutive year, solar has been the nation’s leading source of new generation. It has proven to be a true champion through the test of time. The economics of solar remain strong despite the current administration’s changes in regulation and tax policy. With solar leading the charge, the momentum toward co-location of solar and battery systems is becoming impossible to ignore, especially as data centers hunger for clean, reliable power.

The Intermittency Challenge

As promising as renewable energy is, its intermittent nature creates challenges for consistent grid power. The grid currently lacks the technologies and infrastructure needed to operate on 100% renewable energy. This challenge is playing out in real market terms. PJM, the largest grid operator in the U.S., has downrated solar resources in its capacity auctions because solar cannot reliably deliver power during peak stress hours like winter evenings or extreme weather events. This is a signal that solar alone is not enough, and that pairing it with battery storage is becoming less of an option and more of a necessity, and the market is starting to respond. 

The Role of BESS and the Co-location Opportunity

Battery Energy Storage Systems (BESS) use batteries to store energy from renewable sources like solar, then discharge it when needed. According to the U.S. Energy Information Administration, developers plan to add 86 GW of new utility-scale electric generating capacity to the U.S. power grid in 2026, with solar power accounting for over half of these additions. That is nearly double the 43 GW added in 2025, signaling that solar’s momentum is not slowing down. Recent geopolitical tensions, such as the U.S.-Israel war on Iran that began in late February 2026, have disrupted the Strait of Hormuz and pushed Brent crude to over $113 a barrel in mid-March. This spike in oil prices has not only highlighted how vulnerable fossil fuel markets are to global events but has also reinforced the business case for renewables. As energy prices remain unpredictable and fossil fuel supply risks mount, renewable energy is becoming an increasingly attractive option for energy users.

Scaling Co-location for Data Centers

The opportunity for co-located solar and battery systems to serve data center demand is real and growing. These projects do require a large land footprint and navigating regulatory complexities from permitting to grid interconnection, but developers are finding ways to work within these constraints. In practice, co-located systems in the U.S. typically remain grid-connected rather than fully off-grid, using storage to reduce grid dependence rather than eliminate it entirely. Texas is already leading the way, topping all states with 11 GW of new solar installations last year. With the U.S. expected to add 490 GW of new solar capacity by 2036, the scale of the co-location opportunity is hard to ignore, and with data center operators hungry for reliable, affordable power, storage is becoming more competitive and the momentum behind co-location is only building. It is a constant dance in today’s energy market, tangoing around regulations, costs, and surging demand. But with solar leading the way and storage becoming more competitive, the pieces are aligning. For developers, investors, and Big Tech alike, there may just be sunshine around the corner.