Energy demands in the 21st century are more critical than ever. Today, we are moving to renewable energy sources like wind and solar.

Grid reliability is crucial when it comes to deploying these. We all know wind doesn’t blow all the time and the sun shines only during the day.

But both of those problems are easily solved with energy storage. And energy storage will play a key role in enhancing grid reliability too.

Including energy storage as part of today’s electric power grid design allows the movement of energy in time. In other words, excess energy generated during periods of low use can be stored and used when demand is high.

We’ve never been able to do this in a broad fashion until now. But the continual drop in storage battery manufacturing costs has made energy storage a reality.

That’s good news for homeowners who want to install energy storage systems. And it’s good news for investors too.

Utilities Jump Into Energy Storage in a Big Way

Until a few years ago, utilities had little interest in energy storage. It was expensive and had few benefits to utilities’ grids.

But falling prices and more solar and wind farms have made utility-scale storage a necessity.

Despite the pandemic, energy storage in the U.S. saw record additions during the second quarter of 2020. And I expect that to continue at a rapid pace for years to come.

During the quarter, utilities installed 168 megawatts of storage. That’s a 72% increase over the prior quarter and a 117% increase over the second quarter of 2019.

The third quarter could be even bigger.

So what’s driving the demand?

It varies by location. Take Hawaii, for example. The state has the highest electric rates in the country.

Its rates are above $0.29 per kilowatt-hour. Because of these high costs, many Hawaiians already have solar arrays.

Adding storage allows them to stockpile excess energy produced during the day for use when they arrive home at night. It’s the perfect match.

And California, with its wildfires, earthquakes and landslides, has a grid reliability issue. Adding storage to solar improves that reliability.

California utilities benefit because storage helps reduce the effective load. Think of it this way: All of California’s battery storage taken together acts as a giant virtual power-generating plant.

Puerto Rico has a grid reliability problem too. But its problem stems from a lack of maintenance, ongoing upgrades and improvements.

On September 20, 2017, Hurricane Maria, a Category 4 storm, hit Puerto Rico. It trashed about 80% of Puerto Rico’s power grid. Residents were without electricity for months.

Most home solar systems produce excess energy during the day.

And without storage, that excess energy goes back into the utility grid. The customer gets only a fraction of what they pay for the electricity as a credit.

So homeowners who already have solar might want to consider adding storage. By doing so, they keep all of what their systems produce.

A battery storage unit is also the ideal whole-house generator. It’s quiet and odorless, and it doesn’t require any fuel or maintenance. If you have five or six power outages a year, like we do, storage makes a lot of sense.

Investors, Take Note

One of the top companies in the energy storage space also happens to make popular electric vehicles (EVs). I’m talking about Tesla (Nasdaq: TSLA).

Some analysts feel the company is overvalued. I don’t.

Here’s why: Tesla is a sustainable energy company.

It’s focused on three sectors: EVs, solar and energy storage. A few years from now, Tesla’s solar and storage businesses will easily surpass its EV business.

Imagine Tesla at four or five times the size it is today. Most investors can’t and therefore won’t buy its shares.

I recommended Tesla back in 2013 when it was trading at $37 per share. Many readers scoffed at the idea of buying it at that price.

Too bad for them. But I digress.

The best way to play the energy storage space now is via the Global X Lithium & Battery Tech ETF (NYSE: LIT). This exchange-traded fund (ETF) is focused on what it calls the “full lithium cycle.”

Most storage and EV batteries today use some form of lithium-ion chemistry. So it makes sense to invest in lithium miners too.

That’s why I like this particular ETF. Its investors are exposed to companies mining and refining lithium and those involved in battery production.

Regardless of how you choose to invest in it, energy storage should be in your portfolio. It’s responsible for part of the global energy disruption.