American Water Works' Arm Installs New Battery Energy Storage System

American Water Works AWK announced that its subsidiary, California American Water, is installing battery energy storage systems (“BESS”) in high-risk regions across the state. The goal is to improve reliability and emergency preparation.

California's Self-Generation Incentive Program, a state-run program that promotes investments in renewable energy, is helping fund the $800,000 Hillview project. It will provide close to $350,000 toward the project's overall cost.

How Will AWK Benefit?  

The system, which is the company's first in Madera County, is situated at the Sierra Lakes Water Treatment Plant in Hillview and demonstrates California American Water's dedication to making necessary investments in preserving and safeguarding water service during emergencies and Public Safety Power Shutoffs (“PSPS”). 

PSPS are typically started by electric utilities in order to prevent wildfires, but they can disrupt water infrastructure that relies on uninterrupted power. In an area where outages frequently occur, the BESS will provide reliable energy by replacing diesel generators.

The battery backup system helps ensure continuity of service during grid outages and PSPS events. More reliable service lowers the likelihood of consumer complaints and service interruptions for a utility. Increased availability can lower operational expenses associated with emergency responses and tends to increase customer satisfaction.

After wildfires and PSPS incidents, California American Water started implementing BESS technology in Ventura County in 2020. As part of its long-term resilience strategy, the company is still evaluating other locations for potential deployments. The company remains committed to developing clean energy solutions throughout the state that strengthen communities and infrastructure.

Growth Prospects for BESS

According to a Precedence Research report, the global BESS market is projected to grow from $10.16 billion in 2025 to $86.87 billion by 2034, at a CAGR of 26.92%. This industry is expanding globally due to the need for grid stability and the growing trend toward renewable energy sources.

Along with AWK, other utility companies like NextEra Energy, Inc. NEE, Vistra VST and PG&E Corporation PCG are also enhancing grid reliability through battery storage systems. 

NEE’s subsidiary, NextEra Energy Resources LLC (“NEER”), is a world leader in battery storage capacity. NEER develops and constructs battery storage projects, which, when combined with its renewable projects, help enhance its ability to meet customers' firm capacity needs, or as standalone facilities. As of Dec. 31, 2024, NextEra Energy Resources had net ownership interests in approximately 3,379 megawatts (MW) of battery storage capacity.

NEE’s long-term (three to five years) earnings growth rate is 7.89%. The Zacks Consensus Estimate for 2025 sales indicates a year-over-year increase of 15.7%.

Vistra’s Moss Landing Energy Storage Facility in California, one of the world’s largest, exemplifies its leadership in deploying utility-scale storage. As of Dec. 31, 2024, VST owned BESS totaling 750 MW in California, 270 MW in Texas and 4 MW in Illinois. It has plans to develop additional BESS at retired or to-be-retired plant sites in Illinois.

VST’s long-term earnings growth rate is 10.16%. The Zacks Consensus Estimate for 2025 sales indicates a year-over-year increase of 25.3%.

PCG has managed contracts for more than 4.6 gigawatts of battery energy storage to be deployed over the next several years and operates 183 MW of utility-owned battery storage, strengthening California’s grid efficiency and reliability.

PCG’s long-term earnings growth rate is 8.95%. The Zacks Consensus Estimate for 2025 sales indicates a year-over-year increase of 7.7%.

AWK’s Stock Price Performance

Year to date, shares of the company have risen 11.3% compared with the industry’s 17.6% growth.    

AWK’s Zacks Rank

The company currently has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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