Source: AES.

As the photovoltaic and wind markets mature in the United States and around the world, attention is shifting toward the next step in the market's evolution: battery storage. Gaining some exposure recently, battery storage conversations swirled through the media with news of Tesla Motors' (TSLA -3.55%) Gigafactory; however, the applications for battery storage greatly transcend those pertaining to electric vehicles.

Utility applications
According to a research report published by IHS, grid-connected energy storage is bound to experience substantial growth over the next few years. Approximately 340 MW of grid-connected energy storage was installed in 2012 and 2013; however, IHS solar research manager Sam Wilkinson and report co-author Abigail Ward suggest that the annual rate of installations will grow to more than 6GW by 2017 and more than 40 GW by 2022. Perhaps this is an underestimate. California alone has set a lofty target. The California Public Utilities Commission has an energy storage target of 1.325 GW by 2020 for its three largest utilities.

Where will these and other utilities look in order to meet these targets? One company is The AES Corporation (AES 0.80%). Located in the United States and South America, AES has more than 200 MW of storage-based resources in operation and construction, and it has more than 1,000 MW in development. Last week, AES revealed its Advancion storage offering, which the company characterizes as "a complete battery-based grid resource -- delivering the services expected from peaking power plants, with added benefits." Supplying AES with the power conversion system for Advancion is Parker Hannifin. The two companies have previously worked together on other storage projects, namely on the AES Laurel Mountain Storage Array, a 64 MW advanced battery-based resource, which helps a 98 MW wind farm to supply grid stability services.

Closer to home
Energy storage isn't just a concern for utilities; companies are looking to provide solutions for the residential market as well. Power-One, a member of the ABB (ABBN.Y 6.26%) Group, will be offering home owners the REACT energy storage system later this year. Paired with one of the company's Aurora inverters, the system affords homeowners the opportunity to store excess PV-generated energy during peak times for periods with higher energy demands. Having only completed the acquisition of Power-One last July, ABB has already acknowledged the benefit. In its 2013 annual report, ABB credits Power-One with contributing significantly to the 4% increase in revenues and 2% increase in orders.

Although SolarCity (SCTY.DL) uses Power-One's Aurora inverters in its PV systems, it's doubtful that it will choose to offer the REACT system to its customers. Instead, SolarCity has chosen to partner with Tesla in providing residential customers with the ability to add battery backup to their PV systems. The energy storage option is available in certain California, Connecticut, and Massachusetts markets at the moment, but SolarCity plans on rolling out the service nationwide in the near future. In addition to the residential offerings, SolarCity began offering businesses the ability to incorporate energy storage systems. Similar to the popular PV system model, SolarCity plans on offering consumers the option of adding a battery backup without any initial cost. Instead, the customer would lease the system, making monthly payments, over a term of about 10 years.

The company foresees battery solutions as an inextricable complement to the PV systems. When asked on the most recent earnings conference call about the role of battery systems in the future, Peter Rive, SolarCity's chief technology officer, acknowledged the importance: "Yes, I think if you look at the business over the long term, we aspire to eventually deploy a battery with every single solar panel system that we deploy."

Final Foolish thoughts
Long gone are the days when discussions regarding energy addressed only coal and oil. Renewables are assuming a larger part of the discourse, and while the residential, commercial, and utility-scale markets make headlines with their sizable solar farms and wide-reaching wind projects, energy storage is quickly emerging as the next act in the domestic energy story. Which company belongs in your portfolio? That's up to you to decide after further research. But, AES, ABB, and SolarCity all offer compelling theses for investment.