Battery start-ups see ‘crazy’ demand to smooth power surges in data centres
Rapid growth of clusters of processors for AI training drives need for energy storage
Battery start-ups are moving into AI data centres where their specialist technology helps to smooth split-second power surges, driving what executives describe as “crazy” demand.
The rapid growth of AI data centres is creating a profitable niche for the battery makers, as operators seek technologies capable of responding to energy surges that can be equivalent to the electricity demand of a small town, occurring multiple times per second.
Alsym Energy, a US sodium-ion battery start-up backed by an investment arm of the Indian conglomerate Tata Group, said interest had soared over the past three months from data centre operators seeking ways to manage the frequent power transients caused by AI computing.
These extreme energy fluctuations meant that the facilities were otherwise not able to connect to the grid, Alsym chief executive Mukesh Chatter told the FT. “Battery has become an essential component, not a desired component of data centres,” he said.
Sodium-ion batteries could discharge power more quickly than traditional lithium-ion products, making them suitable for balancing AI-driven fluctuations, he said.
During conventional computing, processors tend to operate independently. But the thousands of processing units operating in synchrony during AI training and, increasingly, inference workloads — the process of running AI models — draw and shed power almost simultaneously.
Kazuhiro Sugiyama of Dutch semiconductor designer Fortaegis Technologies said this created the swings of tens of megawatts in as little as one thousandth of a second.
Existing backup systems and gas turbines are not designed to respond to millisecond-scale movements, the battery executives say.
The opportunity for specialist battery companies comes at a time when electric vehicle battery demand is challenged by the slowing pace of production and fierce competition from Chinese manufacturers.
Volkswagen-backed QuantumScape, a solid-state battery developer originally focused on EVs, said it was in talks with data centre equipment companies about supplying its technology.
Chief executive Siva Sivaram told the FT that the data centre market “clearly” offered better margins and could help the company reach profitability sooner.
Nyobolt, a UK battery start-up, said it was shipping samples to data centre customers, with installations planned for next year. Chief executive Sai Shivareddy said its system allowed hyperscalers to run processing unit clusters at “full power” without breaching grid connection limits, avoiding the throttling of AI workloads that could cost operators “millions of dollars a minute”.
In many countries, electricity grids are already struggling with congestion and years-long connection queues as renewable energy projects and large power users compete for access to limited network capacity.
The new market began drawing wider attention late last year after companies including Nvidia, OpenAI, Microsoft, and Elon Musk’s xAI warned about severe energy disruption caused by the latest AI servers, said Caitlin McManus at BloombergNEF.
BloombergNEF estimates the battery capacity for this kind of power smoothing will be a fraction of the broader energy storage market. Established battery manufacturers such as South Korea’s LG Energy Solution and China’s CATL would retain an advantage over the start-ups by relying on existing products, and could scale production more rapidly, it said.
But the battery start-ups believe it will remain an attractive niche, as intense competition and Chinese overcapacity continue to squeeze profit margins elsewhere in the industry.
Prime Batteries Technology, a Romanian battery producer focused on high-end energy storage systems, said data centre customers were far less sensitive to battery costs than developers of renewable energy projects, instead prioritising rapid deployment and energy security.
Vicentiu Ciobanu, Prime chief executive, said it was important to establish an early presence because demand from data centres was likely to scale “super fast” and was unlikely to become commoditised. “When we are looking into other segments like EVs or energy storage systems, definitely, it’s a bloodbath,” he said.