Energy storage was less impacted by the passing of the One Big Beautiful Bill Act than renewable generation projects, but developing supply chains and sourcing domestic content is not going to be easy for storage developers, industry leaders say
US energy storage may have emerged as the “winner” from the One Big Beautiful Bill Act (OBBBA), but the Act’s FEOC provisions increase the complexity of project development, at least in the medium term, a new report has concluded.
The report by the law firm Troutman Pepper Locke – entitled ‘Brave New World: What’s Next for US Energy Storage After OBBBA and Amid Continued Tariff Risk?’ – said that, to the relief of many industry executives, energy storage was less impacted by the passing of the OBBBA than renewable generation projects. Wind and solar projects under Code Sections 45Y and 48E were particularly affected — such projects must be placed in service by December 31, 2027, to remain eligible for the production or investment tax credits or “begin construction” on or before July 4, 2026. In contrast, energy storage tax credits are not phased out until after 2033.
Storage in better shape than wind or solar
Why was energy storage largely spared? It was batteries’ role in providing baseload power that meant it emerged from the passing of the OBBBA in better shape than the wind and solar industries, according to a vice president at one of the world’s leading investment banks quoted in the report. He added that battery storage has been proven to be critical, and states have sought to widen its deployment via a range of avenues, for example, by state mandate, as is the case in California, or through the use of pure market forces, as in Texas. “Those who are driving renewable build out, including all of the AI data centre growth, have come to appreciate the role of baseload power and firm supply — this was a factor in OBBBA in that, while you saw a phase out for wind and solar tax credits, that is not the case for baseload power, including geothermal, nuclear, and battery storage,” the vice president at the investment bank said.
‘Massive uptick’ in investor interest in storage
Despite energy storage’s reprieve, the industry was impacted by the uncertainty that prevailed prior to the passage of the OBBBA. The lack of clarity about the new U.S. administration’s approach to renewables — prior to the passage of the Act — resulted in a lag in capital deployment in the energy storage industry. When Donald Trump won the presidential election last November, investor confidence took a hit and, in the words of Andrew Waranch, CEO of Spearmint Energy — which has more than 20 projects, totalling more than 13GWh of capacity, under development in 10 states — it was not until the OBBBA came into force on July 4 that investors felt that they could re-enter the storage market in any meaningful way. Prior to that date, “investors sat on their wallets,” Waranch said. “They waited for clarity, and the OBBBA gave people some clarity.” He added that, consequently, since the Act’s passage, there has been a “massive uptick” in investor interest in storage.
Storage industry ‘handicapped’
That said, the battery storage industry faces significant constraints from the OBBBA, most notably, the FEOC rules. These restrictions — which vary depending on the tax credit and tax year in question — prevent entities linked to adversarial nations, particularly China, from accessing, directly or indirectly, the benefits of US energy tax incentives. Tom Cornell, CEO of battery storage system supplier Prevalon, a Mitsubishi Power Americas and EES joint venture, is unambiguous in his assessment of the impact of the FEOC rules, concluding that they are “really handicapping the industry pretty significantly.” He continued: “There’s just not enough time to move the supply chain that quickly, especially around the battery cells, so that’s really our big concern.” Prevalon is considering acquiring a majority share in some companies to comply with FEOC rules. John Leonti, partner and chair of the Energy Department at Troutman Pepper
Locke, said: “Although the impact of the OBBBA on energy storage is less severe than some feared, the ambition to onshore battery component manufacturing and the attendant FEOC provisions issue significant supply challenges for the industry moving forward. The most prepared in the sector have acted nimbly to restructure supply chains, and key stakeholders are strengthening their close working relationships to share risk and collaboratively revise strategies.”
‘Significant pipeline’ of renewables will continue to qualify for credits
There has been speculation that the scaling back of solar credits could potentially slow down the deployment of energy storage, given that storage systems have commonly been co-located with solar projects in the US. However, Troutman Pepper Locke partner, and report co-author, Vaughn Morrison said that the final version of the OBBBA provided a “relatively long runway for beginning construction on renewable generation to preserve the credits, and subsequent guidance on the rules left the existing framework largely intact.” He added: “As a result, a significant pipeline of renewable generation will continue to qualify for the credits in the near and medium terms, cushioning the blow to build-out of the intermittent generation storage often benefits from.”
Supply chain ‘should be able to manage’ tariff impact
The report highlights that the industry has been seeking more certainty regarding the impact of China’s tariff hikes on the energy storage sector, given that rates have been fluctuating. The highly unpredictable nature of tariffs on China was highlighted earlier this year when it was announced that the US would increase rates to 145 per cent before subsequently slashing them to 30 per cent. However, Sondra Martinez, head of originations, Americas, project finance at NORD/LB, noted that the energy storage industry had “advanced insight” of the US government’s intention to increase tariffs on imports of non-EV lithium-ion batteries from China, dating back to the Biden administration. Back in May 2024, former US President Joe Biden announced that, from 2026, tariffs on Chinese non-EV lithium-ion batteries would increase to 25 per cent. “If you think back under Biden’s leadership, there were some really bad days for solar in terms of some of the policies put in place, and the Biden administration also noted that they were going to go after Chinese battery components and that there were going to be tariffs,” Martinez said. “The industry has been aware that this is coming and has been making moves to adjust for this, so from a mid- to long-term perspective, the supply chain should be able to manage the tariff impact.”
Supply chains ‘more nimble’ than expected
Rebuilding supply chains, and more specifically sourcing domestic content, is expected to pose considerable challenges for storage developers, according to Jacob Sandry, CEO of Euclid Power. “The difference between getting ITC and not is going to be pretty dramatic, and so I think in the short term, it’s going to be a lot about who can find that supply,” he says. “But I think we’ve seen supply chains be more nimble than we expected over the past few years. You’ve seen manufacturing move out of China to other Asian countries very quickly, and we are starting to have domestic supply abilities like we’ve never had.”
Image (clockwise from top left): Vaughn Morrison (Troutman Pepper Locke), Tom Cornell (Prevalon), John Leonti (Troutman Pepper Locke), Sondra Martinez (NORD/LB), Andrew Waranch (Spearmint Energy) and Jacob Sandry (Euclid Power).
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