The outlook for the US energy storage industry remains positive, despite foreign entity of concern (FEOC) rules introduced by the One Big Beautiful Bill Act “handicapping” the sector, according to a new report.
The report by law firm Troutman Pepper Locke – entitled ‘Brave New World: What’s Next for US Energy Storage After OBBBA and Amid Continued Tariff Risk?’ – concluded that the FEOC provisions posed “significant challenges” for the energy storage industry. The FEOC rules – which exclude entities linked to adversarial nations, particularly China, from the benefits of U.S. energy tax incentives – were “handicapping the [energy storage] industry pretty significantly”, said Tom Cornell, CEO of battery energy storage system supplier Prevalon, who is quoted in the report.
Meanwhile, John Leonti, partner and chair of the energy department at Troutman Pepper Locke, said that, while the impact of the OBBBA on energy storage had been less severe than some feared, the ambition to onshore battery component manufacturing and the attendant Foreign Entities of Concern (FEOC) provisions pose “significant supply challenges for the industry moving forward”. However, he added that 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.”
Despite the FEOC-related challenges, the developers, investors, and lenders quoted in the report remain confident about the sector’s overall growth trajectory. The report said that, across the shifting US energy landscape, the “strategic value of storage is widely recognised” and the technology is seen as much as a service for grid resilience and power price stability as it is for decarbonisation. Andrew Waranch, CEO of Spearmint Energy, said this was a source of confidence for the industry: “So much of the power market and power price is set by expensive and old generators that only need to operate during ramp times in the morning and evening. In contrast, batteries can solve that quickly and cheaply with extremely high reliability.”
Many in the storage sector see reasons for continued optimism. While the industry navigates supply strain, demand for its services is set to rise sharply due to the US’ exploding load growth and aging grid infrastructure. In addition, the burgeoning data centre industry requires high uptimes and short and long-term reliability from energy providers in order to grow, making energy storage essential, the report said.
The report also that, to the relief of many energy storage industry executives, the sector was less impacted by the passing of the Act than renewable generation projects. Wind and solar projects under Code Sections 45Y and 48E were particularly impacted — 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. Troutman Pepper Locke partner, and report so-author, Vaughn Morrison said: “Energy storage’s versatility of use cases has untethered it from the fate of wind and solar to a meaningful degree.”
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