For years, the energy storage market in the United States existed on speculation. There was plenty of discussion on the technology’s ability to improve the electrical grid but very little follow-through. The mood started to shift in the 2020s. Each quarter has a new record-breaking storage installation headline. Grid-scale storage is getting bigger and safer, and battery energy storage systems (BESS) are finding homes across the country.
While the One Big Beautiful Bill Act (HR1) hammered renewable energy incentives, energy storage emerged unscathed. Storage still has access to the full investment tax credit (ITC) through 2033, whereas solar and wind projects basically have one year to start construction to access any incentives. Energy storage projects with American batteries and components can also still receive the domestic content bonus, and manufacturers may still qualify for the advanced manufacturing production credit (45X) when making batteries in U.S. factories. Not only is the federal government still encouraging energy storage deployment, but it’s also aiding domestic supply.
Finally, energy storage seems to be a real part of the U.S. energy conversation.
But while HR1 isn’t terrible for the battery market, the timing of some of its restrictive clauses could stall progress and discourage further developments in domestic battery manufacturing. Project developers and manufacturers have mixed feelings about the years ahead.
Solar + storage will keep being constructed
The California Flats solar + storage project. 374-MW solar/240-MWh storage. Credit: Arevon
Developer and project owner Arevon Energy has 4.7 GW of solar and energy storage projects operating across the country, 1.5 GW under construction right now and another 10 GW in the development pipeline. Arevon CEO Kevin Smith has been in the energy industry for almost 40 years and said the energy storage market has been an exciting place to set up camp.
“Finally, the market was catching up. Ten years ago, people talked a lot about energy storage, but there weren’t a lot of projects because it didn’t make financial sense,” he said. “Pricing has come down substantially on energy storage, and the need has increased. It’s really hard to get projects — whether it’s solar or wind or natural gas — into urban settings. In some cases, energy storage is a better solution than building generation.”
Arevon recently completed a $300 million storage-only project located a quarter mile from the coast of San Diego Bay. The 200-MW/400-MWh Peregrine Energy Storage Project makes the electrical grid in a dense, urban neighborhood more resilient, storing power during high generation periods and doling it out when there’s high demand. With energy demand only growing across the United States due to data center growth and overall electrification, Smith said Arevon expects to stay as busy as ever. Regardless of incentives, renewable energy and storage projects are cheaper and quicker to build than fossil fuels, and more energy is needed on the grid, fast.
“Wind, solar and storage were like 90% of new generation last year because those projects are more cost-effective, easier to get to market, have quicker development times, quicker construction times,” he said. “For the next five or more years, we’re going to have renewables and battery storage.”
200-MW/400-MWh Peregrine Energy Storage Project in San Diego, California. Credit: Arevon
Since batteries are power holders/movers and not generators, Smith said he doesn’t expect to see a rise in storage-only projects just because they still have the ITC. They’ll still be paired with solar projects, and perhaps more so now to help projects still pencil with the remaining storage tax credits.
Brad Thompson, partner at law firm Duane Morris, said he expects to see more storage added to existing solar projects too.
“[Utilities will have] a renewed focus on areas that may have had large-scale solar deployment but have not yet paired with BESS projects,” he said. “An area that is known for load congestion with a high concentration of renewables will be prime real estate for BESS developers to seek interconnection approvals from utility operators to further deploy BESS. The continued incentives for BESS projects will fuel additional deployment of battery storage solutions.”
Ultimately, utilities will determine if the solar and storage markets will continue to grow in the next few years in this changing federal policy landscape.
“They’re going to buy storage when they need storage,” Smith said. “If we’re truly going to keep pace with China on data center installations and other manufacturing activities, we’re going to have to build more power generation and, with that, more battery storage. Despite the changes, we still think the renewable energy markets will continue to grow. You will see some installations canceled that can’t deal with volatility. You will see some investors exit. You will see fewer projects getting built that would otherwise get built, but you’re still going to see lots of construction activity.”
Some American batteries will materialize, but probably not enough
The new foreign entity of concern (FEOC) clause in HR1 throws a wrench into plans for both installation and manufacturing of storage technologies. Solar and storage projects are unable to qualify for the ITC if they use products from China, nor are U.S. manufacturers able to collect the 45X credit if they use a certain percentage of components from China in their domestic products. Both the solar and storage markets will have a hard time avoiding components from China, which dominates both supply chains.
The IRA was helping the grid-scale storage market establish its domestic supply chain. A few more years of uninterrupted progress could have made all the difference. New FEOC rules go into effect in 2026, and many U.S. battery manufacturing hopefuls might not make the deadline.
“Tesla is a big supplier. They have U.S. manufacturing, but they’re bringing in a fair amount of the subcomponents from China,” Smith said. “In a couple years, the manufacturing of batteries would be well advanced. This is going to end up short-circuiting a lot of that manufacturing.”
LFP cell production at the LG Energy Solution facility in Michigan. Credit: LG Energy Solution
A few domestic manufacturing outfits are better off than others. LG Energy Solution (LGES) opened a 16.5-GWh LFP battery cell manufacturing plant in Michigan earlier this summer. The site previously made battery components for EVs, but the Korean company invested $1.4 billion to swap manufacturing to the BESS market.
“ESS was the ugly duckling for some time for LG,” said Jaehong Park, CEO of LG Energy Solution Vertech, the stationary storage arm of LGES. “The financial performance of ESS in the past was difficult,” and EV was a much larger financial driver for the company. But now LGES sees more growth for stand-alone batteries and is building more assembly sites across the United States.
A handful of other battery manufacturers are also operating in the United States, including Hithium and its 10-GWh LFP battery assembly plant in Texas, and AESC with its estimated 3-GWh LFP cell plant in Tennessee. Canadian Solar subsidiary e-STORAGE is building a 3-GWh LFP cell and module plant in Kentucky, but it’s not yet complete. Still others have announced plans to retool EV battery factories to BESS production, but the FEOC rules will affect whether these projects reach the finish line.
The LG Energy Solution campus in Holland, Michigan, shows the many hands involved in domestic manufacturing. Credit: Solar Power World
The latest “ESS Supply, Technology and Policy Report” from Clean Energy Associates found that nearly 21 GWh of planned energy storage cell manufacturing capacity has been canceled in 2025 due to financing issues and policy uncertainty — and this was before FEOC rules were put in place.
“The industry was making very strong strides,” Smith said. “Two years from now, I think we would have been well into that manufacturing and a lot of those subcomponents would be from U.S. sources or at least non-FEOC sources. When the FEOC rules kick in in January 2026, it’s going to cause a lot of volatility in the market. It will cause lost jobs, because there will be some manufacturing facilities that had been approved for construction, and the manufacturing sector still depends on [Chinese] equipment. The timing is bad.”
Storage incentives may have been preserved in HR1, but it’s still uncertain whether other legislative hurdles will harm this market too.