Tariffs reshape project economics for U.S. energy storage

A backlog of warehoused batteries may buffer the energy storage industry from immediate shocks, but time is running out, according to reports by Clean Energy Associates.

May 7, 2025 Phoebe Skok

The Lancaster Area Battery energy storage system, which is one of the largest energy storage complexes operating in California

Image: Fluence Energy

Tariffs remain at the center of the discussion about what’s next for the U.S. energy storage market as they continue to reshape project economics, according to the Q1 2025 reports on energy storage supply, technology, policy and pricing from consultancy Clean Energy Associates (CEA).

“With tariff rates of 145 percent and the potential for additional tariffs, the impacts are already being felt,” Daniel Finn-Foley, the vice president of energy storage at CEA and one of the lead authors of the reports, told pv magazine USA. He said the combination of Section 301 tariffs and potential anti-dumping and countervailing duties on anode materials is forcing developers to reevaluate their market strategies.

“You’re looking at a total cost that’s more than double what you were planning on spending a few months ago, and projects might not pencil out anymore,” he added.

While buyers are increasingly considering domestically made batteries, there might not be enough to meet the demand for stationary storage. As it stands, 60 GWh of stationary storage lithium iron phosphate (LFP) battery production capacity is planned in the United States through 2028. By CEA’s estimates, “maybe 46 GWh of this is likely to come online by then.”

“But the annual demand in 2028 will be 100 GWh,” Finn-Foley said, “And there is going to be a scramble for developers to capture some of the supply that does come online assuming these tariffs remain in place.”

Those domestic supply limitations will also lead some to seek out alternate suppliers, he added, including those in South Korea that are building out LFP battery production of their own. That doesn’t happen overnight, so some developers are looking to limit their tariff exposure through partial domestic integration.

“It’s cost-effective to import a cell from China and integrate it in the U.S.,” said Finn-Foley. He said even if you have to pay duties on Chinese cells, sourcing everything else domestically will likely slash the overall cost.

But, he cautioned, full workarounds aren’t possible.

“There have been rulings effectively by trade commissions indicating that if you have a battery cell from another country and wrap it into a different module, the country of origin will still be the country where the battery was made,” he said.

“Avoiding that will be difficult,” he added.

However, the industry did prepare for the tariffs. Finn-Foley said that many companies imported and stockpiled batteries in the months leading up to the 2024 election. That’s letting many companies sidestep the tariffs for the moment and keep installations on schedule.

“We’re going to be pulling on that reservoir for a while, but we don’t know how long we can ride that wave,” he said. That also depends on what happens over the next three months with the tariffs.

“Are buyers going to pull back purchasing, and if so, how long does that last,” he said and the longer that stretches on, the more likely the possibility of market disruption. There’s an inflection point, he said, where the uncertainty leads to scaling back. “The market will not show endless patience here.”

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