Navigating One Big Beautiful Bill and tariffs in U.S. solar PV and storage

The U.S. solar PV and storage sectors are entering a phase of major policy and market realignment. The One Big Beautiful Bill (OBBB), together with proposed tariffs on foreign components and systems, is reshaping incentives, investment flows, and supply chains across both technologies.

While these measures are designed to strengthen domestic manufacturing and reduce exposure to foreign entities of concern (FEOC), they also introduce new challenges for manufacturers, developers, investors, and utilities. Understanding how these shifts affect profitability, demand, and regional dynamics is essential for stakeholders seeking to navigate near-term uncertainties and position themselves for long-term growth in the clean energy transition.

Market impact: Solar PV and storage under OBBB

The OBBB marks a turning point in the economics of U.S. clean energy, reshaping the fundamentals of both solar PV and storage. While solar faces tightening margins and policy-driven uncertainty, battery storage continues to show resilience, offering stakeholders a clearer path to near-term profitability.

For solar PV, the numbers tell a sobering story. According to EUPD Research analysis, internal rates of return (IRR) for residential, commercial & Industrial (C&I), and utility-scale projects decline by 4% to 7% under OBBB, reflecting the phaseout of tax credits and rising compliance costs, particularly when projects rely on domestic modules. Yet the picture is not uniformly bleak. States with higher retail electricity prices such as California, Massachusetts, and Maine still deliver profitable returns, particularly in the C&I segment, which remains comparatively strong even as residential systems lose some appeal.

Battery storage paints a contrasting picture. Even after applying conservative assumptions and excluding tax credits that could be lost under FEOC rules, both C&I and utility-scale storage projects continue to deliver attractive IRRs of 14% to 18%. With growing demand for grid flexibility and backup capacity, storage is emerging as the stabilizer in an otherwise unsettled market.

The tariff environment further complicates the economics of solar PV deployment. Proposed anti-dumping and countervailing duties on modules from Southeast Asian nations could sharply raise system costs, with average module tariffs projected to approach 800%, though the exact levels vary widely by country. While around 83% of U.S. solar PV module imports between January and June 2025 originated from this region, the absolute volume was only about 15 GW, compared to 49 GW imported over the full year in 2024. Even at these lower volumes, the potential upward pressure on costs could significantly affect both residential and utility-scale projects, further squeezing already tightening returns.

On both solar and storage, FEOC restrictions loom large. If domestic manufacturers lose access to Section 45X manufacturing tax credits under the IRA, costs are expected to rise by roughly US$0.07 per watt for solar modules and US$10 per kilowatt-hour for battery modules. These amounts correspond to the incentives currently provided through the IRA, and losing them would directly increase system costs. While such increases are not expected to drastically alter profitability, they add to developers’ and investors’ uncertainty.

The immediate demand outlook reflects ongoing policy transitions. Solar PV capacity additions are projected at 53–56 GWdc in 2025, with growth potentially extending into 2026 and 2027 as developers accelerate projects ahead of tax credit phaseouts for C&I and utility-scale systems. At the same time, an uncertain regulatory environment and the risk of project cancellations could temper this momentum. If cancellations occur, demand could weaken as early as 2026.

Manufacturing and supply chain realignments

If the OBBB is reshaping project economics on the demand side, its true force may be felt upstream in manufacturing and supply chains. The combination of FEOC restrictions and proposed tariffs is not only changing who can participate in the U.S. market, but also creating ripple effects far beyond its borders.

As per EUPD Research analysis, roughly 17 GW of Chinese-affiliated solar PV module manufacturing capacity in the U.S. is now at risk of disqualification under OBBB’s FEOC rules. The U.S. had about 24 GW in total, of which around 7 GW has already been sold to U.S.-based firms. The remaining capacity faces an uncertain future. Unless these assets change hands, they may be shut out of federal incentives or forced to shut down entirely. For investors, the question is whether these facilities can be quickly restructured to comply or whether they represent stranded capacity in a tightening market.

Beyond ownership, the U.S. faces more fundamental bottlenecks. While module assembly capacity has grown, the country still lacks large-scale production of critical upstream components such as ingots, wafers, and cells. For storage, the gaps are equally pressing: cathode and anode active materials remain heavily dependent on imports from China. Under OBBB’s domestic content tests, these gaps mean many products could fail to qualify for tax credits, even if final assembly occurs on U.S. soil. Bridging these weaknesses will require sustained investment in upstream capacity, something that cannot be achieved overnight.

In response, manufacturers and policymakers are exploring new strategies. One option is nearshoring, building capacity in allied countries with stronger trade ties to the U.S. Joint ventures with non-FEOC jurisdictions are also being discussed, offering a pathway to reduce Chinese exposure while diversifying risk. These partnerships may allow manufacturers to maintain access to U.S. incentives while securing more stable component supplies. Given potential future regulatory volatility, it is difficult to project the intrinsic risks with certainty.

Why stakeholders should engage now

The shifting U.S. policy landscape demands immediate attention from all stakeholders in the solar and storage ecosystem. OBBB provisions, proposed tariffs, and FEOC restrictions are not abstract policy debates, they directly influence investment returns, project pipelines, and supply chain stability. Against this backdrop, stakeholders must act decisively in four key areas:

Prepare for tax-credit expirations and FEOC rules: Early preparation for tax credit expirations and content requirements will determine which projects remain viable.
Prioritize high-price states & battery storage: States with elevated retail electricity prices (e.g., California, Massachusetts, Maine) continue to deliver attractive returns, while battery storage projects in the C&I and utility-scale segments remain strongly profitable.
Mitigate stranded capacity and supply-chain risks: Stranded capacity, job losses, uncertain regulations, and project cancellations are looming risks if strategies fail to adapt.
Pursue nearshoring & FEOC-compliant partnerships: Joint ventures, nearshoring strategies, and partnerships in non-FEOC regions can create new pathways to growth in a restructured market.

Stakeholders who move early will be better positioned to mitigate risks and seize emerging opportunities as the market resets. A good step in this direction is to engage in forums that bring together developers, investors, and policymakers to discuss strategies. Industry forums such as the upcoming Solar – Made in the USA Conference at RE+ provide a vital platform to address these questions collectively and to build the partnerships required for long-term competitiveness.

Conclusion

The OBBB and proposed tariffs represent a double-edged shift for the U.S. clean energy sector. In the near term, they are already raising system costs, constraining imports, and amplifying uncertainty around project economics. While they could eventually support a stronger domestic clean energy base by reducing supply chain vulnerabilities and stimulating local manufacturing, returns are tightening across the value chain. PV power plant investors in particular are recording lower IRRs compared with international benchmarks, highlighting the financial headwinds the sector must navigate during this transition.

The challenge for stakeholders is to bridge this transition: to weather short-term disruption while preparing for the opportunities of a more self-sufficient market. Strategic positioning before OBBB fully takes effect will be critical, and success will depend on proactive collaboration across industry players, investors, and policymakers.

About the Authors:

Markus A.W. Hoehner is the Founder, President and Chief Executive Officer of Hoehner Research & Consulting Group and EUPD Group. He has been active in top-level research and consulting, focusing on cleantech, renewable energy, and sustainable management for more than three decades. He can be reached at m.hoehner@eupd-research.com.

Rajan Kalsotra is a Senior Consultant at EUPD Research, bringing over 14 years of experience in the renewable energy sector. His expertise encompasses market research, policy development, and strategic consulting. He has collaborated with leading energy organizations, delivering valuable insights into the global renewable energy landscape, with a particular focus on solar energy, energy storage, and emerging technologies. He can be reached at r.kalsotra@eupd-research.com.

Abhinandan Khajuria is a Renewable Energy Analyst at EUPD Research, focusing on analyzing global solar PV and battery markets, understanding international policies, engaging stakeholders, and undertaking research to deliver valuable inputs for the clean energy market. He can be reached at a.khajuria@eupd-research.com.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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