Policy
Turbulent times for US energy storage
US President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, dealing a blow to clean energy. The OBBBA kills many of the provisions in the US Inflation Reduction Act that were most impactful for the energy storage industry, and while no one is fully sure what comes next, many are bracing for turbulence.
By
Phoebe Skok
Aug 19, 2025
Finance
Markets
Policy
Supply chain
Image: Contego
For many green financiers, the OBBBA poses a major investment risk. The expansive legislation has repealed billions of dollars in clean energy tax incentives, imposed new domestic content rules for renewables and expanded “foreign entity of concern” (FEOC) restrictions, many of which directly impact energy storage. It’s uncharted territory.
“This is the first time in my career I’ve heard of geopolitical risk being a major risk factor for US energy investments,” said Noam Yaffe, the vice president at energy finance data firm Pexapark.
Many investors are getting spooked and reconsidering sending their cash to the United States.
“This rewrite and lack of stable policy adds volatility and uncertainty that changes the whole risk calculus,” he added.
Michael Thomas, the founder and CEO of energy market research firm Cleanview, explained that “storage is different [from solar and wind] in that its investment tax credit won’t be phased down as early.”
The bad news, he said, is that “the main sources of energy driving storage’s growth will be severely impacted.” If renewable penetration stalls, Yaffe expects there will be fewer negative pricing intervals and less volatility, which reduces BESS profitability in highly arbitrage-dependent markets such as Texas. Yaffe also said he expects to see increasing electricity prices across the board.
“It’s good for developers who have projects already operating, but it will be tricky for new developers who can’t take advantage of that source of revenue,” added Thomas.
Pair that with increasing battery costs due to tariffs and sourcing restrictions, and it’s a one-two punch.
Yaffe also said projects nearing completion are commanding premiums, while those with commercial operation dates in late 2026 and beyond are being paused.
Scale vs. speed It’s anyone’s call as to whether bigger or smaller companies are better positioned to weather the storm.
“It’s a really good opportunity for smaller developers and those with more regional focus,” said Raafe Khan, the head of energy storage at Camelot Energy Group. He explained that smaller, more agile developers can pivot more efficiently than those with a few hundred employees.
“I think the larger developers will wait and see how things unfold and reallocate resources accordingly,” he added, noting that many have weathered similar storms using creative financing structures and technology selection.
From a financial standpoint, Yaffe said that smaller, undercapitalized renewables developers could be at risk of losing capital and selling their portfolios or companies out of desperation. “Smaller shops with earlier stage projects face very difficult decisions now,” he said.
Thomas added many larger developers had the upfront capital to stockpile materials before the election, meaning they’re able to slow down the impact.
Supply chain stress The OBBBA’s changes to domestic content and FEOC regulations are set to shake up supply chains. Anne Loomis, a partner at law firm Troutman Pepper Locke, warned the new rules could “change the nature of the storage supply chain completely” as developers scramble to source eligible components.
Tom Harries, a partner at renewable energy insurance specialist NARDAC, noted that deep-pocketed developers will likely continue importing battery technologies from established vendors “and enjoy less project risk and lower insurance premiums” compared to those purchasing cheaper domestic equipment with little operational track record.
“If you’re using new tech from a brand-new supplier with limited evidence, you’ll likely get narrower defects coverage or higher deductibles,” he explained, adding that underwriters are already pushing back on projects using “untested” equipment.
“Assembly is easy. Manufacturing isn’t,” he said. “You can’t look inside a battery and see if it’s faulty. You rely on the track record of the production line. That’s a huge unknown for reshored operations.”
Tax credits From a tax credit standpoint, the future is uncertain. Loomis expressed concerns about a return to short-term extensions and legal ambiguity. Before the US Inflation Reduction Act was introduced, tax credits operated on shorter time horizons and required regular congressional renewals.
“It’s highly likely the industry will return to needing extensions from Congress,” Loomis said.
“Historically, there have been lapses in the federal investment tax credit for solar and in the federal production tax credit for wind,” added Gilbert Michaud, an assistant professor of environmental policy at Loyola University Chicago. Michaud noted that the resulting uncertainty led to heavy investment before the incentives expired and then decreased deployment. “I’d anticipate a similar cycle for energy storage.”
Beyond the OBBBA, legislative volatility is a major threat to investment in sustainability, according to Michaud.
What’s next? Even so, many believe energy storage is too critical to derail entirely.
While falling project valuations could reduce interconnection wait times – a small bright spot – the bigger story is one of flux. “This is a hard reset, but that happens whenever we see a change in administration with fundamentally different priorities,” said Khan, adding that partnerships play vital roles in turbulent times. “We should expect to see strategic plays from several companies in the coming months.”
He said that even now, energy storage is increasingly recognized as not only a renewable add-on, but as a grid reliability asset in its own right, especially with rising demand from data centers. That change doesn’t happen overnight. Battery players must stay quick on their feet and keep a close eye on policy.
Loomis’ advice for how to handle the coming months? Get moving. “Learn what’s already been done, what works and what doesn’t,” she said. “The developers who will come out ahead are the ones who adapt quickly in what they build and how they structure their deals.”
From pv magazine print Issue 07 & 08 2025
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