The battery energy storage system market in the United States was set for a boom year in 2025, at least until early April, when tariffs imposed by the Trump administration slammed the door shut on Chinese imports. Although a deal to pause or roll back tariffs on China was reached in May, and installations soared in 2024—with first quarter 2025 figures supporting continued optimism for the industry—the remaining tariffs and a possible shift in tax credits and other incentives have created uncertainty for the industry’s near-term future. 

Annual energy storage deployments in 2024 grew 34% versus 2023’s total, according to Wood Mackenzie’s March 2025 U.S. Energy Storage Monitor. While 61% of the total was installed in Texas and California, the remaining 39% was spread across 13 additional states, including New Mexico, Oregon and Arizona, which analysts said signals adoption beyond traditional leading markets. A record-breaking 380 megawatts (MW) of residential storage was installed in just the fourth quarter of 2024—a 6% jump from third quarter figures. 

For 2025, Wood Mackenzie anticipates 15 gigawatts (GW) of new storage installations, a 25% increase over 2024, largely due to developers rushing to get delayed 2024 projects into service. Looking out through 2029, the view becomes cloudier, with analysts seeing a possible 27-GW difference between best- and worst-case scenarios. At the high end, with Biden-era tax credits still in place and tariffs reduced to previous levels, there is potential for an extra 10 GW installed over the next five years. At the low end, the rate of new connections drops 22%, in total, from 2025–2029.

There was a rush to build new battery production facilities in the United States during the last two years of the Biden administration, sparked by incentives in the Inflation Reduction Act (IRA). That legislation bases tax credits for electric vehicle buyers on how much of a vehicle’s battery was produced or assembled in North America, with a target of 100% compliance by 2029. 

These incentives, along with others for EV manufacturers and buyers, led auto and battery makers to commit to $112 billion in domestic cell and module manufacturing investments, according to a February TechCrunch report. However, tariffs have brought that business to a halt. 

A battery lesson

Language describing battery assembly can be a bit confusing, so a brief tutorial could be helpful to understand the tariffs’ potential impact. The basic component of an EV or storage battery is a battery cell, which consists of two electrodes, a cathode and an anode. Cells, which in some designs can look like a common AA or AAA battery, are grouped into packages called modules (the most commonly used term), packs or jars. 

Historically, U.S. battery makers have been more like assemblers, putting imported cells and modules together with cooling systems into a casing to complete a finished product. The IRA’s provisions were intended to grow the nation’s cell and module manufacturing capabilities. 

However, these new U.S. plants will still rely on equipment and chemicals from China, South Korea and Europe. And with tariffs on Chinese exports at 30% or more, as of mid-May, that pushes those materials into high-cost territory. With China restricting sales of rare-earth elements to the United States, some required battery ingredients aren’t available at all.

Additionally, storage makers are seeing IRA tax credits facing an unknown future. Money allocated to new factory construction was largely out the door by 2024, but those companies are still dependent on tax credits their buyers are eligible for years after installation. The IRA credits give stationary battery buyers the same incentives provided for solar panels and wind turbines. They’ve become a target in efforts to cut government spending. 

Several energy consulting firms have produced reports illustrating how repealing those credits for all covered technologies, including wind and solar, could raise electricity prices across the country. Data center construction is still going strong, and distributed resources such as solar, wind and batteries have been seen as the fastest and least expensive option for meeting related power demand. 

NERA Economic Consulting, in a February report, estimates full repeal of incentives would force electricity prices up by 7.3% for residential customers and 10.6% for commercial and industrial customers. 

A separate report by the Brattle Group outlines even broader risks with full repeal of the credits, with the potential for a $250 billion to $510 billion hit to U.S. gross domestic product through 2035. Given the limited gas-fired generation expected to begin operation before the early 2030s, the report says, a drop-off in solar, wind and storage development could lead to an inability to meet rising demand, which could, in turn, hold back potential industrial growth.

FRESHIDEA / STOCK.ADOBE.COM