US energy storage outlook dented by Trump policies

U.S. energy storage installations are forecast to hit a record 16.2 gigawatts in 2025, a 49% jump from 2024, driven by surging power demand and renewable energy growth. However, deployment is expected to slow significantly from 2026 due to new Trump administration policies, specifically the 'One Big Beautiful Bill Act,' which introduces Foreign Entity of Concern (FEOC) rules requiring 55% of material costs for Investment Tax Credit (ITC) eligibility to be non-FEOC sourced. This policy could reduce projected installations by 16.5 GW between 2025-2029, creating supply chain challenges, though the industry anticipates a recovery by 2029 as domestic manufacturing, such as LG Energy's expansion, adapts to the new requirements, with price arbitrage remaining a key economic driver for utility-scale projects.

Analysis

U.S. energy storage installations are projected to reach a record 16.2 gigawatts (GW) in 2025, marking a 49% year-over-year increase, driven by surging power demand from data centers and electrification, coupled with rising renewable capacity and falling battery costs. This accelerated deployment is partly due to developers front-loading projects ahead of stricter tax credit regulations.

However, a significant slowdown is anticipated from 2026, with potential reductions of up to 16.5 GW between 2025-2029, attributed to the Trump administration's "One Big Beautiful Bill Act." This act imposes Foreign Entity of Concern (FEOC) rules, requiring 55% of material costs to be non-FEOC sourced for Investment Tax Credit (ITC) eligibility, creating supply chain and permitting challenges.

The industry is expected to adapt, with installations potentially returning to 2025 levels by 2029 as domestic manufacturing, exemplified by LG Energy's expansion to 40 GWh, ramps up to meet new sourcing requirements. Price arbitrage remains a key economic driver for utility-scale projects, particularly in markets like Texas, where 66% of installed capacity utilized this strategy in 2024.

Key Decisions for Investors

• Monitor policy developments, particularly the implementation and enforcement of FEOC rules, as these will dictate supply chain viability and ITC access for energy storage projects.
• Evaluate companies with robust domestic manufacturing capabilities or diversified non-FEOC supply chains to mitigate regulatory risks and capitalize on potential incentives.
• Consider strategic investments in regions like Texas, where high renewable penetration and established price arbitrage opportunities offer strong economic fundamentals for energy storage projects.