US Battery Market vs. China: Can Grid Storage Untangle?
The US is setting records for energy storage growth, a critical piece of grid reliability and emissions cuts. But that boom has been powered by cheap Chinese batteries, and a late-August executive order now bans foreign-produced bulk-power equipment, including battery storage systems, from grid-scale projects. The move raises a bigger question: how much should countries lean on cheap, available tech versus cutting off major sources to force domestic manufacturing, even at a higher cost?
What the order actually does
The executive order declares a national emergency and bans installation of any foreign-produced bulk-power system electric equipment that poses a national security risk. It specifically names battery energy storage systems, inverters, and transformers. This is not the first US push to reduce Chinese influence: tax credits from the 2022 Inflation Reduction Act restricted where battery minerals could be mined, processed, or recycled, and where components were assembled. New legislation requires that starting in 2026, 55% of material costs for new storage projects come from outside China and other restricted countries, or projects lose tax credits. Tariffs on batteries also rose to 25% in January, up from 7.5%. The outright ban is a more drastic step.
Near-term pain for developers
BloombergNEF analysis suggests the ban will likely slow deployment of grid-connected energy storage in the near term. Developers may wait for clarity on rules, with detailed Department of Energy guidance expected by the end of the year. Some projects may need to source cells domestically or from other countries, which will likely be more expensive than Chinese imports. Isshu Kikuma, an energy storage analyst at BloombergNEF, says worst case, those projects could get canceled. The order technically applies to existing plants too, though it is unlikely they will be taken offline because of battery origin. Enforcing it to the letter would mean removing most installed battery storage from the US grid, according to Kikuma.
Domestic supply is coming, but not soon enough
In the longer term, the US could meet its own battery demand, with enough capacity possibly by around 2030. But some factories may not ramp up or run at full capability, meaning domestic supply may not actually meet demand until later in the 2030s. New factories from LG Energy Solutions, Samsung SDI, Ford, and SK On are set to come online or ramp up by next year. In an ironic twist, a slowing EV market is helping, as some factories originally designed for vehicle batteries are retooling to build cells for grid storage. Still, batteries produced in the US remain significantly more expensive than those made in China, and even switching to imports from South Korea would likely cost more.
A global dilemma, not just a US one
China is miles ahead of much of the world on technologies like solar panels and batteries, built through years of government support and manufacturing experience. The US case highlights a delicate political balance: cheap technology can drastically reduce emissions and energy costs, but relying too much on any single player for crucial technologies carries risks. The question of how much to take advantage of cheap, available tech versus cutting off major sources to force domestic development at higher cost is not unique to America. It is a challenge other countries will face as they try to secure their own energy futures.
Key Takeaways
- A late-August executive order bans foreign-produced bulk-power equipment, including battery storage systems, from US grid-scale projects.
- BloombergNEF expects near-term delays and possible cancellations as developers await Department of Energy guidance due by end of year.
- US domestic battery capacity may meet demand around 2030, but full supply could slip to the later 2030s.
- US-made batteries remain significantly more expensive than Chinese imports, and alternatives like South Korean cells also cost more.
- The dilemma of cheap tech versus supply-chain security extends beyond the US and batteries.
Source: MIT Tech Review • 🇺🇸 San Francisco
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