The battery energy storage market faces significant disruptions from recent tariff measures, particularly impacting cost structures, supply chains, and market growth. Here’s a breakdown of the key effects:
Increased Costs and Reduced Viability
- Tariff rates: Chinese-origin lithium-ion batteries face layered tariffs, including a 34% reciprocal rate, 7.5% on LFP cells, and 3.4% baseline tariffs, with total potential levies nearing 150%–200% by 2026.
- Project economics: Higher import costs are delaying projects and reducing the economic viability of new installations, particularly for grid-scale storage.
Supply Chain Disruptions
- Dependency on China: Over 90% of lithium-ion battery cells deployed in U.S. storage projects in 2024 came from China, making the sector highly vulnerable to tariff escalations.
- Forced labor scrutiny: Storage batteries face heightened border detentions for forced labor evaluations, requiring importers to provide detailed supply chain documentation to U.S. Customs, which can delay shipments for months.
Market Shifts
- Domestic manufacturing: Tariffs are accelerating U.S. production investments by firms like Tesla and LG Energy Solution, though capacity remains insufficient to meet short-term demand.
- Geographic diversification: Developers are shifting procurement to South Korea, Japan, and Europe, though at higher costs.
- Technology innovation: Alternatives like flow batteries and solid-state storage are gaining traction as companies seek to reduce reliance on lithium-ion imports.
Policy and Regulatory Risks
- Compounding tariffs: Existing Section 301 tariffs (25% on Chinese EV batteries) and new reciprocal tariffs create overlapping financial burdens.
- Uncertainty: Future adjustments to exemptions or retaliatory measures by trading partners could further destabilize supply chains.
These dynamics are reshaping the market, prioritizing supply chain resilience over cost optimization in the near term.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-are-tariffs-and-duties-impacting-the-battery-energy-storage-market/
