US Energy Storage Costs Could Spike by 50% – Tariffs Are to Blame
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According to a recent analysis by Wood Mackenzie, the implementation of tariffs is poised to significantly increase the costs of clean energy projects in the United States, with energy storage set to suffer the most. The report, titled “All aboard the tariff coaster: implications for the US power industry,” outlines the potential impact of new tariffs on the power sector.
The primary effect will be felt in utility-scale energy storage, where a significant portion of US projects currently depend on imported battery cells from China. Chris Seiple, vice chairman of power and renewables at Wood Mackenzie, emphasized that “in a business with 5-to-10-year planning cycles, not knowing what a project will cost next year or the year after is disruptive and causes massive uncertainty.” He added that the actual impact on power sector capital projects will depend on various scenarios.
Wood Mackenzie modeled two potential scenarios: one where tariffs stabilize at an effective rate of 10% by 2026, and another more extreme “trade war” scenario where the rate rises to 30% and remains at that level until 2030. In either case, energy storage costs are expected to increase significantly.
The firm estimates that project costs for energy storage could rise anywhere from 12% to over 50%, depending on the scenario. This is largely due to the fact that in 2024, nearly all utility-scale battery cells used in the US were sourced from China, and domestic production is not expected to ramp up quickly enough to compensate. Seiple noted, “While US battery cell manufacturing capacity is expanding, it is not growing at a pace nearly fast enough to meet even a small fraction of battery projects in the US.” By 2025, it is estimated that domestic manufacturing will only meet about 6% of demand, with the possibility of reaching 40% by 2030.
The solar sector is also facing challenges. Existing tariffs and stringent interconnection regulations have already made solar installations more expensive in the US, and new tariffs would exacerbate this issue. Wood Mackenzie predicts that utility-scale solar could become 54% more expensive compared to Europe and a staggering 85% pricier than new solar plants in China. Seiple remarked, “An increase in tariff levels will only worsen this premium that US energy consumers must pay to access renewable energy.”
In summary, current trade policies are making clean energy projects in the US more costly to develop than in almost any other part of the world, leading the industry to brace for further uncertainty and rising costs in the future.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/rising-us-energy-storage-costs-tariffs-could-increase-prices-by-50/
