Tariffs Expected to Drive Up Costs and Delay Development in US Solar and Energy Storage Sectors

Tariffs Expected to ‘Significantly’ Raise Costs for US Solar and Energy Storage
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Analysis from the research firm Wood Mackenzie indicates that tariffs on imports will lead to increased costs for solar photovoltaic (PV) and energy storage technologies in the United States, ultimately slowing down project development. The White House’s expansive global tariff initiatives are expected to create uncertainty and elevate the prices of imported goods, as detailed in their recent report titled “All Aboard the Tariff Coaster.”

Chris Seiple, Vice Chairman of Power and Renewables at Wood Mackenzie, noted 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 for participants in the US power industry.” He added that this uncertainty could result in potential delays in project development and increased prices for power purchase agreements (PPAs).

Currently, most of the broad, “reciprocal” tariffs enacted by former President Donald Trump have been paused until July. A ruling from the US Court of International Trade suggested that the president overstepped his authority with these tariffs, but this decision is temporarily suspended by a federal appeals court. However, tariffs on steel imports remain in effect. Typically, tariff costs are borne by importers and subsequently passed on to buyers and end consumers through elevated prices.

### Impact on Solar PV Costs

Wood Mackenzie asserts that the existing tariff structure will “significantly” increase costs in the US solar PV market. The US already has some of the highest solar module prices globally due to long-standing trade barriers against China and steep antidumping and countervailing duty (AD/CVD) tariffs on products from Southeast Asia. The combination of Trump’s tariffs and tense trade relations with China is expected to further inflate costs for US solar projects.

Under Wood Mackenzie’s “trade tensions” forecast—assuming the effective US tariff rate stabilizes at 10% by 2026, with a 34% rate specifically on China—a US solar project could cost 54% more than a comparable project in Europe and 85% more than one built in China. In a more pessimistic “trade war” scenario where tariffs could reach an overall rate of 30% by 2030, construction costs for solar projects could rise by approximately 15%, as opposed to around 5% in the moderate “trade tensions” scenario.

Seiple emphasized, “The tariffs on solar modules, coupled with an inefficient transmission policy that raises interconnection costs, have already made construction costs higher in the US than in most other markets. An increase in tariff levels will only exacerbate the premium that US energy consumers must pay for renewable energy.” He noted the necessity for industry stakeholders to brace for higher costs and potential disruptions to supply chains.

### Energy Storage Market Vulnerabilities

The energy storage sector in the US is projected to suffer even more than other areas of the power sector due to its reliance on Chinese imports. While the US has successfully developed domestic manufacturing for solar modules, it is significantly dependent on China for battery cell production. Wood Mackenzie reports that “nearly all” battery cells used in US utility-scale storage projects in 2024 will originate from China. The anticipated cost increases for US utility-scale storage could range from 12% to 50%, contingent on the tariff severity.

Seiple mentioned that although domestic battery cell manufacturing is on the rise, it is not expanding quickly enough to satisfy even a fraction of US battery project demands. By 2025, domestic manufacturing is expected to meet only about 6% of demand, with projections suggesting it could rise to 40% by 2030.

### Broader Implications

In addition to the uncertainties and cost increases stemming from tariffs, the US is also experiencing a rollback of domestic incentives for clean energy deployment and manufacturing. The proposed tax reconciliation bill, dubbed “One, Big, Beautiful Bill,” is on track to significantly curtail production and investment tax credits from the Inflation Reduction Act (IRA) for renewable energy projects. While the bill aims to maintain the 45X Advanced Manufacturing Credit for domestic factories, its current stipulations regarding “foreign entities of concern” could hinder companies’ access to this provision. In its present form, the bill designates China as an “FEOC,” restricting “material assistance” from numerous Chinese companies and potentially affecting Chinese-owned technology patents.

In summary, the ongoing tariff situation and domestic policy challenges pose significant risks to the future of solar and energy storage markets in the US. Industry participants are urged to prepare for heightened costs and possible disruptions to their operations.