Tariffs Expected to Increase Power Generation Costs Significantly, Reports Indicate

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Tariffs to Spike Power Generation Costs: Reports

Battery energy storage systems (BESS) are particularly susceptible to the impact of tariffs, as highlighted by analyses from Wood Mackenzie and Anza Renewables. Their data indicates a significant increase in BESS costs in the last quarter.

Published on June 9, 2025, by Brian Martucci

According to Wood Mackenzie, import tariffs could inflate battery costs for U.S. utility-scale energy storage installations by over 50%, potentially making the United States the most expensive solar market globally. Since January, prices for four-hour battery systems have surged between 56% to 69% and are expected to remain unpredictable until more stability is achieved, as reported by Anza Renewables.

U.S. energy storage developers are anticipated to rely on imports for the foreseeable future, with domestic manufacturing capacity projected to grow from 6% of current demand to 40% of the expected demand by 2030, according to Wood Mackenzie.

Anza’s quarterly report reveals significant market ramifications stemming from the tariff policies of the previous administration. By April, imported batteries were subjected to a universal 10% tariff, an additional 145% tariff on Chinese components, and increased Section 301 levies that date back to the current administration. The report notes that by early April, all battery manufacturers tracked by Anza had halted price quotes. Many resumed quoting with shorter validity periods in late April, just before a 90-day tariff reprieve on May 14, which reduced the Chinese tariff to 30%.

This temporary reduction in tariffs may indirectly raise final prices for domestic energy storage developers next quarter, as shipping costs are likely to increase due to a rush to bring inventory into the U.S. Despite a 17% drop in spot prices for lithium carbonate, a key component in lithium-ion batteries, four-hour battery system costs have risen by over 50% since January.

The long-term outlook for energy storage costs is closely tied to the final tariff rates. Wood Mackenzie has examined two scenarios: a “milder trade tensions” scenario, which assumes stable tariffs of 34% on Chinese products and 10% on others by the end of 2026, and a “trade war” scenario, predicting a 30% average global tariff through 2030. Depending on these scenarios, long-term costs for utility-scale energy storage projects could increase by 12% to more than 50%. Costs for other energy technologies could rise by 6% to 11%, making the U.S. the priciest solar market worldwide.

In the “trade tensions” scenario, U.S. utility-scale solar projects would be 54% more expensive than in Europe and 85% more costly than in China. High solar construction costs in the U.S. are attributed to existing tariffs on solar modules and an inefficient transmission policy that elevates interconnection costs, as stated by Chris Seiple, Vice Chairman of Power and Renewables at Wood Mackenzie. He emphasized that the administration’s erratic trade decisions add complexity for developers, creating significant uncertainty over project costs for the future, which could lead to construction delays.

Recent data from Anza indicates that battery pricing has fluctuated considerably week to week. Prices for a four-hour, 40-MW alternating current BESS increased by 49% from early to late April but then fell by 21% after the May 12 tariff pause. Direct current BESS experienced even greater volatility, rising by 84% in late April before decreasing by 33% in May. Anza found that smaller, distribution-connected systems were slightly more sensitive to tariffs than bulk-connected systems overall. Since January, AC and DC pricing for distribution-connected systems has risen by 68%, compared to 56% for AC bulk-connected systems and 69% for DC bulk-connected systems.
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