US Solar and Energy Storage Costs Set to Rise Significantly Due to New Tariffs

Tariffs to ‘Significantly’ Increase Costs for US Solar and Energy Storage
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According to a recent analysis by research firm Wood Mackenzie, tariffs on imports will lead to heightened costs for US solar photovoltaic (PV) and energy storage technologies, consequently slowing down project development. The White House’s extensive tariff agenda is expected to introduce uncertainty in the US power sector and raise the prices of imported products, as detailed in their new report titled “All Aboard the Tariff Coaster”.

Chris Seiple, vice chairman of Power and Renewables at Wood Mackenzie, stated, “In a business with 5-to-10-year planning cycles, not knowing what a project will cost next year or the year after causes significant disruption and uncertainty for participants in the US power industry.” He further noted that this uncertainty could lead to delays in project development and increased prices for power purchase agreements (PPAs). The impact on capital projects in the power sector will depend on how various scenarios unfold.

Currently, most of Donald Trump’s broad “reciprocal” tariffs are on hold until July. A ruling from the US Court of International Trade indicated that the president may have overstepped his authority in imposing these tariffs, but a federal appeals court has temporarily suspended that ruling. However, tariffs on steel imports remain in effect. Typically, the costs of tariffs are borne by importers and subsequently passed on to consumers through higher prices.

### Solar PV Market Impact

Wood Mackenzie indicated that the existing tariff regime will “significantly” raise costs within the US solar PV market. The US already faces some of the highest solar module prices globally, attributed to historical trade barriers against China and fluctuating antidumping and countervailing duties on products from Southeast Asia. The ongoing trade tensions, particularly with China, are expected to exacerbate these costs.

Under Wood Mackenzie’s “trade tensions” forecast, which projects an effective US tariff rate of 10% by the end of 2026 and a 34% rate on China, a solar project in the US will be approximately 54% more expensive than a similar project in Europe and 85% more costly than one built in China. In the more severe “trade war” scenario, where tariffs could rise to an overall rate of 30% by 2030, the construction costs for solar projects could increase by about 15%, compared to around 5% in the moderate scenario.

Seiple remarked, “The tariffs that have been imposed on solar modules, combined with inefficient transmission policies increasing interconnection costs, have already made construction costs in the US higher than in most other markets. An increase in tariff levels will only escalate the premium US energy consumers must pay to access renewable energy.”

### Energy Storage Market Challenges

Wood Mackenzie emphasized that the energy storage sector in the US will face even greater challenges than other areas of the power sector due to its reliance on Chinese production. While the US has successfully developed domestic manufacturing capacity for solar modules, it still heavily depends on China for battery cells.

The report indicates that cost increases for utility-scale storage in the US could range from 12% to 50%, depending on the severity of the tariffs. In the aggressive “trade war” forecast, significant price hikes on energy storage are anticipated. Although domestic battery cell manufacturing is growing, it is not expanding rapidly enough to meet rising demand. In 2025, it is estimated that the US will only have sufficient domestic capacity to meet about 6% of demand, with a projected increase to approximately 40% by 2030.

### A Dual Challenge

In addition to the uncertainties and rising costs associated with tariffs, the US is also facing a rollback of domestic incentives for clean energy deployment and manufacturing. The tax reconciliation bill, referred to as “One Big, Beautiful Bill,” proposes a near-complete elimination of production and investment tax credits established by the Inflation Reduction Act (IRA) for renewable energy. While the bill aims to maintain the 45X Advanced Manufacturing Credit for domestic factories, its provisions concerning “foreign entities of concern” (FEOC) could hinder companies attempting to access this credit. Under the current bill, China would be classified as an FEOC, restricting “material assistance” from many Chinese firms and potentially affecting access to Chinese-owned patents for technology.

Overall, industry participants are advised to prepare for increased costs and potential disruptions in their supply chains amid these challenges.