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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Tariffs on imports are expected to raise the costs of solar photovoltaic (PV) and energy storage technologies in the United States, thereby slowing the pace of project development. This assessment comes from a new report by research firm Wood Mackenzie, which highlights the impact of the White House’s comprehensive tariff strategy on the US power sector. The report, titled “All aboard the tariff coaster,” indicates that the tariffs will introduce uncertainty and escalate the prices of imported goods.

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 is disruptive and causes massive uncertainty for US power industry participants.” He added that this uncertainty could lead to delays in project development and increased power purchase agreement (PPA) prices, with a notable impact on capital projects in the power sector.

Most of the broad, “reciprocal” tariffs initiated by former President Donald Trump have been paused until the beginning of July. A federal appeals court has temporarily suspended the US Court of International Trade’s ruling that deemed the president overstepped his authority in imposing these tariffs. However, tariffs on steel imports remain in effect. Typically, tariff costs are borne by importers but are ultimately passed on to buyers and end consumers through higher prices.

In the solar PV sector, Wood Mackenzie asserts that the current tariff regime will “significantly” raise costs. The US already faces some of the highest solar module prices globally due to longstanding trade barriers against China and fluctuating antidumping and countervailing duties on products from Southeast Asia. The trade tensions forecast suggests that by the end of 2026, the effective US tariff rate could be around 10%, with a staggering 34% on goods from China. Consequently, the cost of a solar project in the US could be 54% higher than in Europe and 85% more than a similar project in China. Under a more aggressive “trade war” scenario, where tariffs could rise to 30% by 2030, the construction costs for solar projects are projected to increase by approximately 15%, compared to around 5% under the “trade tensions” forecast.

Seiple remarked, “The tariffs that have been implemented on solar modules, combined with an inefficient transmission policy that increases interconnection costs, have already made construction expenses for solar higher in the US than in most other markets. An increase in tariff levels will only exacerbate this premium that US energy consumers must pay to access renewable energy. While the full impact remains uncertain, it’s clear that industry participants need to brace for increased costs and potential disruptions to their supply chains.”

The report outlines two scenarios with varying impacts. In the energy storage sector, Wood Mackenzie indicates that the US market will face even harsher effects than other areas of the power sector due to its reliance on Chinese imports. While the US has successfully developed domestic manufacturing capacity for solar modules, nearly all battery cells used in utility-scale storage projects are sourced from China. It is estimated that costs for US utility-scale energy storage could rise by 12% to 50%, depending on the severity of the tariffs. Under the “trade war” forecast, energy storage prices could see steep increases.

Seiple noted that although US battery cell manufacturing is growing, “it is not expanding at a pace nearly fast enough to meet even a small fraction of the demand for battery projects in the US.” He projected that by 2025, domestic manufacturing capacity would only satisfy around 6% of demand, potentially increasing to 40% by 2030.

In addition to uncertainty and rising costs from tariffs, the US is also grappling with the potential reduction of domestic incentives for clean energy deployment and manufacturing. The proposed US tax reconciliation bill, referred to as “One, Big, Beautiful Bill,” aims to end the Inflation Reduction Act (IRA) production and investment tax credits for renewable energy. While it suggests maintaining the 45X Advanced Manufacturing Credit for domestic factories, provisions regarding “foreign entities of concern” (FEOC) could hinder companies attempting to take advantage of this benefit. Under the current bill, China would be classified as an FEOC, restricting “material assistance” from numerous Chinese firms and potentially impacting Chinese-owned patents for technology.

This reconciliation bill must pass through the Senate before being sent to the president for approval.

As the landscape of solar and energy storage evolves, industry stakeholders are urged to prepare for the challenges ahead, including potential cost increases and disruptions in supply chains.