An energy storage developer buying DC battery units has three tiers to choose from. There are the cheap units from China, which start at $70 to $80 per kilowatt-hour, and land at around $120 once tariffs, shipping, and service costs are added. There are more expensive battery units from other countries that face lower tariffs, meaning their cost comes to roughly $130 to $140; those generally still aren’t compliant with new foreign entity of concern rules, given that their supply chains are typically tangled with China’s.
And there are the American-made units, which cost between $160 and $180. Those higher prices, however, can be offset if the project where they’re installed qualifies for the lucrative investment tax credit.
Tony Song, SVP of engineering, procurement, and construction at energy storage developer GridStor, monitors these prices closely to decide whether it’s worth paying the premium for domestic units to qualify for the ITC. For now, he said, buying the pricier batteries claiming the 30% ITC is still GridStor’s best option.
“But if the DC blocks start to drop down to the 60s or high-50s as they continue to innovate, even with tariffs, you’re looking at sub-$100 for a DC block delivered into the U.S [from China],” Song said, noting that there have been many price decreases in the past two years. In that case, going through all the steps required for a company to qualify for the full 30% ITC might not be worth it after all.
The ITC has been granting battery projects up to 30% in tax credits if they meet a series of requirements, including paying workers the prevailing wages of the area, since it was extended to include energy storage by the Inflation Reduction Act in 2022. With the One Big Beautiful Bill passed in 2025, the GOP added a layer of complication, requiring that projects comply with FEOC restrictions, which make them ineligible if too high a percentage of their equipment is tied to China.
Due in part to these restrictions, GridStor is among a few energy storage companies that used to pursue the ITC as a matter of course, but are now actively weighing whether pursuing it makes sense to a project’s economics anymore.
Ravi Manghani, head of strategic storage sourcing at procurement platform Anza Renewables, said he’s seeing approximately two out of 10 projects seriously consider proceeding without the ITC as their baseline strategy. “Every developer in an ideal world would want to get those 30% credits on the project investment, but the reality does look a bit different,” Manghani said. “It’s a math problem.”
While this shift away from tax credits-as-default is clearest in energy storage, whose supply chain has so far been overwhelmingly Chinese, it shows up in other sectors too. When talking about their geothermal equipment supply, for example, Zanskar’s chief development officer Ryan McGraw told Latitude Media that the air-cooled condensers coming from China, which do not qualify for tax credits, are cheaper than other options. “So we have to do the math to understand how painful the loss of the tax credit is,” he said.
Deciding whether to pay a premium for FEOC-compliance equipment is part of that math problem. But the decision goes beyond just pricing. “U.S. manufacturing has ramped up, but it’s still in that early stage… and if you try to go source some of that supply, you might run into constraints,” Song said.
Companies that are beginning to manufacture more batteries domestically like Samsung SDI and LG Energy won’t have their U.S. capacity coming online before late 2026 or early 2027. So if a developer needs a project operational sooner than that, it’s likely to turn to the more abundant supply from China, which is a more mature market, rather than wait for new capacity to show up.
“If you look at quality and execution capabilities of the vendors, generally the rule of thumb with a new factory is that it usually takes a year or two to ramp up and work out some quality issues before you have a mature product,” Song added. “If you’re looking at a factory in the U.S. that started manufacturing this year… that means you’re getting the early batches of that production, and there might be a little bit more risk.”
Other factors need to be considered as well. To qualify for the ITC, projects must meet prevailing wage requirements, which in states like California means using union labor, which Manghani said comes at a higher cost. Then there are the legal costs of demonstrating compliance, especially if a developer intends to sell the credit on the transferability market. “All these cost premiums add up, and the math is not simple; it’s not that you just subtract 30% from your overall project cost,” he said.
And at least one of a developer’s variables is still uncertain: FEOC guidelines that will govern the specifics of who is eligible for which credits are still vague, even a year after OBBB’s passage.
“We don’t have all the information we need to make some of these calls,” Manghani said, explaining that the market is still waiting for the IRS to provide some clarity on what counts as Chinese control, and how much foreign-held debt disqualifies a developer. “So some of these questions are still pending.”
