For the U.S. energy storage market, 2025 can be divided into pre-OBBB and post-OBBB.
Like most of the clean energy industry, the beginning of the Trump administration brought uncertainty to the storage sector. Storage had a relatively good 2024 — with installations up 33% over the previous year, to 12.3 gigawatts — but a new president who had been actively hostile to renewables and particularly solar and wind introduced a new variable.
President Trump’s trade policies were a problem from the outset. In his first week in office, research suggested that the platform he proposed as a candidate, including increasing existing Section 301 tariffs against Chinese imports to 60%, could drive up costs for battery storage systems by more than 35%.
The tariffs bit both China and other countries where U.S. battery factories sourced components, including both Japan and Korea. And as Sam Jaffe, principal at 1019 Technologies, told Latitude Media at the time, Trump’s new import taxes came into effect at a particularly unfortunate time for the domestic battery makers who have slowly been building up capacity in recent years; the administration’s decision, he said, “really disrupts the entire mechanism that’s been slowly grinding forward to create U.S.-made batteries.”
Many of those manufacturers ran up against high costs, even before the Trump changes set in. In the first months of the year, both Kore Power and Freyr Battery canceled plans for greenfield factories in the U.S., citing high costs and interest rates.
These companies, which both were to lithium-ion phosphate batteries, initially made plans in light of the 2022 Inflation Reduction Act, which offered storage- and clean energy manufacturing-specific credits. That legislation spurred hope in the industry, Jaffe said, that “there would be a U.S. LFP manufacturing buildout.” But under Trump 2.0, he said, “all of that is in question.”
Trade policy uncertainty also hit storage integrators like Powin, which shut down over the summer, laying off nearly 250 employees and citing “unforeseen circumstances” in the market. Powin told Latitude at the time that the company’s “challenges have been compounded by recent tariff developments that have added cost and complexity to the company’s operations and ongoing uncertainty surrounding the investment tax credit.”
But then, some unexpected good news. In July, Congress passed its long-anticipated budget bill, ending the months of uncertainty with a surprise win for storage: The GOP’s “One Big Beautiful Bill” kept the sector’s federal incentives largely intact.
While both wind and solar tax credits saw an accelerated phase-out, storage projects can continue to qualify for both the 48E investment tax credit and the 45Y production tax credit under the original IRA timeline. (That said, the bill phased out the 45X manufacturing credit that battery makers have relied upon one year sooner than the IRA had.)
This win for storage appears to be linked to load growth, and especially to the needs of data centers. Load growth projections are still accelerating; one estimate quadrupled in just two years, to 166 GW of peak load growth by 2030. Against that backdrop, an important tool for making the most of the capacity we have already, no matter the source of generation, is storage.
Data centers especially are contributing to the new demand. And that includes both novel forms of long duration storage — Google signed a deal with the carbon dioxide battery startup Energy Dome, while meanwhile 100-hour battery company Form is scaling up manufacturing to meet the needs of data centers — and the more strategic deployment of distributed storage.
Distributed storage to bolster the grid
It’s not just utility-scale batteries that are seeing momentum. Data centers are beginning, slowly, to embrace behind-the-meter batteries for onsite power. In an October note to clients, the investment firm Jefferies said that “hyperscalers present a 20 GW opportunity” for BESS through 2035. “With hyperscalers increasingly embracing some permutation of grid-connection and BTM backup generation, we see BESS as a complementary resource to enable flexible load management, accelerate speed to interconnection, and provide backup capacity in a redundant form factor,” the note read.
Around the same time, Aligned Data Centers announced a deal for a 31-megawatt, 62-megawatt-hour battery alongside a data center in the Pacific Northwest — sized to allow it to get interconnected “years earlier than would be possible with traditional utility upgrades.” The project relies on two-hour batteries developed by energy storage company Calibrant Energy, and is planned to be operational next year.
These batteries are also seeing strategic deployment on the distribution grid. In October, the utility Xcel Energy proposed a first-of-a-kind approach to distributed capacity procurement (also known as DCP), which it will deploy in Minnesota between now and 2028. The program will install up to 200 megawatts of utility-owned and operated battery storage “at strategic locations on the grid” — generally local businesses and commercial and industrial sites, who would be paid for the privilege — to host much-needed capacity. The idea is that the batteries can boost overall grid health by preventing transformer overload and otherwise avoiding the need for costly upgrades.
Meanwhile, in Texas, Base Power is demonstrating that residential batteries can also be used for grid health and that doing so can be valuable to investors. The vertically integrated company manufactures, installs, owns, and operates residential batteries in Texas, providing customers backup power while simultaneously employing them for grid services. The company, which also acts as an electricity retailer, announced a $1 billion Series C this fall.
The EVs-to-storage battery switch
Against this market backdrop, major companies are beginning to reallocate resources: away from producing batteries for electric vehicles, which saw their tax credits stripped in the OBBB, and toward making them for storage.
Data centers, of course, are a huge part of this new demand.
Even before the OBBB passed, AI infrastructure developer Crusoe was quietly building a data center in the Nevada desert to test whether second-life EV batteries could be used to power AI workloads. In June, it unveiled its off-grid modular data center, powered by a new energy storage offering from the battery recycling company Redwood Materials. The company’s new business line, dubbed Redwood Energy, launched with plans to repurpose EV battery packs in a microgrid to firm up cheap renewable energy, specifically for a cheaper solution to powering data centers.
For more on Redwood Materials’ decision to start repurposing EV batteries for grid storage, listen to CTO Colin Campbell’s interview on the Catalyst podcast:
Then, automaker GM got involved. In August, the company announced an agreement with Redwood Materials to develop grid-scale energy storage, using new and repurposed batteries that were initially intended for EVs. Key to its rationale was the fact that the company — weathering the post-OBBB slow-down — found itself with far more battery cell production capacity than demand for electric vehicles.
This shift also revealed the tough conditions for the battery recycling sector. For years, it has struggled to truly scale, in part because there haven’t been enough used batteries in circulation. And the EV sector’s downswing has complicated things further. Demand for critical minerals has surged in 2025 as the U.S. race with China has intensified, but extracting valuable materials from batteries and other used equipment is incredibly challenging: logistically, chemically, and economically. Over the summer, the battery recycler Li-Cycle went bankrupt, facing a severe feedstock shortage.
Just this month, Ford followed GM’s lead — with a twist. The company said it plans to change over its EV battery capacity at a Kentucky plant to manufacture storage systems instead, which it hopes to start bringing online in 2027. It plans to invest roughly $2 billion “to capture the large demand for battery energy storage from data centers and infrastructure to support the electric grid,” the company said. In so doing, Ford joins a growing group of manufacturers, including LG Energy and SK On who have begun to do the same.
Against this backdrop, storage is coming out of 2025 a clear victor. According to numbers from BloombergNEF, the U.S. is expected to add 204 GW of battery storage in the next decade. That estimate is 25% higher than the numbers BNEF released in the wave of clean energy pessimism immediately following the OBBB’s passage. (Solar and wind projections, in contrast, are expected to be 48% lower than the mid-year report estimates.)
