Tariffs, FEOC rules, and changes to clean energy tax credits are making solar and storage projects more expensive and harder to plan in the US
With IRA incentives reduced under the OBBBA, Wood Mackenzie projects a drop in new solar, wind, and storage installations compared to earlier forecasts
Limits on Chinese-linked equipment and a lack of US-made battery cells could cause shortages and higher prices, especially for solar-plus-storage projects
However, strong electricity demand from data centers, electric vehicles, and rising power prices are keeping long-term demand for solar and storage strong despite short-term challenges
A new report by market intelligence firm Wood Mackenzie and accounting and advisory company CohnReznick says recent US tariffs, tax changes, and Foreign Entity of Concern (FEOC) rules have significantly reshaped the economics of renewable energy projects in the country. Despite these ‘unprecedented headwinds’, the report finds that strong structural factors continue to support solar and energy storage deployment across the US.
Trade Actions Began Before ‘Liberation Day’
It was not the Trump 2.0 administration that brought on these challenges; the trade action that impacted renewables started well before ‘Liberation Day’ tariffs were announced in April 2025.
Since June 2022, under the Biden Administration-backed Uyghur Forced Labor Prevention Act (UFLPA), the report claims over $3 billion worth of electronics shipments, including solar modules, have been detailed by the US Customs (see UFLPA Comes Into Force In The US).
It was followed by Section 201 and Section 301 tariffs – continued by the current administration – that have contributed to elevated prices and to antidumping and countervailing duties (AD/CVD) on Southeast Asian imports. Requests from the US manufacturing industry to cover imports from Laos, Indonesia, and India under its ambit have also played a part in pushing up prices (see US Investigates Solar Trade From Laos, Indonesia & India).
The phase-out of the Inflation Reduction Act (IRA), with the advent of the One Big Beautiful Act (OBBBA), and renewed scrutiny of renewables under the Trump administration only adds to this (see Elevated US Federal Scrutiny For Wind & Solar Energy Projects).
Wood Mackenzie had previously forecast the US would add 375 GW of new solar by 2034 if the IRA credits were retained, projecting a 5% annual growth rate between 2028 and 2031. The main barriers back then were interconnection and transmission delays, along with trade policy pressures.
With the IRA scaled back or eliminated, Wood Mackenzie predicts a 30% decline in solar, storage, and wind installations.
“The OBBBA, combined with trade policy changes and a host of administrative agency actions, will undoubtedly reshape the prospects of America’s wind and solar and storage markets,” reads the report.
Trade & Policy Risks for Solar and Storage
It is still hard to know how US tariffs will change, the analysts admit. A US court has stated that some Trump-era tariffs may be illegal, but they will remain in place while the Supreme Court reviews the case, which could take months.
Irrespective of the court’s decision, solar and energy storage projects still face major trade and policy risks. These include cuts to clean energy funding, tougher tax credit rules, administrative agency attacks against permitted and under-construction solar and wind farms, and limits on placed-in-service requirements under the OBBBA, which effectively eliminate IRA incentives, among others.
Wood Mackenzie projects substantial uncertainty for utility-scale and commercial and industrial (C&I) solar projects under the OBBBA. It expects the US to add 197 GW DC of utility-scale solar between 2025 and 2030 under the base case, with a 16% to 18% downside risk if Treasury rules and federal permitting constrain future project viability, while its projection is 79 GW/257 GWh for storage.
Half of this pipeline is tied to hybrid solar-plus-storage projects that are exposed to changes in solar Investment Tax Credit (ITC) eligibility. FEOC restrictions, meaning no Chinese equipment, could also disrupt storage supply chains and elevate costs over the near term, it cautions. The alternative will be domestic and Korean supplies, but it could only be available by the end of the decade.
While avoiding blanket assumptions, analysts expect the tariffs to have a major impact on smaller players compared to large developers with diversified supply chains and financial buffers. This could lead to market consolidation.
The tariffs will also impact manufacturing efforts. Post-IRA, Wood Mackenzie estimates 380 manufacturing facilities to have been announced, with almost half in operation by March 2025. As several domestic solar and storage factories rely on imported components to make PV panels and battery packs, tariffs and changes to the IRA have ‘chilled’ those investments.
Limited availability of solar modules, battery cells, and other equipment is increasing power purchase agreement (PPA) prices for clean energy. Wood Mackenzie expects Liberation Day tariffs to drive a 30% increase in module and inverter costs, and a close to 10% hike in overall project costs for utility-scale solar.
A major challenge is the proposed FEOC restrictions on imported equipment from China or from a company with Chinese investment. Projects can be disqualified from ITC if they use components produced under a licensing agreement with a Chinese company, or even if the subcomponents are produced in China.
The US also currently lacks a sufficient domestic supply of battery cells, as it remains dependent on the Chinese supply. It adds a caveat, though: under trade tensions scenarios, US utility-scale solar projects could cost 54% more in the US than in Europe and 85% more than in China, and battery storage prices could rise between 12% and about 50%.
“While credits for solar and storage received more favorable treatment under the manufacturing tax credit, complex Foreign Entity of Concern (FEOC) restrictions make them harder to obtain,” they point out. “While questions remain about how policy, tariffs, and administrative actions will impact wind, solar and storage projects, the expected outcomes include higher prices and fewer deployments.”
Advantage Solar & Storage
Nonetheless, the report writers point out the powerful structural advantages of solar and storage projects, despite the headwinds. The speed of project installation is one of them, vis-à-vis long wait times for natural gas and fossil fuel projects. This increases investor appetite and confidence for renewables as demand grows for electric vehicles, factories, and data centers. Small, local solar and battery systems can also help communities stay powered during extreme weather.
Investors are ‘increasingly interested’ in renewables as they seem to be long-term, stable, yield-generating assets. Pension funds, insurance companies, and infrastructure funds see utility-scale solar and storage as a stable debt asset despite short-term policy and tariff turbulence.
Banks are also committed to reporting and reducing financed emissions, and they are starting to offer more favorable terms and specialized green bonds in their financing structures.
Despite the challenges of elevated costs and uncertainty, renewable energy deals are being done, albeit at lower returns, deferred equity, or innovative offtake structures, they point out.
Growing demand for electricity will fuel their growth, especially from data centers. Wood Mackenzie is tracking 134 GW of proposed data centers across the country, up from 50 GW a year back. US utilities, it adds, have signed up to serve 64 GW of new data center capacity, equivalent to 12% increase in the US’ current electricity demand.
Rising electricity prices, across both the commercial and residential segments, also benefit the economics of solar and storage projects.
Additionally, the global demand for renewables remains strong outside the US. Global clean energy growth keeps money, research, and parts flowing between countries. As more global manufacturing companies compete worldwide, prices will fall, helping reduce the impact of US tariffs over time. Some foreign manufacturers may also build factories in the US to avoid tariffs, thereby strengthening local supply in the country.
“Put simply, while tariff and policy uncertainty may complicate and stall solar and storage projects, it can’t fully derail the energy transition,” stress the analysts.
They point to the solar industry’s resilience, having survived several ups and downs, and believe it will survive this ‘solar coaster’ as well.
Having said that, the report writers want solar and storage companies to acknowledge the change to their risk profile. They add, “Tighter FEOC rules, tariffs, future AD/CVD determinations, OBBBA impacts, and other factors will raise costs and lengthen the timelines of many projects.”
“In short, prudence rather than pessimism is the appropriate posture to identify and move forward bankable projects, investigate and optimize supply chain options, and secure favorable financing. At a time when policy and trade are uncertain, execution and discipline matter more than ever,” reads the report.
The complete report titled Navigating Trade Uncertainty in the U.S. Solar and Storage Markets is available for free download on Wood Mackenzie’s website.