White House emergency order curbs Chinese grid batteries

New bulk power restrictions and tax credit rules force storage developers to seek non-Chinese equipment despite higher initial capital costs.

An executive order issued in late August declared a national emergency that blocks the installation of foreign-produced bulk-power system electric equipment deemed a national security risk.¹² The measure explicitly targets battery energy storage systems, inverters, and transformers tied into the electric grid.¹² The directive follows a multiyear push by federal officials to reduce reliance on equipment imported from China, which currently supplies the vast majority of lithium-ion cells used by American storage developers.³¹

The policy arrived as utility-scale storage installations expanded at record speed across the United States.¹⁴ Developers rely heavily on grid batteries to capture excess generation from intermittent wind and solar facilities, providing stability to regional grids during peak demand hours.¹ Lower-cost Chinese imports made that rapid buildout commercially feasible.¹³ The federal intervention abruptly shifts project economics, pushing developers toward domestic or allied suppliers that remain substantially more expensive.¹²

Industry analysts quickly signaled that the installation ban will disrupt short-term project schedules.¹² An outright ban was a bit of a surprise, and it does create a bit of concern for domestic players in the US, said Shan Tomouk, energy storage and energy lead at Benchmark Mineral Intelligence.¹ The directive gives Energy Secretary Chris Wright authority over existing and planned hardware, creating regulatory uncertainty for utility procurements that have already broken ground.²

According to analysis from BloombergNEF, the immediate effect of the federal order will be project delays and selective cancellations.²¹ Isshu Kikuma, an energy storage analyst at BloombergNEF, explained that projects awaiting final rules from the Department of Energy face difficult choices.¹ Developers must either find alternative cells from domestic factories or non-restricted countries, or redesign their facilities entirely.¹² Worst case, those projects could get canceled, Kikuma said.¹

Tax credits tighten the supply chain

The August executive order compounds strict procurement rules enacted under the One Big Beautiful Bill Act, signed into law in July 2025.⁴² While the statute preserved clean energy investment tax credits for standalone energy storage through 2033, it introduced prohibited foreign entity limitations based on Foreign Entity of Concern guidelines.³⁴ Under these rules, projects that receive excessive material support from restricted nations lose their federal tax credit eligibility.⁵⁴

To enforce those limits, the Treasury Department and the Internal Revenue Service issued Notice 2026-15 in February 2026.⁵⁴ The guidance created a mathematical test known as the Clean Electricity Material Assistance Cost Ratio.⁵ For projects beginning construction in 2026, at least 55% of total direct project costs must originate from non-prohibited sources.⁵¹ That non-prohibited cost threshold escalates by 5% annually, eventually reaching 75% in 2030 and subsequent years.⁵³

According to reporting by the EticaAG Team, battery energy storage systems face distinct structural compliance hurdles under this formula.⁵ In IRS safe harbor tables, battery cells alone account for 52% of total direct costs in standard grid-scale configurations.⁵ Because cells constitute the majority of hardware expenses, sourcing a Chinese cell virtually guarantees that a project will fail the 55% direct cost requirement, disqualifying the facility from claiming federal credits.⁵

Those tax credit disqualifications arrive alongside escalating trade tariffs.¹³ Section 301 tariffs on Chinese-origin lithium-ion batteries increased to 25% in January 2026, rising from a previous baseline of 7.5%.¹³ According to reporting by April Bonner, the combination of tariff increases pushed total duties on Chinese battery energy storage equipment to roughly 55% at the start of the year.³ The rising trade barriers make imported cells increasingly expensive even before considering lost federal incentives.³

Electric vehicle slowdown creates an opening

Despite immediate procurement shocks, domestic battery production capacity is expanding faster than earlier projections anticipated.³² An unexpected drop in consumer demand for electric vehicles prompted battery manufacturers to reassign manufacturing lines originally intended for cars.¹³ Companies including LG Energy Solution, Samsung SDI, and SK On have moved to adapt domestic gigafactory production to supply stationary storage systems instead.³¹

Justin Johnson, chief operating officer of renewable energy developer Arevon Energy, explained that the automotive slowdown provided an accidental lifeline to the power sector.³ The slower uptake of EVs is freeing up battery cell capacity for BESS to use, Johnson said.³ He noted that multiple manufacturers are retooling production lines to create cells specifically for stationary storage facilities, creating stronger domestic availability across the country.³

Johnson noted that several large-scale battery manufacturing plants are scaling up production across the United States. He highlighted LG Energy Solution's battery cell plant in Holland, Michigan, where significant capital investments created a sprawling industrial campus employing thousands of American manufacturing workers.³ Domestic integrators like Fluence and non-lithium storage producers like Eos have also expanded their local supply networks to meet utility procurement requirements.³

South Korean battery manufacturers have established enough domestic expansion projects to theoretically meet domestic storage demand once all planned facilities become fully operational.³ BloombergNEF trade and supply chains analyst Zoe Zakrzewska noted that four battery plants commenced operations in the United States during the first half of 2026, with several additional facilities scheduled to open before the end of the year.²

The cost of domestic procurement

Replacing Chinese imports with domestic battery cells carries a substantial financial premium.¹ Domestic manufacturing capacity in the United States remains at an early stage of operational scale, and production costs remain significantly higher than those of Chinese manufacturers who benefit from years of state subsidies and established supply ecosystems.¹ Even importing components from alternative manufacturing hubs like South Korea increases overall capital expenditures for developers.¹

Storage developers indicate that many utility customers are willing to accept modest price premiums in exchange for regulatory certainty.³ Johnson pointed out that customers often prefer domestic equipment because it insulates projects from sudden tariff revisions, logistical bottlenecks, and federal customs enforcement actions.³ When domestic hardware adds roughly 10% to baseline equipment costs, utility off-takers frequently absorb the expense to ensure firm delivery schedules.³

Federal energy planners project that the United States will achieve domestic battery manufacturing self-sufficiency during the 2030s.¹ Although domestic manufacturing capacity could nominally match demand around 2030, factory ramp-up schedules and supply chain adjustments mean full self-sufficiency will likely arrive later in that decade.¹ Until domestic factories reach full production capacity, grid storage developers must manage delayed project timelines while absorbing higher system costs.¹²

Reporting note: this piece draws on announcements and regulatory filings regarding bulk-power system executive actions, Treasury Notice 2026-15, and energy storage supply chain analyses published through September 2026.

Source: MIT Technology Review via The Spark, September 10, 2026.

References

This article is based on 5 sources, listed in the order they are cited.

1. 1 CC Casey Crownhart announcement · 10 Sep 2026 Can the US battery market untangle from China? See the source
2. 2 U utilitydive.com third party · 1 Sep 2026 Trump grid order likely to cause energy storage delays, cancellations: BloombergNEF See the source
3. 3 E energy-storage.news third party · 22 Jan 2026 EV slowdown creates potential lifeline for US energy storage amid FEOC, tariffs See the source
4. 4 M morganlewis.com third party · 13 Mar 2026 FEOC Rules and Energy Storage Tax Credit Eligibility See the source
5. 5 E eticaag.com third party · 24 Feb 2026 Treasury’s Updated FEOC Guidance and Its Impact on Battery Energy Storage Systems (Feb 2026) - EticaAG See the source