EV slowdown creates potential lifeline for US energy storage amid FEOC, tariffs

Overall, it means that on 1 January, 2026, tariffs on Chinese batteries and BESS went from around 37.5% to around 55%.

Era of uncertainty

While the industry has been aware of these coming changes, the unpredictability of the Trump administration’s additional announced tariffs over the past year has caused uncertainty and a need for careful planning.

Speaking with Energy-Storage.news, Justin Johnson, COO of renewable energy developer-operator Arevon Energy, explains of the BESS industry, “The combination of the Inflation Reduction Act (IRA) and then all these tariffs and FEOC restrictions have just been another impetus to continue to bring more domestic supply online. The slower uptake of EVs is freeing up battery cell capacity for BESS to use. They’re now retooling those production lines and creating cells specifically for the energy storage space.”

He continues, “The short answer is it’s creating even more impetus to use domestic production as much as possible. We saw the same movie with modules over the last three years when the Uyghur Forced Labour Prevention Act (UFLPA) went into effect – there was a big impetus to try to source domestic or US-compliant modules.”

This view is consistent with a consultant’s statement to ESN in December, suggesting that changing trends in the US BESS industry might eliminate the need for Chinese batteries in the near future.

“EV demand is going to decrease because of the removal of the EV consumer tax credit. The battery manufacturing capacity from those is now being repurposed to BESS. It’s not cheap to repurpose, but there’s a lot of sunk cost with a gigafactory, so it’s happening,” they said.

“The South Korean battery manufacturers’ announcements could even be enough to meet domestic demand for BESS. You might not even need Chinese batteries online at all, once those are all online.”

Repurposing EV battery facilities

LG Energy Solution, Samsung SDI, and SK On have all increased local manufacturing and announced domestic supply agreements with BESS integrators. Similarly, US-based system integrators like Fluence and non-lithium battery companies such as Eos are also expanding their local supply chains.

Johnson says, “Maybe it’s bad for climate change, but the slower uptake of EVs is kind of saving our asses a bit. We did have a domestic BESS supply coming online, but it wasn’t going to be enough. But the fact that LG, Samsung, SK On, and a bunch of others are retooling factories and sending that capacity into the stationary storage market, most of the forecasts I’ve looked at show us in an oversupply scenario by late 2026, so through 2027, 2028, throughout the foreseeable future. There will be excess cell capacity to meet our needs.”

This also comes with uncertainties, though. In September, US Immigration and Customs Enforcement (ICE), along with multiple other law enforcement organisations, raided Hyundai Motor and LG Energy Solution’s EV battery cell plant in Ellabell, Georgia.

Although that specific factory was not converting EV manufacturing lines, the work involved in EV and BESS cells is similar because workers from outside the US possess skills that US workers lack in large numbers. These foreign workers are expected to train US workers.

Several aspects of that incident are still unresolved, but Donald Trump has adopted a firmer position against the raid, emphasising the significance of the South Korean worker’s skills.

Johnson notes, “(Trump’s sentiments) give me some hope that you won’t see that sort of activity in the future. I went to LG’s cell factory in Holland, Michigan. It is a massive factory; I think they have a couple of billion dollars invested there. It’s a sprawling campus that covers acres and acres. There are thousands of people who work there.”

He continues, “The vast majority of people I saw working there are just Americans, people born and raised in Michigan, everyone you’d see in the town. I did see some Korean folks, and they were spooling up the factory for training. But everyone I talked to who was leading their individual areas was young, 30-ish college graduates from America pursuing a manufacturing career.”

Speaking to immigration raids or other potential delays in building out manufacturing, Johnson says, “I hope we don’t see that sort of stuff recur, because that runs contrary to something that’s popular on both sides of the aisle, which is bringing manufacturing jobs back into the US.”

BESS cost considerations

Johnson says that Chinese-manufactured BESS are still the cheapest option in the industry, but “not by much”. And further, that customers are willing to pay more to avoid the possibility of tariff changes.

He explains, “Most of the people you would sign power contracts with, whether you’re Arevon or one of our competitors, our customers appreciate and are typically willing to pay a little bit more if they have certainty that you’re not going to need to come back and renegotiate with them on the delivery date or the price if you end up being impacted by tariffs or some other thing associated with a really long, extended supply chain. So, they’re often willing just to pay a little bit more for the certainty that domestic provides.”

Johnson adds, “You have extended timelines on logistics that end up being way more expensive. The combination of those two things – shorter logistics tails and domestic supply – really reduces a lot of the uncertainty. People are usually willing to pay for that. You can’t pay twice as much for it, but if it costs 10% more, maybe you’re willing to pay for that because of the certainty it provides.”

The Energy Storage Summit USA will be held from 24-25 March 2026, in Dallas, TX. It features keynote speeches and panel discussions on topics like FEOC challenges, power demand forecasting, and managing the BESS supply chain. ESN Premium subscribers receive an exclusive discount on tickets. For complete information, visit the Energy Storage Summit USA website.