Energy-Storage.news Premium speaks to Daniel Dedrick, US-based BESS developer and operator GridStor’s CTO, about the company’s strategies for navigating FEOC and Section 301 tariffs.
Restrictions on foreign entities of concern (FEOC) and the scheduled Section 301 tariff increase to 25% on Chinese-origin battery energy storage systems (BESS) took effect on 1 January.
The ‘One Big, Beautiful Bill Act’ (H.R. 1) kept investment and production tax credits for battery storage until 2033 but introduced restrictions disqualifying projects that receive significant aid from restricted foreign entities like China. Thresholds start at 55% this year, reaching 75% after 2029.
Meanwhile, Section 301 of the 1974 Trade Act addresses foreign trade practices. In 2024, the Biden administration announced tariff increases on Chinese lithium-ion batteries to 25% . Beginning 1 January 2026, tariffs on Chinese batteries rose from approximately 37.5% to 55%.
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Founded in 2022, GridStor received backing from Goldman Sachs through Horizon Energy Storage, which specialises in sustainable and infrastructure investments. As detailed in its 2022 sustainability report, the company’s investments target solving power supply intermittency issues that could impede the growth of renewable energy.
Shortly after, GridStor began developing its first project, a 60MW/160MWh BESS in Goleta, California, which is the largest battery storage project in Santa Barbara County.
The company has experience navigating changes in federal policy, previously speaking to ESN Premium about how it completed an investment tax credit (ITC) transfer deal for the Goleta BESS.
Now, Dedrick shares how the company is approaching FEOC and Section 301.
How has BESS procurement changed since 1 January, with active FEOC restrictions in place?
We have maintained a flexible a forward-looking approach to procurement, as opposed to locking in large multi-year orders from a single supplier like some of our peers. As a result, we pre-qualified vendors and re-assessed supply options during the second half of 2025 in anticipation of new restrictions on Sec 48E tax credits. We are now waiting for Treasury guidance before advancing pending procurement decisions on our longer-dated projects.
How has BESS procurement changed since January 1 in regard to the Section 301 tariffs?
The new Section 301 tariff levels have been planned since 2024, and so we have had ample time to adjust procurement and bidding approaches going forward.
Are Chinese-manufactured BESS still the most cost-effective option?
For now, although it depends on how tax and tariffs evolve. We assess vendors for a variety of considerations, with cost a major but not the only factor. We have established a diverse set of cost-effective BESS supply options to ensure our BESS supply is robust and able to withstand day-to-day trade law and regulation uncertainty.
What have you done prior to the active restrictions and increased tariffs to secure BESS?
First, a number of our projects commenced construction in 2024 and are not subject to the restrictions placed on projects started today that seek Sec 48E tax credits.
Even before current restrictions and tariffs, we worked with our vendors to mitigate tariff risk, using contractual arrangements and strategic procurement decisions. As a result, we have been able to assign batteries and other key equipment to our planned projects to ensure project economics are not disrupted for our customers.
How will these changes impact the industry over the next year?
We expect most projects planned to achieve COD this year have already procured their major equipment. The main impact to the BESS industry this year will be a slowdown in prospective procurement and investment decisions until Treasury guidance reduces uncertainty and makes compliance requirements clearer.
In addition, we expect that prices for contracted offtake will rise to offset new costs, due to the dearth of supply alternatives at a time when many regions are indicating capacity shortfalls and unprecedented load growth. These tax and tariff changes will ultimately result in higher costs to end retail electricity customers.
How do you expect your company to be impacted over the next year?
Our next two projects, the White Tank Reliability Project in Arizona and the Gunnar Reliability Project in Texas, have all major equipment onshore and are under construction, with commercial operations planned to start in first half of 2027.
We also have a subsequent pipeline of projects already with assigned equipment that we expect will proceed as planned. That gives us plenty to do while we await the necessary clarifications and guidance at the federal level, though time is of the essence, as continuing uncertainty and delay in guidance will begin to imperil investment decisions as projects reach milestones.
To what extent is domestically manufactured BESS increasing and available for new projects?
Domestically manufactured BESS is increasing and available, albeit well below US industry demand. We expect that 2028 is the earliest that domestically manufactured BESS will be available to meet a significant proportion of demand from US developers.
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 can get an exclusive discount. For complete information, visit the Energy Storage Summit USA website.