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Navigating the IRA landscape: Balancing the US supply chain and global diversification in battery storage

By Rauni Jaskari, director of supply management, Wärtsilä ES&O

The Inflation Reduction Act (IRA) put battery storage into the mainstream of the US energy industry, but also created supply chain complexities, writes Rauni Jaskari of Wärtsilä Energy Storage and Optimisation (Wärtsilä ES&O).

Only two years since the Inflation Reduction Act (IRA) passed, the world’s largest experiment in climate policy is now paying dividends. Entire new sectors of the US economy — chief among them battery storage — are flourishing, accelerating emission reductions while creating thousands of jobs in the process.

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What was once a little-known industry has emerged today as a titan of the energy transition, helping underpin intermittent renewables to drive decarbonisation across the country.

While the trendlines are unequivocally positive, there remain significant challenges facing the battery storage sector that are cause for concern, including raw materials competition, newly introduced tariffs, and a looming election.

As a result, many battery storage developers have opted not to fully commit to the legislation’s provisions — a missed opportunity for business and climate action.

To navigate this ongoing instability, prudent battery storage companies need to find an effective middle ground between the benefits of leveraging domestic incentives and ensuring supply chain diversification.

A comprehensive understanding of global supply agreements, including knowing how and if companies are shielded in the event of potential price fluctuations and tariff increases, is also important.

Recently announced tariff increases from 7.5% to 25% on Chinese lithium-ion (Li-Ion) batteries beginning in 2026, although expected, will force many parties to re-calculate the economics of the planned projects and consider the timings of those carefully. This change will also put pressure on increasing the domestic Li-Ion battery supply.

The coming months and years will shape our collective energy future and as critical players, battery storage providers must be prepared to confront these obstacles.

If they aren’t, billions of dollars worth of capacity and capital investment could be at risk, jeopardising renewable deployments and grid stability at a precarious point in history.

Battery storage is just beginning to scale in the US; capacity is on track to double in 2024, with nearly 15GW planned, second only to utility-scale solar, according to the US Energy Information Administration (EIA). In fact, battery storage deployments now exceed those of onshore and offshore wind energy, showcasing the speed at which the technology has achieved liftoff thanks to favorable economics and the IRA.

Additionally, annual battery manufacturing is expected to grow to more than 115GWh by 2030 as suppliers race to shore up battery plants and scale up production. This manufacturing boost is spurring fierce competition for raw materials and equipment supplies and leading to potential shortage concerns in the process.

Supply chain risks and rewards

The interconnectedness of the battery supply chain, being critical to both battery storage systems and electric vehicles (EV), adds another challenge, as fluctuations in EV market capacity can negatively impact materials availability. And for domestic producers, an adequate supply of materials is necessary to comply with ambitious domestic content requirements stipulated by the IRA.

To effectively manage risks and optimise benefits amid regulatory, economic, and political uncertainties, battery storage companies should adopt strategic measures to diversify their operations and secure reliable supply chains. Due diligence and erring on the side of caution in selecting the right partners is essential, as companies with prior experience in comparable supply chains offer greater value and more reliable contractual performance.

Battery storage growth is nothing short of a modern marvel, but it’s not impervious to bottlenecks or disruption. Legislation kicked the sector into gear, and now, companies need to maintain it by mitigating uncertainty and risk through proactive and thoughtful supply chain diversification and a commitment to operational agility and collaboration.

About the Author

Rauni Jaskari is director of supply management at Wärtsilä Energy Storage & Optimisation, where she manages both the strategic sourcing of main equipment direct materials, as well as supplier development and quality. Rauni holds a degree in industrial engineering and management from LUT University of Technology in Finland, and has over 20 years of experience in strategic sourcing, supplier relationship management and supply chain management.

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