Year in Review series perspectives, from FEOC to data centres, from Vaughn Morrison, partner at US law firm Troutman Pepper Locke.
Last year was a particularly busy one for legal experts in the US energy sector. From the ‘Liberation Day’ tariff announcements to the months-long process of passing the ‘One, Big, Beautiful Bill Act’ (‘OBBBA’) and developments that took place deeper in the weeds of policy and regulation, energy industry segments from clean to conventional sought clarity at almost turn.
When we last caught up with lawyer Vaughn Morrison for an ESN Premium interview in late October, it was off the back of a report his firm, Troutman Pepper Locke, had published with guidance on navigating the post-OBBBA and tariffs landscape.
Morrison and his fellow partner, John Leonti, said then that foreign entity of concern (FEOC) restrictions on investment tax credit (ITC) eligibility had prompted their clients to act nimbly, restructuring their supply chains and negotiating risk allocations with suppliers and partners.
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Nonetheless, despite the challenges this and other developments had presented, Morrison noted that battery storage had emerged from the OBBBA negotiations relatively unscathed, certainly compared to solar PV and wind, which effectively lost their tax credit-eligible status. At the same time, electricity load growth driven by data centres would provide a significant driver for energy storage resources, he said.
This time out, we revisit some of those key takeaways and more, as Vaughn Morrison reflects on 2025 and looks forward to the year ahead.
What did 2025 mean for the energy storage industry from your company’s perspective and for the bigger picture?
Our firm’s success follows the industry’s success, so the answer to both questions is the same: 2025 was a mixed year for energy storage.
The OBBBA curtailed the previously longer runway for the investment tax credit for storage, and created additional qualification challenges in the form of FEOC requirements. Meanwhile, ongoing instability in international trade policy has created a level of uncertainty in project capital expenditures that has strained the market’s ability to effectively underwrite project economics.
With that being said, storage demonstrated its value to the grid on a grander scale than any year prior, and emerged from OBBBA as a relative winner, and certainly better off than before the Inflation Reduction Act (IRA).
What do you think 2026 will hold, in terms of both things to look forward to and in terms of challenges ahead?
I expect 2026 will showcase the industry’s resilience and ingenuity. With most of the new rules of engagement now known, the market can focus on developing the solutions and conventions that will govern project development and finance in the medium term.
There are challenges, of course, including FEOC compliance and continuing trade uncertainty. But with OBBBA in the books, the market can move ahead.
What are some of the big legal questions still facing the industry, and how might we hope to see them answered?
Guidance from the Treasury on FEOC rules is expected this year, and that could have a significant impact, good or bad. We hope to see greater stability in the trade environment this year. Another unknown is whether there will be additional executive action targeting foreign suppliers on national security grounds.
More encouraging is the prospect of queue reform in PJM and potential pro-development policy emerging from FERC directives relating to large load customers (particularly data centres). Those could present opportunities.
Consensus appears to be that, in terms of energy storage deployment in the US, 2025 did not go too badly. Was this contrary to expectations from earlier in the year?
There was a lot of concern earlier in the year about change in tax law and tariffs. I do think those things had an impact, but 2025 was going to be such a big year that even a blunted version was impressive.
In October, you said that data centres and domestic content policy would be defining topics for the industry. How should energy storage developers be approaching these issues?
With respect to the latter, domestic sourcing considerations have become even more important in light of the FEOC rules imposed by OBBBA. At the same time, more domestic and FEOC compliant products are coming to market. Many developers are partnering with suppliers to reap the benefits, in some cases by providing advance market commitments to support the buildout of domestic manufacturing capacity.
Developers are still figuring out the right value proposition of storage to data centres. We have heard a lot of ideas, and seen some deals get started. If someone can figure out a scalable role for battery storage in data centre load service, that could be a vast new market.
What should the industry’s priorities be in 2026 and beyond?
I think the industry should focus on further cementing its relatively privileged position in energy policy by onshoring production, technology, and capital structure, and enhancing cybersecurity protections and fire safety.
From a value proposition standpoint, the narrative should focus on the role that batteries can play in stabilising the grid and power prices. For now, both political parties seem to recognise there is a valuable role for storage on the US electric grid, but that is far from a foregone conclusion.
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 on ticket prices. For complete information, visit the Energy Storage Summit USA website.