The recently passed One Big Beautiful Bill Act (OBBBA) cemented the energy storage investment tax credit (ITC) through the 2030s, which is an incredible decision for the future of energy storage and the broader energy transition.
As energy demand reaches the highest levels in history and outpaces supply, there is an urgent need to increase the reliability of our aging electric grid increasingly strained by electrification, climate change, and to alleviate the need for costly grid upgrades.
As you likely know, energy storage (typically in the form of a battery energy storage system) can reduce the cost of electricity, by storing energy when it is cheapest and discharging it when energy is most expensive. This can help businesses and communities and save costs and carbon emissions while improving reliability.
In this blog, we’ll cover how the OBBBA will influence energy storage (and solar) and some frequently asked questions we are getting from our customers—businesses or utilities like yours.
Overview: Energy Storage and the OBBBA
There have been a variety of federal supports for energy storage. Solar-plus-storage systems could qualify under the Investment Tax Credit (ITC) in the 2010s, with limitations such as primarily charging the battery storage system from the co-sited solar. The Inflation Reduction Act, enacted in 2022, both increased those credits and made standalone energy storage eligible for the ITC. The OBBBA, signed on July 4, 2025 cemented the storage ITC but put an end date on the solar portion.
Key takeaways:
🔋 The federal energy storage tax credit is fully protected into the 2030s, including all adders. This is because Congress has consistently recognized the importance of energy storage to the U.S. grid, economy and innovation.
☀️ The solar tax credit will sunset for projects that do not 'begin construction' by July 2026. The storage portion of a solar plus storage system will continue to receive the tax credit.
🗺️ Foreign Entity of Concern (FEOC) rules limit how much content tax-credit-claiming projects can use from Prohibited Foreign Entities – organizations with ties to one of four countries, most notably China.
Frequently Asked Questions: Energy Storage and the OBBA
Does FEOC mean I can't use any imported components from China?
- Battery storage systems that 'begin construction' within 2025 are not impacted by FEOC.
- If starting construction in 2026 or later, battery storage systems can use a declining portion of manufactured product imported from China, starting at 40% in 2026 and reducing to 25% by 2030.
Could these changes make my battery storage system more expensive?
- For later projects, yes.
- There are overlapping impacts. Battery storage is still experiencing a decline in costs due to technology improvements, but this has been offset recently by tariff increases.
- The FEOC-specific impact is currently difficult to estimate precisely. While the concept has been around, such as in electric vehicle tax credits from the Inflation Reduction Act, the detail for stationary energy storage was set in late June and became law on July 4.
- It is fair to predict that complying with the FEOC rules will impose a cost which increases over time, driven by the annually ratcheting requirement to find components from other sources that have traditionally been manufactured at lower cost within China.
Does it make sense for us to wait for six months until there’s less uncertainty?
- There is a strong value proposition for energy storage now, especially given the challenges presented by FEOC. The sooner, the better.
Now that regulations are loosening up with oil, won’t energy be getting cheaper?
- The prices businesses pay for electricity are driven by the market prices for generation plus the cost to move it from that generation (transmission) and get it to your business (distribution). Generation prices vary widely year-by-year and are difficult to predict. Transmission and distribution (T&D) costs are easy to predict: they have been rising steadily for years and show no sign of abating. Average US T&D costs rose 65% in the 2010s, and that rate will likely increase in the future as accelerating system demand needs to be met with new investment.
Is Convergent Energy and Power well placed to handle these changes?
Yes. An energy storage developer who is best placed to manage this landscape, including FEOC:
- Was not previously reliant upon importing fully assembled energy storage from China.
- Is technology- and product-agnostic and willing to design each system 'from the ground up' to reflect customer needs, such as proportion of U.S.-made content.
- Has a strong network of Tier One global suppliers who are both willing and able to rapidly adjust their component choices to fit current and emerging requirements. This can include, for example, optimizing a blend of cell sources within a single project to reduce cost while ensuring compliance.
Ready to Move Forward on your Battery Storage System?
Load growth forecasts are surging, and battery storage will play a critical role in helping businesses and utilities deliver needed power and capacity while managing their costs.
While recent legislation does add limitations on the inclusion of battery storage and solar components from China, which a developer with a strong supplier network can help you navigate.
By addressing challenges like supply chain constraints and interconnection processes, Convergent is poised to continue delivering efficient, scalable solutions that meet rising energy demands.
For nearly 15 years, Convergent has gained deep expertise by working closely with businesses, communities, and utilities to take the hassle out of on-site renewables by financing, building, owning, and operating these systems on our customers’ behalf.
Schedule a free, no-obligation introductory call with our team today to explore how we can support your energy goals in this new regulatory landscape.
Peter Cavan serves as Convergent's Head of Strategy and leads the team responsible for answering the question, "Where next?" Peter has spent over a decade in distributed energy for business and utility customers.
