Trump’s dampening effect on US investor sentiment could lead to a flight to quality while tariffs will cause a surge in orders this year, writes Tao Kong, managing partner of developer Luminous Energy.
Kong will be speaking at the Energy Storage Summit USA 2025, which kicks off tomorrow in Dallas, Texas. In this guest blog ahead of the event, he explores what the rest of 2025 holds for deploying BESS, the impact of Trump’s regime on investor sentiment and near-term deployments, interconnection challenges, and more.
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2025 will be another significant year of deployments
2025 is expected to be another significant year for energy storage development and deployment in the US. According to the Energy Information Administration (EIA) and various industry reports, utility-scale BESS installations are projected to reach between 15GW to 19GW, or approximately 48GWh to 57GWh of newly installed storage capacity.
Deployment activity will remain primarily concentrated within the CAISO and ERCOT markets, as these regions continue to offer superior profitability, even though energy storage profit margins are steadily declining due to increased saturation. In addition, these markets benefit significantly from their early establishment of clear policy frameworks and revenue streams potential for battery storage, factors that other regional markets in the US are currently striving to emulate.
In terms of project development, 2025 is likely to witness a noticeable pivot away from overly saturated regions like CAISO and ERCOT toward emerging market opportunities.
This shift is driven by the lengthy development timelines required for utility-scale battery projects, typically spanning between three to five years or more from initial project origination to commercial operation. Developers must assess market conditions and associated risks projected several years into the future, a long time after they’ve secured land, permits, and interconnection rights.
Trump leads to cautious investor sentiment, flight to quality
The new Trump Administration’s ambiguous stance on the production tax credit (PTC) and investment tax credit (ITC) for the renewable energy industry, which includes utility-scale battery storage, has contributed to cautious investor sentiment regarding expanding investments in both development and deployment in the US.
Additionally, persistent high interest rates, exacerbated by the potential of ongoing or higher inflation driven by tariffs and trade disputes, are likely to further dampen enthusiasm for capital deployment.
As a result, investor focus is anticipated to shift towards higher-quality projects. High-quality battery storage projects will need to demonstrate robust and sustainable profit margins derived from multiple revenue streams.
While current pricing favours ancillary service, future projects will need a particular focus on energy arbitrage opportunities in ERCOT or reliable and profitable tolling agreements in other markets, complemented by additional revenues from resource adequacy or capacity payments.
In response to market uncertainty, resource concentration is expected. Investors will increasingly favor developers with proven track records, potentially leading to heightened M&A activity. Developers and operators with established resources and credibility are poised to see expanded opportunities and mandates, while smaller or newer market entrants may face greater challenges in securing necessary capital.
Tariffs to cause surge in orders
One new emerging trend that is creating uncertainty in the US energy storage market is tariffs. There is an existing tariff of 7.5% on all non-EV battery imports from China; the Trump Administration’s new 20% general tariff on any imports from China effectively increases this tariff to 27.5%.
The non-EV battery tariff is set to become 25% on 1 January 2026, without additional changes to tariffs on China. This will make the non-EV battery tariff 45% on 1 January 2026. As a result, we are likely to see a surge in orders attempting to take delivery before the new tariff in 2026 takes effect.
The surge in order is likely to overstrain bottleneck supplies. While China’s oversupply and overcapacity in solar module, BESS cells and DC blocks is unlikely to create a bottleneck, this may further exacerbate issues on power conversion systems (PCS), transformers, and ancillary products, leading to potential risks in project deployments.
Chinese companies to continue driving down prices
One thing to monitor is pricing. China has built a massive manufacturing capacity for lithium-ion battery production. With a slowdown in the global EV market this will translate to more supply, especially for lithium iron phosphate (LFP) and non-EV applications. As we’ve observed in the solar PV market, China’s oversupply causes global price shock in the short-term before reaching equilibrium as manufacturers begin to fail.
In the short to medium term, we are likely to see similar trends in energy storage. As Chinese firms start to explore outlets for their capacity overseas, more aggressive bidding and price wars will likely start to take shape, potentially offsetting any price increase as a result of the tariff as manufacturers absorb profit margin loss to increase their market share in the US.
This will significantly impact US manufacturers with less cost efficiency, higher prices, and lower price margins compared to their Chinese counterparts.
Manufacturing in the US, Chinese system integrators to start onshoring
An interesting trend is the onshoring manufacturing capacity, especially in DC block manufacturing in the US. While battery cell manufacturing in the US is unlikely to occur until more certainty policy stability and support is provided, system integrators that focus on battery pack and DC block manufacturing will likely onshore in the US to remove the risk of further escalating tariffs.
Combined with the potential qualification of ITC adder from made-in-US products, superior system-level optimisation, and streamlined supply chains, Chinese energy storage system integrators have a significant advantage should tariffs continue to escalate.
Integrators that start to manufacture in the US first are blessed with a first-move advantage and reduced risk exposure from increased tariffs. Manufacturers hoping to succeed in the US will need to conduct proper risk management on product bankability, policy instability, and maintain high system-level optimisation and cost optimisation while operating in the US.
Overall, the tariffs are unlikely to change pricing trends in utility-scale energy storage in the US but may have a noticeable effect on C&I and residential systems as a result of oversupply and significant competition for market share in the US by Chinese energy storage system integrators.
We are likely to see lower prices overall in the medium term while short-term price increases can occur if tariffs are further increased but will reach an equilibrium soon.
Interconnection
The last important trend to monitor in the US is on the interconnection side. As multiple ISOs/RTOs attempt to comply with FERC Order 2023, we are likely to see increased adaptation and “expedited processing” for BESS as interconnection operators realise the importance of BESS’s role in supporting grid reliability, especially on a grid with high renewable energy penetration.
We’ve already seen a framework from CAISO and a mention by MISO in expediting projects that support resource adequacy, and BESS will be an important part of that support.
Additionally, the growing trend of AI data centre deployments in the US adds to further strains on interconnection resources. Battery storage can become an important solution for the additional reliability issues and strains on the grid either through transmission-level strategic location, or co-location/behind-the-meter generation + storage + load (data centre) solutions.
Both of these solutions are an important direction for Luminous Energy as we continue to work with Hyperscalers and data centre owners on providing solutions that address transmission owner concerns or expedited data centre power solutions integrated with utility-scale energy storage for expedited infrastructure deployments.
Conclusion
Ultimately, in 2025 we are expecting to see three major trends in the US energy storage sector: growing deployment of energy storage and shifting development with a focus on M&A of high-quality projects, tariff but increasing competition resulting in no significant trend shift of energy storage pricing but onshoring manufacturing capacity, and lastly, BESS playing a bigger role in supporting interconnection reliability and resource adequacy.
For developers, the key to navigating these risks is a deep understanding of underlying market dynamics, interconnection processes, and future-proofing your projects instead of blindly following development trends in currently highly profitable markets. For projects that are already further along in the development stages, consider strategic partnerships and co-development with developers with a proven track record for deployments.
For investors, mitigating uncertainty isn’t just about avoiding risk—it’s about positioning strategically to maximise returns. The energy storage market is transitioning away from quick-win opportunities toward equilibrium, rewarding those who secure premium assets early, especially in emerging markets with substantial future growth.
Investing alongside experienced developers at an earlier stage not only allows you to capture higher profit margins before market saturation sets in but also establishes first-mover advantages that significantly outperform the limited upside associated with simply acquiring RTB projects and relying on trading strategies as we move into 2025 faced with market saturation in established markets
Manufacturers seeking to successfully onshore in the US market must prioritise flexible, strategic partnerships with established project developers. Such alliances provide immediate market access, regulatory insight, and customer alignment critical for rapidly securing significant market share. Those who proactively adapt to the unique US business landscape and culture can seize substantial first-mover advantages during this period of uncertainty and opportunity.
About the author
Tao Kang is a managing partner at developer Luminous Energy, a company that develops renewables and storage projects in the UK, Australia, Chile and the US. He will be speaking on the ‘Tariff and Onshoring Trends: What to Expect in 2026’ panel at the Energy Storage Summit USA, two-day event which kicks off tomorrow in Dallas, Texas.
