US-made batteries could meet most BESS demand within years. Here’s how FEOC rules, tariffs, and AI-driven optimisation are reshaping green energy storage.
Most companies looking at battery storage in the US right now are focused on one thing: can they still afford to rely on Chinese batteries once new rules and tariffs bite in 2026?
Here’s the twist: several analysts now think US-based and allied battery manufacturing could cover nearly all domestic BESS demand within just a few years. That’s a massive shift for the grid, for decarbonisation – and for your project economics.
This matters because utility-scale batteries are no longer a niche technology. They’re the backbone of green technology: stabilising high-renewable grids, powering data centers, and turning solar and wind into reliable, dispatchable capacity. If the supply chain flips from China-centric to North American and allied partners, the rules of the game change for developers, investors, and energy buyers.
In this post, I’ll break down what’s driving this manufacturing surge, how US policy is reshaping battery supply chains, and what smart players are doing right now to protect margins and keep their decarbonisation plans on track.
Why US BESS Demand Might Soon Be Met Domestically
The core point is straightforward: between IRA-driven incentives, new FEOC rules, and a wave of gigafactories, US and allied battery makers are on track to meet domestic BESS demand by the late 2020s.
Several forces are converging:
- The Inflation Reduction Act (IRA) supercharged tax credits for energy storage.
- The storage Investment Tax Credit (ITC) was maintained, but now comes with Foreign Entity of Concern (FEOC) restrictions.
- New and expanded factories from players like LG Energy Solution, Tesla, SK On, Samsung SDI and others are shifting production to US soil or friendly jurisdictions.
The FEOC rule: why Chinese supply suddenly got complicated
Under the Trump administration’s updated implementation, the ITC now comes with strings attached:
- 55% of a project’s capex must be non-FEOC (non–China-controlled) to receive the credit today.
- That threshold rises to 75% by 2030.
- On top of that, tariffs on Chinese BESS reach around 55% from 1 January 2026.
If you’re a developer, that’s brutal math. Even if a Chinese-sourced system is cheaper at the factory gate, by the time you’ve added tariffs and lost tax credits, your levelized cost of storage can blow out.
The reality? A lot of projects simply won’t pencil out on Chinese hardware anymore.
That’s why serious players are racing to qualify non-FEOC supply chains now, not in 2029 when everyone is scrambling for the same limited capacity.
The New US Battery Factory Map: Who’s Building What
To understand how domestic manufacturing can catch up, look at the factory announcements of the last 3–4 years. The trend is clear: EV-focused gigafactories are being expanded or retooled to serve energy storage, often shifting chemistries at the same time.
From EV cells to LFP for energy storage
A good example is LG Energy Solution’s plant in Holland, Michigan, which topped out in 2023. The site originally produced NMC cells for electric vehicles. Now, lines are being retooled to produce LFP cells for energy storage systems (ESS).
That shift is happening across the industry:
- LFP (lithium iron phosphate) is becoming the standard chemistry for grid-scale BESS in the US.
- It’s cheaper, doesn’t use nickel or cobalt, and is well-suited to stationary storage where energy density is less critical.
- The flexibility to swing a line from NMC EV cells to LFP storage cells gives manufacturers a way to respond quickly to policy and demand.
The big three (plus Tesla) and the new storage ecosystem
Several large, often Asia-headquartered companies already have or are building substantial footprints in the US:
- LG Energy Solution – Michigan and other US sites, increasingly oriented toward LFP and stationary storage.
- SK On – investing across the US, often through joint ventures with automakers.
- Samsung SDI – expanding North American presence with multiple partners.
- Tesla – scaling production of Megapack in the US and ramping US content.
- Fluence and other system integrators – building strong relationships with multiple cell suppliers to meet FEOC constraints.
From a green technology perspective, this shift does two useful things:
- De-risks decarbonisation by reducing reliance on one country’s exports.
- Shortens supply chains, which cuts lead times and emissions from long-distance shipping.
If current build-out stays on track, the US plus allied production (Canada, Korea, Europe, Mexico) can realistically supply the majority of US BESS demand by the end of this decade, especially as factories learn and costs fall.
What This Means for Project Economics and Risk
For developers, IPPs, and corporate energy buyers, the key question isn’t “Can the US make enough batteries?” It’s “How do we structure projects and partnerships to ride this shift rather than get crushed by it?”
ITC + FEOC: the new investment calculus
Because the standalone storage ITC survived, but with tighter rules, you’re now navigating three variables on every project:
- ITC eligibility (and whether you hit the non-FEOC capex thresholds)
- Tariff exposure on any FEOC/BESS content
- Local content and bonus credits where applicable under the IRA
For most large projects, the most valuable asset on the table is still the tax equity structure, not shaving a few dollars per kWh on hardware that triggers penalties.
Practical implication:
- A slightly more expensive non-FEOC US-made LFP system will often beat the headline-cheaper Chinese system once you factor in the full tax and tariff picture.
How to de-risk supply and pricing now
Here’s what the more sophisticated players are doing:
- Signing multi-year framework agreements with US or allied manufacturers to secure price and volume.
- Standardising on LFP-based platforms from a handful of suppliers to simplify qualification and O&M.
- Embedding FEOC compliance checks directly into procurement workflows and RFP documents.
- Working with integrators (like Fluence and others) who already maintain diversified, compliant cell supply.
If you’re still doing one-off tenders that focus only on upfront $/kWh, you’re effectively gambling on policy risk, trade risk, and supply chain risk all at once.
How AI and Software Are Squeezing More Value Out of US-Made Batteries
There’s another angle that doesn’t get enough attention: AI and advanced software can offset higher upfront capex by pulling more value out of every installed kWh.
That’s right in the core of the green technology story – it’s not just about cleaner hardware, it’s about smarter operation.
AI-optimised dispatch and revenue stacking
Modern BESS projects don’t make money from a single service. They rely on stacking multiple revenue streams, for example:
- Energy arbitrage (charge low, discharge high)
- Capacity markets
- Frequency regulation and ancillary services
- Transmission and distribution deferral
AI-based optimisation platforms can:
- Forecast prices and grid conditions more accurately.
- Schedule dispatch to capture the most profitable mix of services hour-by-hour.
- Adapt in real time when market rules or grid conditions change.
I’ve seen cases where AI-driven dispatch improved annual revenue by 10–20% over static or rules-based strategies. That’s the kind of performance boost that makes a slightly higher-cost US-manufactured system very competitive in practice.
Extending asset life and reducing O&M
Software and AI also support predictive maintenance and smarter cycling:
- Monitoring degradation patterns at the cell and rack level.
- Adjusting operating windows to reduce stress and extend usable life.
- Identifying failing modules early, avoiding unplanned outages.
If you can add even 2–3 years of profitable operation to a 15-year asset, your project IRR changes a lot more than if you shaved 5% off capex.
This is where the “green technology” story gets interesting: AI and analytics don’t just help the environment. They make the financial case for domestically produced, FEOC-compliant batteries stronger.
Strategic Moves for Developers, Utilities and Large Energy Buyers
If you’re planning or procuring BESS in 2026–2030, here’s a practical way to think about strategy.
1. Design for FEOC compliance from day one
Treat FEOC thresholds the way you’d treat interconnection or land rights: non-negotiable constraints, not afterthoughts.
- Set internal policies for minimum non-FEOC content ahead of regulation timelines (for example, target 75% by 2028 instead of 2030).
- Require suppliers to provide full bill-of-materials transparency and origin documentation.
- Align engineering standards to platforms that are already on a path to full compliance.
2. Prioritise partners, not just products
You’re not buying a commodity in a vacuum; you’re choosing who will evolve with you through:
- Changing tariffs
- New grid requirements (e.g., grid-forming inverters, inertia support)
- Future market reforms
Look for:
- Manufacturers with real US build-out, not just press releases.
- Integrators who work with multiple cell suppliers and can pivot if one source hits a policy wall.
- Software partners with a track record of AI-based optimisation and merchant exposure.
3. Use AI and analytics to “buy back” higher capex
If domestic systems are 5–15% more expensive at first, treat that as a design problem:
- Model scenarios where advanced dispatch and predictive maintenance offset the capex delta.
- Invest in data infrastructure from day one: telemetry, historian databases, and API access.
- Build internal or partner expertise for continuous performance tuning instead of “set and forget.”
Projects that treat software as a core asset, not an after-market add-on, will simply outperform.
The Bigger Picture: Green Technology, Industrial Policy and the Next Grid
Here’s the thing about US battery manufacturing: it’s not just an industrial story, it’s a climate story.
- More domestic and allied supply makes it politically and economically safer to push higher renewable penetration.
- Smarter, AI-driven storage makes those renewables more valuable and reliable.
- Shorter, cleaner supply chains reduce upstream emissions and ESG risk.
As more US plants flip to LFP and purpose-built ESS lines, it becomes far more realistic to talk about:
- Data centre growth that doesn’t automatically mean more gas peakers.
- Coal retirements backed by firmed renewables and storage, not new fossil capacity.
- Local jobs in manufacturing, engineering and software that sit right inside the green technology ecosystem.
If you’re planning projects, building software, or allocating capital, the next few years are when positions get set. Chinese supply isn’t disappearing overnight, but its economics are being structurally pushed to the margins for US projects that want full tax benefits.
The smart move now is to treat US and allied battery manufacturing as the default, then use AI, software, and strong partnerships to make that default not just compliant, but highly profitable.
The grid is getting cleaner either way. The question is whether your organisation is positioned to benefit from the new rules – or stuck trying to make yesterday’s supply chain work in tomorrow’s policy environment.