Recent tariff policies in the U.S.  are poised to significantly raise the cost of power generation technologies, with utility-scale energy storage facing the steepest increases due to its heavy reliance on Chinese imports, according to a recent report by consultancy Wood Mackenzie. o2b5t

The report, titled “All aboard the tariff coaster: implications for the US power industry,” warns that tariff-related uncertainty could severely hinder development activity in the U.S. power market.

“In a business with 5-to-10-year planning cycles, not knowing what a project will cost next year or the year after is disruptive,” said Chris Seiple, Vice Chairman, Power and Renewables at Wood Mackenzie. “As a result, we could see potential delays in project development and rising power purchase agreement (PPA) prices.”

Energy storage: The hardest hit 2x3in

The analysis highlights that virtually all battery cells used in U.S. utility-scale storage projects in 2024 came from China. Depending on the tariff scenario, project costs could rise by anywhere from 12% to over 50%.

“While U.S. battery cell manufacturing capacity is growing, it's not expanding nearly fast enough to meet even a small portion of domestic demand,” said Seiple. “In 2025, U.S. capacity may only meet about 6% of demand, potentially growing to 40% by 2030.”

U.S. becomes the most expensive solar market globally 402a3o

Beyond energy storage, the U.S. solar sector will also be significantly affected. The report notes that existing tariffs on solar modules, coupled with inefficient transmission policies, have already pushed construction costs in the U.S. above those in most global markets.

“In the trade tensions scenario, a U.S. utility-scale solar facility would be 54% more expensive than in Europe, and 85% more expensive than one in China,” Seiple stated.

Overall impact: 6% to 11% cost hikes for most technologies 282a1n

Wood Mackenzie’s analysis is based on two tariff scenarios:

• Trade tensions: U.S. effective tariff rate of 10% by end of 2026, with 34% tariffs on Chinese imports.

• Trade war: Aggressive U.S. tariff stance leads to an overall 30% effective rate through 2030.

Most power generation technologies would see capital project costs rise between 6% and 11% under these scenarios, the report estimates. 

Source: Wood Mackenzie

“Our analysis shows that current trade policies are creating significant challenges for the U.S. power industry,” said Seiple. “While the full impact remains uncertain, it's clear that industry participants need to prepare for increased costs and potential supply chain disruptions.”