Storage Developers Weigh ITC Value
Energy storage developers are calculating whether the 30% investment tax credit is worth pursuing, as cheaper Chinese battery units challenge the economics
Energy storage developers are running the numbers on the federal investment tax credit. For some, the 30% credit may no longer justify the higher cost and complexity of using compliant equipment over cheaper Chinese alternatives.
Tony Song, SVP of engineering, procurement, and construction at developer GridStor, monitors battery prices closely. He said buying pricier domestic units to claim the ITC remains GridStor's best option for now. "But if the DC blocks start to drop down to the 60s or high-50s as they continue to innovate, even with tariffs, you’re looking at sub-$100 for a DC block delivered into the U.S [from China]," Song told Latitude Media. In that scenario, qualifying for the full credit might not be worth the effort.
The Battery Cost Equation
Developers face a three-tiered choice for DC battery units. The math behind the ITC decision starts with these prices.
| Battery Source | Approximate Cost per kWh | Notes |
|---|---|---|
| China | $70-$80 starting cost; ~$120 with tariffs, shipping, service | |
| Other Countries (non-U.S.) | $130-$140 | Typically not fully FEOC-compliant due to supply chain ties to China |
| United States | $160-$180 | Higher cost potentially offset by qualifying for the ITC |
The ITC, extended to storage by the 2022 Inflation Reduction Act, grants up to a 30% tax credit. Projects must meet requirements like paying prevailing wages. The 2025 One Big Beautiful Bill added FEOC (foreign entity of concern) restrictions, making projects ineligible if too much equipment is tied to China.
A Shifting Developer Strategy
Due to these rules, some companies are re-evaluating. GridStor is among those now actively weighing whether pursuing the ITC makes economic sense for every project.
Ravi Manghani of procurement platform Anza Renewables sees this shift. He estimates roughly two out of ten projects are seriously considering a baseline strategy that forgoes the ITC. "Every developer in an ideal world would want to get those 30% credits on the project investment, but the reality does look a bit different," Manghani said. "It’s a math problem."
The calculation extends beyond simple battery pricing. Song noted that U.S. manufacturing is still in an early stage. "If you try to go source some of that supply, you might run into constraints," he said. Major manufacturers like Samsung SDI and LG Energy won't have new U.S. capacity online before late 2026 or early 2027. Developers needing faster deployment may turn to China's mature, abundant supply.
Quality and risk are further factors. "Generally the rule of thumb with a new factory is that it usually takes a year or two to ramp up and work out some quality issues," Song added. Early production batches from a new U.S. factory might carry more risk.
The Complicated Cost Premium
Other expenses complicate the ITC math. To qualify, projects must meet prevailing wage rules. In states like California, this means union labor at a higher cost, according to Manghani. Legal costs for proving compliance, especially if selling the credit, also add up.
"All these cost premiums add up, and the math is not simple; it’s not that you just subtract 30% from your overall project cost," Manghani explained.
Uncertainty remains a final variable. FEOC guidelines from the IRS are still vague, a year after the OBBB's passage. The market awaits clarity on what constitutes Chinese control and how much foreign-held debt is disqualifying. "We don’t have all the information we need to make some of these calls," Manghani said.
