USA – CALIFORNIA Trends and Developments Contributed by: Nora Sheriff and Samir Hafez, Buchalter
These developments have dramatically increased the cost of building new generation and stor- age assets, even as the tariffs themselves have yet to take effect. Media outlets are reporting that a significant number of project deferrals are already under way across the solar and energy storage sectors, particularly for merchant devel- opers who lack long-term offtake agreements. Tech news outlet Utility Dive reported in late April that clean energy manufacturers cancelled, closed or downsized nearly USD8 billion in pro- jects in the first quarter of 2025, citing the sec- ond Trump administration’s roll-back of federal support as the primary cause. According to Utility Dive, the cancellations spanned 16 projects in sectors such as wind, solar and electric vehicle manufacturing, includ- ing the cancellation of Arizona-based lithium battery maker Kore Power’s planned USD1.2 billion factory, and Freyr Battery’s cancellation of its USD2.6 billion Georgia battery factory. The outlet reported these cancellations as “another sign of companies’ hesitation to push ahead with clean energy projects in the era of the Trump administration”. California developers, in particular, are facing difficult choices. The state’s reliance on utility- scale solar-plus-storage to meet its Senate Bill 100 (de Leon, 2018) goals means that these cost increases are reverberating across procurement processes. Several California load-serving enti- ties have delayed Request for Proposal (RFP) timelines, citing uncertainty around module pric- ing and equipment delivery. For projects that have offtake agreements in place, many are now being renegotiated or delayed to avoid passing steep cost increases on to customers. Developers with flexible time-
lines are opting to push construction to 2026 or later, hoping the trade landscape stabilises. Energy Storage Roadblocks Yet To Be Overcome The US energy storage industry is quickly becoming a case study in how trade shocks rip- ple through infrastructure development. Battery energy storage systems, which are essential to grid flexibility and peak load management, are heavily dependent on foreign components and materials. A report from Bloomberg indicates that the cost of a four-hour lithium-ion battery storage system in the US has risen above 2023 levels, despite prior expectations of cost declines. Experts cited by Bloomberg say merchant developers with tight development timelines and no offtake contracts to renegotiate will have their project economics “completely submerged”, poten- tially freezing activity in a cohort that accounts for up to 30% of the US stationary storage mar- ket. Deregulated markets such as the Electric Reliability Council of Texas (ERCOT) are see- ing a slower pace in favour of a wait-and-see approach, with counterparties unwilling to lock in contracts under volatile conditions. The 2022 Inflation Reduction Act introduced a suite of tax incentives aimed at accelerating clean energy manufacturing in the United States, most notably by way of Section 45X, a manufac- turing production tax credit designed to bolster domestic supply chains. Under Section 45X, producers of eligible components such as solar cells, wind turbine parts and battery modules receive per-unit tax credits to offset production costs. For energy storage specifically, the credit applies to battery cells, modules, electrodes and certain critical minerals, with the aim of reducing US dependence on foreign suppliers.
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