May 27, 2025 How U.S. Battery Manufacturers Can Win the Trade War

American battery manufacturers can win in uncertain times by promoting security and reliability.

By Andy Roehr and Rob Bellile of Baker Tilly

When a widespread power outage struck Spain and Portugal in April 2025, it disrupted daily life for residents and raised concerns about the reliability of the electrical grid. 

Having secure and reliable energy storage is becoming increasingly important across the globe, especially at the utility and commercial scale. Here in the U.S., electrical grid sections are starting to incorporate a third to one-half renewable energy generation. In some places, that number can reach 100% at points during the day.

But as cost pressures rise amid the ongoing trade war, U.S. chemical battery manufacturers are left wondering whether the industry will be willing to pay for more secure and reliable products. In fact, this period of uncertainty represents a prime opportunity for manufacturers to differentiate themselves from Chinese manufacturers and other manufacturers abroad by promoting security and reliability. This opportunity has been reinforced by reports of “hidden” radios in Chinese manufactured inverters.

Security and reliability at the grid level comes in several forms.

Supply chain security. The ability for the U.S. to source, manufacture and deploy American products into the energy infrastructure can help ensure supply chain security. Domestic manufacturing eliminates dependence on foreign sources and allows the industry to respond quickly to any changes that happen within international supply chains amid global uncertainty.

Security against cyber threats. Operational infrastructure security and reliability can be achieved by using American-made battery platforms, including control software. With security incidents occurring on a consistent basis, this minimizes exposure to cyber threats from state and non-state actors via hacks and backdoors. U.S. manufacturers that write, control, source and audit platforms domestically can offer increased protection against cyber threats.

Energy security.  By embracing long duration (defined as 10+ hours by the Department of Energy) energy storage including chemical, heat and other technologies as an alternative to shorter duration solutions (e.g. lithium-ion) the industry can reduce the impact of extended service interruptions and support critical circuits and infrastructure. Outside of crisis situations, the grid may be able to rely on battery storage to avoid blackouts due to generation or a need for frequency response and similar ancillary services.

For American battery manufacturers who meet the domestic production criteria and take advantage of the opportunity to compete on security and reliability while they scale to affordability, there are two manufacturing tax programs available from the U.S. government that can help; the 45X tax credit, a production tax credit which provides domestic manufacturers with a subsidy/kwh produced, and the 45Y/48E domestic content bonus, an investment tax credit available to project owners on project completion. Working together these programs are designed to support the supply of and stimulate demand for affordable reliable, secured domestic production.

The 45X production tax credit is a rebate that is paid to battery manufacturers to support manufacturing of these products in the U.S. Rather than selling product at cost or at a loss to compete on price, manufacturers can claim this production tax credit to provide a sustainable margin and expand operations. For battery manufacturers that demonstrate they are manufacturing products in the U.S., the tax credit can help achieve price parity with a competing, foreign product.

For project owners, the domestic content bonus allows a project owner to earn a bonus tax credit if they use an American-manufactured battery. A project that buys buy a domestic-made American battery may receive 10% of their project spend paid for via the tax credit, helping to make the American-made product price competitive with a foreign-made one. If tariffs remain high or continue to go up, it can substantially shift the economic equation and influence an owner’s purchase decision.

The benefits can quickly add up because the credits are stackable, meaning both the manufacturer and the project owner can claim their respective credits.   

Whether it’s trade turmoil or energy security threats, U.S. battery manufacturers can stay a step ahead of the competition by offering project owners increased security and reliability while investing in advanced manufacturing and new chemistries that create a sustainable domestic battery industry.  By understanding the possible benefits of these tax incentives including their ability to transform capital investment programs, manufacturers and project owners can provide a secure domestic energy infrastructure.

About the Authors:
Andy Roehr is managing director with Baker Tilly’s energy and energy transition practice. Rob Bellile is a senior manager with Baker Tilly’s manufacturing advisory practice.

Read more from the authors:

The section 45X tax credit | Baker Tilly, February 27, 2024

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