“One Big Beautiful Bill” – What Could the New Law Mean for the U.S. Energy Storage Market?

Last week, the House of Representatives passed the “One Big Beautiful Bill Act” – a fundamental legislative proposal from the Republican Party aimed at strengthening the U.S. economy through permanent tax reliefs, infrastructure modernization, support for the agricultural sector, and promotion of energy independence. Although the bill still needs to pass the Senate, which is likely to introduce numerous amendments, it’s already worth examining how the proposed changes could impact the energy storage sector.

Changes to Technology-Neutral Tax Credits – A Blow to New Storage Projects?
In the new version of the bill, at the request of the ultraconservative House Freedom Caucus, the eligibility period for so-called technology-neutral tax credits (§45Y and §48E) has been drastically shortened. These credits were initially expected to remain in a variable form through 2031. Under the new terms:

Projects must begin construction within 60 days of the bill’s enactment.

Projects must be placed in service by the end of 2028.

This dramatically shortens the development and realization window for new investments, including energy storage systems, which often require long planning and financing timelines.

The only exception applies to nuclear projects, which are exempt from the 60-day requirement.

As a reminder, §45Y is a technology-neutral tax credit for energy production introduced by the Inflation Reduction Act. It offers support to any project that:

Generates electricity,

Has zero or negative greenhouse gas emissions,

Meets other environmental criteria.

Meanwhile, §48E is the sister credit to §45Y but is based on capital investment rather than energy production.

Transferability of Credits – Good News for Energy Storage Investors
Despite the timing limitations, a key change positively received by the private sector is the restoration of full transferability of tax credits for projects eligible under §45Y and §48E, provided they fall within the new timeline.

For companies building energy storage systems—often characterized by unstable cash flows—the ability to sell tax credits on the secondary market is a crucial financing tool. Thanks to this mechanism, investments that move quickly can still count on strong capital support from the financial market.

No Changes to §48C – Credit for Advanced Manufacturing and Energy Infrastructure
A key update for the sector is that §48C remains unchanged. This is a special tax credit for energy-related manufacturing projects, such as battery factories, PV panels, or components for nuclear power plants. Key features include:

Supports expansion or modernization of clean energy-related manufacturing facilities.

Covers up to 30% of investment costs.

Has a competitive allocation – companies must apply to the IRS and DOE.

Remains transferable, which favors industrial investments like battery, inverter, or energy flow management equipment production.

Restrictions on Foreign Entities – Deadline Moved Forward
According to the bill, restrictions on the participation of so-called Foreign Entities of Concern (e.g., entities from countries such as China) will take effect in 2026 – one year earlier than previously planned. This means that energy storage manufacturers using Chinese components (like lithium-ion batteries or cells) will have to accelerate diversification of their supply chains to remain eligible for tax credits.

This poses a challenge for firms reliant on Chinese technology, but also presents an opportunity for local manufacturers and U.S. allies – such as Canada, South Korea, or EU countries.

Senate Outlook – A More Moderate Approach
The Senate, returning from recess after June 2, has a historical tendency to moderate radical provisions from House-passed bills. This was the case during the passage of the Inflation Reduction Act in 2022. Many Republican senators, even from the conservative wing, are already signaling the need to maintain stable, long-term incentives for investment in energy and industry.

It is expected that longer expiration periods for tax credits will be one of the first issues to be renegotiated.

Source: www.reuters.com