Battery energy storage systems (“BESS”) are an emerging factor in utility portfolios throughout the United States and worldwide to help mitigate supply demand and capacity, enhance grid stability, and provide for energy management (i.e., peak demand and pricing). BESS projects added 10.4 gigawatts ("GW") of new battery storage capacity to the nation’s power grid during 2024, exceeding 26 GWs of cumulative utility-scale capacity and a 66 percent increase in total battery storage capacity in the year alone. Forecasts for 2025 projected a similar trend, with current and planned BESS development on track to reach new heights with approximately 19.6 GWs of capacity by the end of the year. Despite comprising about only 2% of the total utility-scale electricity generation throughout the country, the growing prevalence of renewable generation along with consistent technological advances highlights the potential for strong interest in future BESS projects.
Several factors have contributed to the bullish outlook on the future of BESS. One such element is the close integration between BESS and renewable generation, such as wind and solar, as battery storage can help provide generation during parts of the day when the renewables experience a lull in capacity. This mutualistic relationship has been crucial for meeting consistently rising load demand across the country. For example, the California Independent System Operator (“CAISO”) is increasingly relying upon BESS to maintain grid capacity, comprising roughly 9 percent of the energy used during peak demand while allowing for dispatchable short-term flexibility. This growing reliance on battery storage is a trend that is likely to continue as more renewable energy projects interconnect to the system.
Furthermore, BESS projects can charge during times of the day with low demand while dispatching energy during high peak hours, resulting in lower wholesale energy prices by reducing the need for higher-cost reserve generation. This more efficient dispatching schedule will improve grid resiliency and address short-term resource adequacy challenges by ensuring customers have access to energy, even during exceptionally high load periods.
Navigating the Battery Storage Regulatory Landscape Following New Reconciliation Bill
Notwithstanding this historic growth, new federal policy changes could impede this burgeoning BESS development. On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (“OBBBA”) into law, causing major waves across the energy sector and impacting how utilities compose their portfolios. These changes include several provisions that could potentially subside the forecasted boom of BESS projects both in the short-term and moving forward, although the impact this legislation will have on the future of battery storage is not immediately evident.
One such provision involves the sunsetting of tax credits for new BESS construction extending through the end of 2036, albeit on a less accelerated timeline than for tax credits for solar and wind projects. While sparing standalone storage from vanishing Investment Tax Credits (“ITCs”) and Production Tax Credits (“PTCs”) for solar and wind—which will begin phasing out at the end of 2025—could positively impact developers in their financing of BESS projects for the foreseeable future, battery storage projects are commonly paired with other renewable energy projects given the inherently low capacity factors of these projects. With solar and wind generation ITCs and PTCs slated to sunset on an accelerated schedule and developers receiving less financial incentive to begin new renewable projects, the secondary impact on BESS development could be significant.
Another crucial consideration for BESS development is the new Foreign Entity of Concern (“FEOC”) rules—limitations on foreign investment and ownership originating from certain countries, with China as the most consequential for battery production. The OBBBA updated and greatly expanded the definition of FEOC to, in part, prevent BESS projects from receiving tax credits if said project either: (1) receives “material assistance” from a Prohibited Foreign Entity (“PFE”), or (2) has an ownership structure whereby a PFE maintains “effective control” over the BESS facility. These restrictions, along with similar FEOC restrictions applying to renewable generation projects, serve nce these new rules go into effect after the end of the 2025 calendar year (except for the Section 45X tax credits for “eligible components,” as those FEOC restrictions went into effect on July 4, 2025). Consequently, the long-term impact of these rule changes on BESS remains to be seen, as the Department of the Treasury is expected to release new guidance on FEOC and other OBBBA rules on August 18, 2025, pursuant to President Trump’s executive order from July 7.
For further information or to discuss how DWGP may be of assistance with regards to approaching BESS projects or navigating new OBBBA regulations impacting your project, please reach out to Jeff Genzer, Keith Gordon, or Gelane Diamond.
Article By DWGP Summer Associate Griffin Krawitz – William & Mary School of Law, May 2026
