Federal safe harbor tables already assign 52% of a grid-scale battery system’s total direct cost to the cells alone, meaning a project sourcing cells from a Chinese manufacturer fails the 55% non-Chinese content threshold required for 2026 tax credit eligibility before a single other component is even counted. Until August 26, a developer could still forgo the credit and install that equipment anyway. President Trump’s bulk power system executive order removes that option entirely.
The Treasury Department’s February 12 guidance on Foreign Entity of Concern rules, Notice 2026-15, gave battery storage developers a specific and narrow test. Projects beginning construction in 2026 must show that non-Chinese-linked equipment accounts for at least 55% of total project cost, rising to 75% for projects starting construction in 2030 or later, calculated through a material assistance cost ratio that divides the cost of non-prohibited equipment by total equipment cost. Because the guidance’s own safe harbor tables assign roughly 52% of a grid-scale system’s direct cost to the battery cells specifically, a project using cells from a prohibited foreign entity, in practice nearly all Chinese cell manufacturers, is left with at most 48% of its cost in non-Chinese content even if every other component, the inverter, battery management system, thermal management and enclosures, is sourced elsewhere. That fails the 55% threshold outright. In plain terms, FEOC compliance for a 2026 storage project already required non-Chinese cells specifically, not just a generally diversified supply chain, before the new executive order existed.
What FEOC did not do, until now, was stop a developer from using Chinese cells anyway and simply forfeiting the tax credit. That workaround, expensive but available, is the specific gap BloombergNEF trade and supply chains analyst Zoe Zakrzewska says the August 26 order closes. “Battery energy storage systems and inverters are the two technologies that are clearly subject to both of these sets of rules… [but] the new EO has the potential to be far more punishing,” she told Utility Dive, adding that it “could likely be the nail in the coffin for Chinese battery and inverter manufacturers selling in the US market: while the FEOC rules allowed some room for Chinese firms to adapt, the [bulk power system] EO can easily shut out these firms for good.” The distinction is mechanical rather than rhetorical. FEOC is a tax credit eligibility test administered by Treasury and the IRS, a project that fails it still gets built, it simply costs more without the credit. The executive order, by contrast, gives Energy Secretary Chris Wright authority to bar covered equipment from connecting to the bulk power system at all, a prohibition that applies whether or not the developer ever intended to claim a federal tax credit in the first place.
Inverters present a more specific version of the same problem, because a meaningful share of the US market has already routed around country-of-origin scrutiny once. Chinese companies supplied about 40% of US inverter volumes in 2025 through production hubs in India and Southeast Asia rather than direct Chinese manufacturing, according to the BNEF note, a pattern consistent with how solar equipment supply chains have adapted to years of country-specific antidumping and countervailing duty actions by shifting final assembly to third countries. Whether that structure still works under the new order depends entirely on how Wright’s department defines the ownership and control links that trigger a restriction, a determination the order leaves to forthcoming Energy Department rules due within 120 days of the signing date. If the implementing rules focus on manufacturing location, as country-specific tariffs generally have, Chinese-owned inverter production based in India or Vietnam could continue supplying the US market much as it does today. If the rules instead reach entity ownership regardless of where assembly occurs, the same production hubs that have insulated roughly 40% of US inverter supply from prior trade measures would no longer offer protection, a substantially larger disruption than the battery cell question alone.
The order’s treatment of equipment that is already installed or under construction adds a second layer of exposure FEOC’s own timeline was designed to avoid. Treasury’s February guidance exempted projects that had already started construction by the end of 2025 from the material assistance calculation entirely, a clean prospective cutoff that gave developers a firm date to plan around. The executive order does not offer the same clarity. It authorizes the Energy Secretary to impose conditions on “the continued use, operation, maintenance, servicing, or updating” of equipment procured or installed before August 26, language that reaches backward toward projects Treasury’s rules had already treated as settled. Zakrzewska specifically flagged the resulting gap: projects that began construction before the January 1, 2026 deadline to avoid FEOC compliance, but that have not yet begun commercial operations, sit in a position where they cleared one federal test only to face a second, less defined one under the new order. How large that exposed category is depends on how many storage and inverter-dependent projects are currently mid-construction, a population the order’s own text does not enumerate and that Wright’s department has not yet been required to disclose.
Industry’s public response so far reflects that uncertainty more than resistance to the order’s underlying goal. Bridget Bartol, head of industry and regulatory affairs at the National Electrical Manufacturers Association, told Utility Dive there is “a need for a lot more clarity,” pointing specifically to the order’s treatment of software products, a category the order’s covered equipment list includes without defining precisely what counts as covered digital functionality within a transformer, inverter or battery management system. BNEF’s own read of the near-term market response is that developers holding battery equipment they have already procured but not yet installed are likely to pause rather than proceed until the Energy Department clarifies scope, and that some projects already rendered marginal by losing access to lower-cost Chinese imports will be cancelled outright rather than rebuilt around costlier alternatives. The administration’s preferred long-term offset, new domestic manufacturing capacity, is real but still early. Four battery plants have come online in the United States so far this year, with a few more expected by year end, according to BNEF, a pace of capacity addition that may eventually narrow the gap the order creates but that cannot plausibly absorb the immediate procurement pause and project cancellations BNEF expects while Wright’s department spends the coming months defining exactly which equipment, and which already-built projects, the order actually covers.
