From policy shifts to platform innovation, the evolving energy landscape demands bold strategies to strengthen domestic supply chains and stay ahead of global disruption

The U.S. energy storage industry is at a crossroads of economic pressure, regulatory reform and rising energy demand. From tariffs and trade dynamics to the reshaping of material strategies and regulatory compliance, the trends shaping this year reflect a broader industry movement toward resilience, transparency and innovation. Here is a deeper look at what's driving momentum for the industry's supply chains in 2025:

1. Tariffs and other trade challenges accelerate the race to reshore
Tariffs dominate the supply chain conversation. Recent trade actions have increased the cost of critical, imported materials and components, including those linked to lithium battery production. These increases are not limited to direct imports − they move through domestic suppliers who rely on foreign-sourced raw materials. This is pushing manufacturers to re-evaluate procurement strategies.

China's bans and limits on exporting certain critical minerals are also causing disruption. In some cases, the nation is the sole supplier of certain materials.

The impact of these trade challenges will likely stay for years, so many companies are exploring onshoring and nearshoring options. Building a lithium cell plant, though, can often be a $300-$500 million investment, which is a significant hurdle for most companies. Large original equipment manufacturers (OEMs) and automakers circumvent the cost by partnering with large battery producers, some of which already have battery manufacturing capabilities onshore.

The cost barrier for onshoring and nearshoring remains a significant issue for the hundreds of small- or mid-sized battery providers in the U.S. To better afford domestic manufacturing investments, many companies may begin consolidating through partnerships, joint ventures, or mergers and acquisitions − a trend that stands to strengthen the entire supply chain over the long term.

The industry was already shifting from importing complete battery packs to assembling modules domestically, with ambitions to eventually localize cell manufacturing and even raw material sourcing. While this transition is both expensive and complex, the goal is to build a resilient domestic supply chain. Though this transformation will take years, many players across the energy storage industry are stepping up to lead the shift.

2. Resilience comes through diversifying the energy storage mix
Energy resilience refers to the ability to recover from and withstand power disruptions. The U.S. electrical grid faces several challenges to reliably deliver a steady source of power to homes and businesses. The integration of more renewable energy sources intensifies pressure on U.S. grid operators to modernize their aging infrastructure. Brownouts and blackouts caused by extreme weather events, like heatwaves, winter storms and floods, are also becoming more frequent and increasing pressure on the grid.

These challenges underscore the urgent need for smarter integration of energy storage systems that can help stabilize the grids, provide backup power and support renewable integration. While lithium has been a leading energy storage material for years, its heavily concentrated global supply chain with China projected to control almost 70% of total capacity by 2030, has raised concerns about strategic reliability. Tariffs are also likely to raise the price of lithium batteries significantly, and a domestic supply chain is years away from being mature.

Therefore, expect to see manufacturers diversifying their battery energy storage system (BESS) technologies this year to provide an ample supply of different, reliable energy storage solutions. Diversification is a key defense against supply shocks and trade bottlenecks. Two alternatives to lithium for BESS systems are vanadium flow batteries (VFB) and lead BESS batteries.

VFBs, ideal for long-duration essential power applications, can support the deployment of clean energy from renewable sources like solar and wind. Energy storage manufacturers are fielding inquiries from data centers about the technology. A domestic supply chain is already being built to provide a reliable supply of this technology.

Advanced lead BESS is also a key technology, especially when domestically sourced materials are a priority. This technology is designed to safeguard against power outages when conventional sources fail. It can also function as a critical grid support tool, providing rapid response capabilities to mitigate fluctuations, stabilize voltage and enhance overall grid resilience. Lead BESS already has a well-established domestic supply chain and a complete circular economy, making it a sustainable and reliable energy storage option.

By diversifying battery chemistry supply this year, manufacturers can help ensure the grid can withstand whatever comes next.

3. Future-proofing around new rules
We expect regulatory pressure to evolve in 2025. Governments are introducing policies to increase transparency, sustainability and security across many supply chains, including energy storage sourcing. Manufacturers must prepare for a future where traceability is not optional, but foundational to market access and success.

In the U.S., new Foreign Entity of Concern (FEOC) restrictions are now in place for manufacturers that supply the Department of Defense. Additionally, the clean energy tax credits available to domestic manufacturers in the recent passing of the One Big Beautiful Bill Act include FEOC provisions. To qualify for the tax credits, companies must ensure full supply chain transparency and provide detailed documentation of their ownership structure to comply with the new FEOC requirements.

Beginning in 2027, the European Union (EU) will require a Digital Battery Passport for electronic vehicles (EVs), along with industrial and light mobility batteries under Regulation (EU) 2023/1542. This regulation mandates a digital record, which will be accessible through a mechanism like a QR code, that documents a battery's origin, composition, performance and recycling history throughout its lifecycle. Although U.S.-based companies are not directly subject to EU law, those serving European customers will be expected to comply, putting pressure on global manufacturers to adopt new tracking capabilities.

Additionally, the Critical Mineral Transparency and Reporting in Advanced Clean Energy (TRACE) Act, known to many as H.R. 8187, is a proposed U.S. bill that aims to increase accountability in the sourcing and use of critical minerals. If enacted, the legislation would require digital tracking identifiers for battery components and minerals throughout their lifecycle. This move signals a shift toward deep supply chain traceability as a baseline for market participation.

These regulatory developments will require major investments in data infrastructure, supply chain visibility and internal coordination. Energy storage manufacturers should continue to closely watch as the EU and the U.S. work to clearly define the rules for each regulation.

Simultaneously, it's important to remember that global and U.S. regulators are targeting per- and polyfluoroalkyl substances (PFAS), also known as "forever chemicals," because of their environmental persistence and health risks. PFAS, which are in everyday household products like carpets, cosmetics, pesticides and paint, have also been widely used in battery manufacturing and electronic components for their thermal stability and chemical resistance.

Regulatory restrictions are expanding, and as PFAS phase-outs progress, product design and material sourcing will need to evolve.

While the challenge is tough, it also unlocks opportunity. Companies that proactively phase out PFAS and innovate with safer alternatives will lead the pack. Compliance will become a differentiator.

A defining year for energy storage supply chains
For energy storage stakeholders, 2025 is not business as usual. It's a pivotal moment. This year's trends signal deep structural changes to how energy storage systems are sourced, built and sustained. To lead through this transition, companies should focus on three strategic moves:

• Embrace domestic sourcing. Structure supply chains under the assumption that domestic manufacturing will be the new norm.
• Invest in chemistry diversity. Integrate alternative storage technologies to ensure energy resilience and mitigate material dependencies, performance risk and pressure on the grid.
• Prioritize compliance and traceability. Equip operations to meet emerging regulations and turn transparency into a market advantage.

In today's unpredictable environment, those who adapt fastest will lead the way. These companies will shape the future of the energy storage industry.