What’s Next for Advanced Energy Manufacturing in the United States?

The One Big Beautiful Bill brings new challenges and opportunities for American manufacturers of batteries and advanced energy components.

In July 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. While the megabill resolves some tax uncertainty, it also raises new questions for industries looking to build in the United States. Here, we break down the key OBBBA provisions that impact the advanced energy manufacturing sector and highlight challenges and opportunities ahead.

US manufacturing investment in advanced energy technologies boomed – then faltered

From 2022–2024, companies invested more than $115 billion to manufacture electric vehicle, battery, solar, and wind components in the United States. This investment in advanced energy supply chains — spurred by new manufacturing tax credits and largely concentrated in rural communities and red states — has added billions to US GDP and could sustain hundreds of thousands of American jobs. It also bolsters US economic security by reducing reliance on Chinese-dominated supply chains and improves US competitiveness in a fast-growing global market.

Policymakers on both sides of the aisle express support for these goals. But in recent months, the advanced energy manufacturing sector has faced major headwinds due in part to remarkable uncertainty and volatility in US tax and trade policy. Domestic manufacturing investment across the entire development pipeline — from planned pilot facilities to already-operational gigafactories — is at risk.

In the first half of 2025, the value of cancelled manufacturing investments exceeded the value of new manufacturing investments announcements in advanced energy technologies (Exhibit 1). With the passage of OBBBA, the path is clearer.

Exhibit 1.

OBBBA brings new opportunities and challenges for manufacturers  

OBBBA includes several provisions that benefit manufacturers across sectors. For example, manufacturers with tax liability can now immediately deduct the entire cost of plant, equipment, and research investments in the year they are made, instead of spreading deductions over the asset’s useful life. Providing tax relief and reducing the cost of capital, what’s known as “full expensing” can encourage manufacturing investment.

But for advanced energy manufacturing specifically, OBBBA’s impacts are mixed. The act largely preserves the advanced manufacturing production credit (45X) that supported recent investment in energy supply chains, and it boosts the advanced manufacturing investment credit (48D) for semiconductors and solar wafers. However, new supply chain restrictions, cuts to key financing programs, and a reduced demand outlook in certain sectors — due to early termination of some clean energy tax credits — pose new challenges. We cover the positive (green), mixed (yellow), and negative (red) OBBBA impacts to advanced-energy technology manufacturers in the table below (Exhibit 2).

Exhibit 2.

How does OBBBA stack up for advanced energy manufacturers?

In weighing the changes above, a few key questions emerge: What does the post-OBBBA demand outlook mean for manufacturing investment? Can manufacturers swiftly shift their supply chains from China? How beneficial is full expensing? The answers will vary by sector, with the greatest potential opportunities in grid equipment, geothermal, nuclear, and midstream and upstream battery and solar component manufacturing. Headwinds are possible for wind components, EV assembly, and downstream battery and solar manufacturing.

• • Recalibrating domestic demand: With the tech-neutral tax credits (45Y/48E) phasing out early for solar and wind, projected US 2025-2035 capacity additions for those generation sources are now meaningfully lower — with estimates ranging from 200 to more than 500 GW below pre-OBBBA levels (a 25 percent to more than 60 percent reduction) per BloombergNEF, Rhodium Group, and Princeton’s ZERO Lab. Early termination of 30D will also likely slow US EV adoption, with projections for 27 million to 41 million fewer light-duty EVs on the road by 2035 (a 20 percent to 34 percent reduction), per Rhodium.US manufacturers will have to carefully evaluate this new demand reality. Existing manufacturers across solar, wind, battery, and EV supply chains may need to run at lower capacity, pursue export opportunities, or pivot to adjacent end markets, such as from EV batteries to battery storage. Cancellations of announced projects may continue. Exhibits 3 and 4 compare pre- and post-OBBBA projected demand for battery and solar to operational and announced manufacturing capacity by component, highlighting overcapacity risk in some areas and supply chain gaps in others.

 

Exhibit 3.

Exhibit 4.

Meanwhile, deployment projections for geothermal, nuclear, and hydropower are relatively unchanged post-OBBBA, given the longer runway for tax credit eligibility, per estimates from BloombergNEF, Princeton, and Rhodium. And across the advanced energy supply chain, there are still areas where post-OBBBA demand exceeds current domestic manufacturing capacity, such as in grid equipment, upstream solar, and the battery storage supply chain. New domestic manufacturing investment should prioritize components with high supply chain concentration or risk of shortage — and focus on commercializing next-generation energy technologies. For example, Wood Mackenzie estimates that power transformers are currently in a supply deficit of 30 percent in the United States, and imports account for about 80 percent of current US power transformer supply.

• Shifting supply chains: OBBBA’s new foreign entity of concern (FEOC) restrictions require manufacturers to limit their reliance on Chinese supply chains and companies to remain 45X-eligible. Securing non-FEOC component supply will be a priority for US manufacturers, because losing this vital credit could mean that some existing and announced manufacturing projects no longer pencil out. While guidance is forthcoming, some manufacturers have already penned supply chain agreements, such as T1 Energy’s Texas-manufactured solar cells that will use Corning’s Michigan-produced solar wafers. But it can take time — and raise costs — to shift supply chains from FEOC countries like China. While this could pose a challenge for manufacturers already dealing with inflationary pressures from tariffs, these supply chain investments are likely worthwhile given the high value of 45X. Exhibit 5 shows the subcomponents that battery manufacturers should target in their sourcing decisions to maintain 45X eligibility. Current non-FEOC cathode production capacity, concentrated in South Korea, exceeds the implied cathode demand of operational US cell factories.

Exhibit 5.

• • • • Taking advantage of full expensing: OBBBA’s full expensing policies — especially the new provision for production facilities — have the potential to reduce tax liability and increase cash flow for manufacturing projects. RMI’s analysis based on a hypothetical battery cell manufacturing plant shows that full expensing could add low single-digit percentage points to a project’s internal rate of return (IRR) but is less impactful than other subsidies like 45X, which could add more than 20 percent to the IRR. Full expensing cannot fill the gap for a project that loses 45X eligibility due to the new FEOC provisions, but it does provide a material boost to manufacturers. Even a 1 percent increase in IRR can represent a substantial increase in profit over the life of a project, especially for large, long-term investments.

    However, to take full advantage of the new full expensing provision for structures, the manufacturing facility needs to be operational within six years of OBBBA’s passage, and the manufacturer needs to have sufficient tax liability, which many manufacturers do not. As we discuss in the following section, making full expensing fully refundable would make this provision more useful to manufacturers.

  For sectors that did not previously qualify for 45X — such as grid equipment and the geothermal and nuclear supply chains — the new full expensing provisions may make domestic manufacturing investments more attractive than they were before OBBBA. Thanks to load growth, grid modernization, and a long runway for the tech-neutral tax credits, projected demand for these components exceeds current manufacturing capacity and suggests potential opportunity for additional investment.

  Battery, solar, and wind components — sectors that have qualified for 45X — may lose this highly beneficial incentive if they cannot shift their supply chains away from China. They also face a more challenging demand outlook for some components, due to the early phaseout of the EV and clean energy credits. While full expensing could add a low-single-digit boost to these projects’ IRR, that is not enough to offset other OBBBA headwinds. Still, opportunities remain for manufacturers that can secure non-FEOC subcomponent supply to maintain 45X eligibility and target markets where domestic demand is projected to exceed capacity — such as in grid-scale battery storage or upstream solar and battery components.

  What’s needed now from federal policymakers?

  While OBBBA brings tax certainty, trade volatility still hangs over the manufacturing sector. Tariffs can protect some US-manufactured goods from lower-cost imports, but they also raise the cost of inputs for domestic manufacturers — especially for advanced energy technologies that rely on global supply chains. To move forward, firms crave stable trade policy and a comprehensive manufacturing strategy to guide onshoring and friendshoring decisions and drive innovation in the technologies of the future.

  As we look ahead, there are many opportunities for federal policymakers to bolster US manufacturing, secure supply chains, and boost competitiveness by:

  • • • Prioritizing innovation through RD&D programs to incubate and commercialize the energy technologies of the future — such as next-generation battery and solar cells, nuclear microreactors, next-generation geothermal, and advanced grid equipment — where market dominance is not yet established. This strategy would include supporting targeted research, development, and demonstration programs at the Departments of Energy, Commerce, and Defense, leveraging regional tech hubs, and providing low-cost financing and strong demand signals to achieve commercial scale.
      • Securing supply chains to reduce overreliance on any foreign nation. Policymakers should protect and expand the 45X tax credit to other strategic sectors — such as grid equipment, geothermal, nuclear, and industrial heat pumps — to promote domestic manufacturing of those components and mitigate supply chain vulnerabilities. But the US cannot onshore all needed production, and policymakers should also negotiate master energy agreements with allies and re-authorize the Export-Import Bank (EXIM) and the U.S. International Development Finance Corporation (DFC) to build more resilient supply chains.
      • Improving the cost-competitiveness of US manufacturing. Policymakers can help US manufacturers be globally cost-competitive by pursuing permitting reform and regulatory modernization and bolstering the capacity of the Manufacturing USA network to drive innovation and efficiency improvements in manufacturing processes. Making the new full expensing provisions fully refundable could also help manufacturers take advantage of new depreciation benefits.
      • Ensuring access to low-cost capital for manufacturers to scale. Policymakers should ensure that the LPO’s new Energy Dominance Financing Program can provide low-cost capital to domestic manufacturing and supply chain projects to help bridge the “valley of death” and commercialize the energy technologies of the future. The Defense Production Act Title III authority, SBA reauthorization, DFC reauthorization, the Department of Defense’s Office of Strategic Capital, and the proposed US sovereign wealth fund are other possible options to provide critical scaling capital to domestic manufacturers.
      • Creating demand signals for strategic energy technologies: US policymakers can help spur the demand needed to diversify supply chains and bring early-stage technologies to market. “Demand-pull” policies include government-backed long-term contracts, the national defense stockpile, and public-private partnerships — which could target advanced energy technologies through existing DOD and DOE authorities, such as the Foundation for Energy Security and Innovation. EXIM reauthorization can also serve as a demand-pull, enabling domestic manufacturers to tap into international markets.

  A robust domestic energy manufacturing sector is clearly in our national interest — to sustain good-paying jobs, promote US innovation and competitiveness, and enhance national security. While OBBBA has several benefits for manufacturing at large, the advanced energy sector will need to be strategic about sourcing, financing, and the evolving demand outlook to protect recent investments. New manufacturing investments should focus on addressing remaining supply chain vulnerabilities and commercializing next-gen tech. With a comprehensive strategy, federal policymakers can keep up the manufacturing momentum and unlock the benefits of reindustrialization.