‘Beyond a Lithium-Only Future’: How US Trade Rules Could Accelerate BESS Diversification

Why It Matters

The policy shift reshapes supply‑chain economics, driving U.S. manufacturers and non‑lithium chemistries into the mainstream and reducing geopolitical exposure for large‑scale energy projects.

Key Takeaways

• 25% tariff raises Chinese BESS project costs.
• FEOC rules push developers toward domestic, non‑lithium storage.
• CMBlu’s flow‑battery rivals lithium‑ion beyond four‑hour duration.
• US tax credits offset up to 40% system cost.
• Long‑duration storage demand drives diversification beyond lithium.

Pulse Analysis

The Inflation Reduction Act’s foreign‑entity‑of‑concern (FEOC) provisions and the newly announced Section 301 tariff have created a regulatory inflection point for the U.S. battery energy storage market. By targeting Chinese‑origin BESS with a 25% duty, policymakers aim to protect domestic supply chains and align projects with emerging tax incentives. This move has already nudged developers to reassess total‑cost‑of‑ownership models, factoring in tariff exposure, eligibility for the Section 45X advanced‑manufacturing credit, and the domestic‑content ITC adders that can collectively shave up to 40% off project economics.

Concurrently, technology diversification is gaining momentum. Non‑lithium chemistries—particularly organic flow‑battery platforms like CMBlu’s SolidFlow—are closing the cost gap for applications exceeding four‑hour duration, where lithium‑ion’s price advantage erodes. These systems offer inherent safety benefits, lower thermal‑runaway risk, and a supply chain free from FEOC constraints. As utilities, hyperscalers, and commercial customers prioritize longer‑duration storage to balance renewable intermittency, the economic case for flow‑type batteries strengthens, especially when combined with U.S. manufacturing incentives.

Looking ahead, the convergence of policy, financing, and technology is set to reshape the BESS landscape. Domestic production capacity is expanding rapidly, driven by investor confidence and the need for resilient, traceable supply chains. The growing demand for long‑duration, FEOC‑safe storage will likely spur further R&D investment and accelerate the commercialization of alternative chemistries. Stakeholders that align early with these trends—by securing local supply, leveraging tax credits, and adopting diversified battery technologies—stand to capture a competitive advantage in a market poised for substantial growth.

‘Beyond a lithium-only future’: How US trade rules could accelerate BESS diversification

By April Bonner · February 13, 2026 · US restrictions on foreign entities of concern (FEOC) and the planned Section 301 tariff hike to 25 % on Chinese‑origin battery energy storage systems (BESS) took effect on 1 January.

[Justin Johnson, COO of renewable‑energy developer‑operator Arevon Energy] and [Tom Cornell, CEO and President of Prevalon Energy] previously spoke with ESN Premium on this topic, both giving unique, though similar, insights on the price of Chinese‑manufactured BESS, especially those using lithium‑ion (Li‑ion) cells.

Johnson observed that Chinese‑manufactured BESS remains the most affordable choice in the industry, although only slightly. He also noted that customers are prepared to pay a premium to avoid the risk of tariff fluctuations.

Cornell said, “On a narrow, equipment‑only basis, Chinese‑manufactured systems can still appear cheaper. However, that gap has narrowed significantly.”

He continued, “When tariffs, FEOC restrictions, potential loss of tax credits, financing impacts, and long‑term service considerations are included, the economics are far closer than they were even a year ago. For many projects, compliant systems with clearer regulatory standing now pencil similarly—or better—on a total cost and risk‑adjusted basis.”

Giovanni Damato, President of organic flow‑battery company CMBlu Energy, Inc., provides insights into how CMBlu and other companies using non‑lithium electrochemical battery technologies view the situation. CMBlu’s approach to flow batteries differs from traditional flow‑battery designs with its ‘Organic SolidFlow’ technology.

“At its core, the architecture is like a flow battery with two major twists that we think give us a strong competitive advantage.” – Giovanni Damato

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How has BESS procurement changed since 1 January, with active FEOC restrictions in place?

“I wouldn’t characterise 1 January as a sharp inflexion point. This shift has been building steadily since the FEOC requirements became clear following the passage of the IRA in 2022. What has changed is the intensity of the conversation. Developers and OEMs are now far more focused on how to preserve tax‑credit eligibility while managing rising project costs tied to steel, cement, and other construction inputs.

FEOC restrictions introduced real procurement and compliance uncertainty, which initially slowed some decisions, but they’ve also accelerated demand for FEOC‑safe supply chains and domestic manufacturing. That regulatory tension has become one of the single biggest factors shaping project timing and sourcing strategy.

For CMBlu, we’re seeing growing interest precisely because our technology does not carry FEOC concerns, and because we can ramp US manufacturing quickly—from active‑material supply chains through module assembly.

At the same time, the market is clearly pushing toward non‑lithium alternatives, and that shift is reinforcing long‑term confidence in solutions like ours that align with both policy and supply‑chain resilience.” – Giovanni Damato

How has BESS procurement changed since 1 January with regard to Section 301 tariffs?

“From our perspective, the impact of Section 301 tariffs – particularly the higher tariffs on imports from countries like China – is becoming more visible in procurement decisions. In the near term, those tariffs are putting upward pressure on project costs and prompting developers with existing or near‑term projects to actively look for alternative technologies and supply chains.

That dynamic has worked in CMBlu’s favour, for many of the same reasons tied to FEOC considerations. We offer a non‑lithium solution and the ability to ramp US manufacturing across the supply chain, which materially reduces long‑term tariff exposure.

That said, in the near term, we do have some tariff exposure related to demonstration and pilot projects, as our initial pilot production facility is located in Germany, which carries its own tariff considerations. Longer term, however, the shift toward domestic manufacturing and diversified supply chains is clearly accelerating, and that aligns well with our strategy and growth trajectory.” – Giovanni Damato

Are Chinese‑manufactured BESS still the most cost‑effective option?

“Lithium‑ion – particularly from Chinese manufacturers – has effectively set the price benchmark in the battery market, especially for short‑duration applications. For use cases in the 1‑hour to 4‑hour range, lithium‑ion can still make sense, but we’re clearly seeing a shift across utilities, hyperscalers, and commercial and industrial customers toward longer‑duration needs.

That’s where non‑lithium technologies gain a meaningful advantage. For applications above four hours, CMBlu Energy’s Organic SolidFlow battery is already cost‑competitive with lithium‑ion today, and as duration extends to six, eight, or even ten hours, our technology becomes increasingly more economical, while also avoiding the supply‑chain and geopolitical risks associated with lithium‑ion.” – Giovanni Damato

What have you done prior to the active restrictions and increased tariffs to secure BESS?

“Our situation is somewhat different because, as an OEM, CMBlu Energy does not face FEOC constraints due to our localised supply chain. Anticipating tighter trade and regulatory conditions, we’ve focused on accelerating manufacturing localisation in the United States.

This allows us not only to clearly differentiate ourselves as FEOC‑safe, but also to fully leverage US policy incentives, particularly the Section 45X advanced‑manufacturing tax credit and the domestic‑content ITC adder. Together, those incentives can drive up to a 40 % ITC benefit, strengthening project economics while ensuring secure, compliant battery supply for our customers.” – Giovanni Damato

How will these changes impact the industry over the next year?

“We expect a period of real disruption across the industry as utilities manage unprecedented load growth while simultaneously transitioning their generation portfolios, retiring older coal assets and rapidly adding solar and wind. At the same time, hyperscalers are under intense pressure to site and power AI‑driven data centres as quickly as possible, and the fastest path forward is pairing renewables with energy storage and firm generation.

Over the next year, this dynamic will drive even greater focus on alternatives like long‑duration, non‑lithium storage solutions that are not constrained by FEOC rules, have reduced tariff exposure through domestic supply chains, and help mitigate geopolitical risk in an increasingly uncertain global environment.” – Giovanni Damato

How do you expect your company to be impacted over the next year?

“We expect the impact to be largely positive for CMBlu Energy. As the industry increasingly looks for alternatives to lithium‑ion batteries, demand for non‑lithium, FEOC‑safe solutions like ours continues to grow.

At the same time, market and policy dynamics are accelerating the need to deploy projects and scale manufacturing capacity in the US. Over the next year, that pressure supports our strategy to ramp domestic production while expanding project activity, positioning CMBlu well as customers seek reliable, long‑duration storage solutions with resilient supply chains.” – Giovanni Damato

To what extent is domestically manufactured BESS increasing and available for new projects?

“Domestic BESS manufacturing is clearly increasing, driven by strong market pressure from utilities, hyperscalers, and developers who need energy solutions available today with minimal geopolitical and regulatory risk. CMBlu is a good example of that shift, as our pricing is already competitive with lithium‑ion, and our localised supply chain, from active chemistry through full module manufacturing, allows us to scale US production quickly.

At the same time, the market is moving beyond a lithium‑only future. Supply chains are diversifying, technology options are broadening, and investors are re‑pricing risk around traceability, safety, and resilience. Longer term, this supports a more secure and flexible energy system built around modular, dispatchable storage assets that reduce reliance on conflict materials, mitigate thermal‑runaway risks, and better match the growing demand for longer‑duration energy storage.” – Giovanni Damato