Opinion: Trump tariffs and bill could spark a U.S. battery renaissance — if loopholes are closed

OBBBA amplifies that message by tying tax credits directly to domestic content. The law bars firms tied to “prohibited foreign entities,” essentially Chinese battery companies and their affiliates, from receiving investment or production tax credits. For energy storage, it increases the minimum share of U.S. or allied nation content from 40 percent to 55 percent by 2028. The base 30 percent investment tax credit now applies only if a project’s cells come from a non prohibited manufacturer, and a 10 point bonus rewards projects that meet the rising domestic content thresholds. In effect, the credit is binary: use U.S. made or allied nation cells and get 40 percent off your project costs, use Chinese cells and get zero.

That simple rule is spurring investment. Our Next Energy (ONE) is building a high capacity LFP cell factory in Michigan and licensing technology to Pomega in Türkiye, a NATO ally whose cells aren’t subject to foreign entity restrictions. As a result, customers are shifting orders toward U.S. and allied suppliers. With most projects still dependent on China, ONE is the only U.S.-owned firm ready to supply utility scale storage, and our Turkish partnership gives buyers a credible non China option.

The danger lies in a quirk of tax law known as the 5 percent safe harbor. To qualify for a credit under long standing rules, developers can either start substantial physical work or incur just 5 percent of a project’s total cost. OBBBA did not change those rules, President Trump’s July 7 executive order merely directs the Treasury to tighten them. Without new guidance, a developer could spend a token 5 percent today, lock in pre OBBBA rules and continue using Chinese cells for years while claiming the old credits. Several advisers even encourage spending slightly more as a cushion. That loophole could allow Chinese components to dominate U.S. projects until the late 2020s, exactly when the new domestic content requirements are supposed to bite.

Safe harbor abuse isn’t theoretical. Tax experts warn that developers often claim the 5 percent rule without making meaningful progress. Consultants expect Treasury to insist that a substantial portion of a facility actually be built before credits are locked in. Yet until formal guidance arrives, some developers are rushing to “start” projects on paper, threatening to lock in Chinese supply chains just as domestic factories come online.

As a systems change researcher, I view OBBBA and the tariffs as tools to rewire an entire supply chain. They align climate goals with industrial policy, investors, utilities and developers all know that using Chinese cells means forfeiting the credit. But systems change fails when loopholes persist. Congress and the Treasury must act quickly.

Guidance should require genuine physical progress or firm commitments to domestic or allied sourced cells before a project can lock in its credit. Safe harbor rules should be updated to reflect OBBBA’s higher domestic content thresholds, and projects relying on the old 5 percent rule should face stricter documentation and auditing.

With these tweaks, high tariffs and the binary credit can attract investment, accelerate manufacturing and protect supply chains. Our Next Energy and our partners stand ready to build the cells America needs. But if policymakers allow a technicality to keep Chinese batteries flowing, we will squander a rare chance to secure jobs, cut emissions and gain energy independence. The window is open, we must close the loopholes before it shuts.

Deeana Ijaz is chief strategy officer of Our Next Energy and a systems change researcher at Columbia University.