The One Big Beautiful Bill Act (OBBBA) of 2025 phased out hefty solar and wind tax credits created under former President Biden’s Inflation Reduction Act (IRA) passed in 2022. But instead of phasing out battery storage tax credits along with the wind and solar tax credits, the OBBBA phases them out much later — in 2036—which solar developers are now capitalizing on by adding battery storage components to new builds, allowing them to keep earning lucrative clean energy tax credits despite the phaseout. Warren Buffett pointed out more than a decade ago: “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
Under the OBBBA, solar and wind projects that have not started construction no longer qualify for the IRA tax credits. Because of lucrative tax credits, wind and solar projects have made up a majority of the energy sector’s growth since 2019. According to the Energy Information Administration, new solar and wind capacity through June 30, just before the end of their phase-out, exceeded the total added to date in 2025 and will likely outpace prior years. This result is similar to what happened when the OBBBA ended the tax credit for electric vehicles last year, with sales of electric vehicles rising sharply just before the tax credit expired on September 30.
Because of tax credits for battery storage and battery procurement mandates in 13 states, battery storage facilities are being built despite their high costs and land requirements. Batteries do not generate electricity; they store excess electricity that may be available on the grid for later release when generators are no longer producing, such as when the wind is not blowing or the sun is not shining. Thus, they are an extra expense that ratepayers and taxpayers must pay because federal and state governments are incentivizing them.
For the 24 states, the District of Columbia, and Puerto Rico that in 2025 have 100% clean or carbon-free energy goals, battery storage is their answer to providing firm power on the grid since they expect most of that carbon-free power to be supplied by wind and solar. According to industry data, total installed U.S. battery storage capacity is projected to approach 40 gigawatts by the end of 2026—almost double the 20.7 gigawatts in mid-2024. The United States added approximately 10.9 gigawatts of energy storage capacity in the third quarter of 2025–the largest quarterly addition on record. Industry forecasts project that the United States could install more than 90 gigawatts of additional storage capacity between 2025 and 2030, driven by load growth, renewable penetration, and grid reliability needs.
The 13 states that have storage procurement targets are: California, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Oregon, Rhode Island, and Virginia. California was the first state to adopt a procurement target, initially mandating that the state’s investor-owned utilities procure 1,325 megawatts of energy storage by 2020, then adding 500 megawatts of distributed storage for a total of 1,825 megawatts by 2020. As of July 2025, California has far exceeded the goal, installing a total of 16,942 megawatts of battery storage capacity. In August 2024, California set another target to achieve long-duration energy storage of 1 gigawatt of 12-hour storage and 1 gigawatt of multiday storage resources to be deployed between 2031 and 2037. To help reach these goals, California implemented the largest financial incentive policy of the states and followed that with a number of grants.
A recent report, Batteries and the Grid: Hype, Hope, and Economic Reality, co-authored by one of the “Energy Bad Boys,” Mitch Rolling, and Jonathan Lesser for the National Center of Energy Analytics (NCEA) modeled how much battery capacity it would take to maintain reliability on PJM, the nation’s largest regional transmission operator, using primarily wind and solar to power the grid. They indicate that the enthusiasm surrounding battery storage—and what many people believe it can achieve—is creating a “Battery Bubble.”
The modelers considered three scenarios: renewables only; a natural gas and nuclear scenario with no new renewables; and a scenario that added batteries to the natural gas and nuclear scenario. Because wind and solar have low capacity factors and need batteries to firm the grid, the renewables-only scenario required the most capacity additions and was the most expensive to implement. The current PJM grid has just under 225,000 megawatts of capacity. The renewables-only scenario would require a massive overbuilding of the grid, with the total capacity on the system at 2,058,337 megawatts in 2045 for an increase of over 800%. The natural gas and nuclear scenario would require 333,023 megawatts, and adding batteries would require 362,828 megawatts—an increase of 48 to 62% in 2045.
The renewables-only scenario would cost over $4 trillion through 2045 due to the massive buildout of wind, solar, and batteries required to maintain reliability. Because these facilities must be repowered every 15 to 25 years, these costs will remain high. The natural gas and nuclear scenario would cost just under $668 billion—or 83% less than the renewables-only scenario—because it utilizes firm, dispatchable generators to meet demand. Adding batteries to the natural gas and nuclear scenario reduced the amount of new natural gas capacity needed and was substantially more affordable than the renewables-only scenario, which would have cost almost $770 billion—15% more than using natural gas peaking plants.
Conclusion
As the modelers indicate, wind and solar intermittency is too frequent, battery storage duration is too limited, and the cost is too prohibitive to achieve the capacity buildout required using wind and solar to power the grid—something that Europeans still do not understand with their increasingly expensive climate policies and extremely high electricity rates. Unfortunately, these facts have not kept U.S. states, particularly blue states, from passing legislation to enforce their use. The modelers predict that the Battery Bubble will eventually pop, but how much money American ratepayers and taxpayers will spend—or be on the hook for—before reality sets in remains the issue.
