Navigating Supply Chain Bottlenecks in Energy Storage

The rules have changed, and not everyone got the memo.

For years, energy storage developers operated on a comfortable playbook: secure financing, hand the hard work to an EPC contractor, and let contracts absorb the risk. It was clean, scalable, and effective — until US policy started rewriting the conditions of the deal.

At Energy Storage Summit USA 2026 in Dallas, a panel of procurement veterans laid out exactly how much ground has shifted beneath the industry's feet. The session, titled "The EPC and Equipment Squeeze – Navigating Supply Chain Bottlenecks in US Energy Storage," brought together Hema Gupta of Onyx Renewables, Hugo Leduc of STS-Certified, and Reddy Tudi of Linxon, moderated by Emily Burlinghaus of SEIA. What emerged wasn't a polished optimism session. It was a frank accounting of an industry mid-pivot, dealing with FEOC compliance, domestic content requirements, and a procurement model that no longer fits the moment.

The Procurement Model That No Longer Works

Developers didn't abandon the EPC model because they wanted to; they were pushed.

Hema Gupta, senior director of supply chain at Onyx Renewables, was direct about how developers historically thought about procurement: "The traditional business model is we finance, we fall back, we let the EPCs do all the diligence. We cover ourselves in the contracts." That model made sense when the primary job was capital allocation. Risk lived downstream, insulated by contract language.

What broke that logic was the convergence of IRS guidance, Foreign Entity of Concern (FEOC) restrictions, domestic content safe harbors, and begin-construction deadlines. Suddenly, the legal and financial exposure tied to *where* equipment comes from and *how* that provenance gets documented landed squarely on the developer — regardless of who physically procured the hardware.

The shift isn't philosophical; it's financial survival. Energy storage projects using domestically produced batteries can qualify for a 30% Investment Tax Credit under current IRS rules, with an additional 10% domestic content adder potentially pushing total ITC value to 40%. That's not a rounding error. On a 100 MW project, the difference between capturing that adder and losing it runs into tens of millions of dollars.

But the FEOC guidance — intended to exclude components tied to foreign entities of concern from ITC eligibility — still carries unresolved questions. Interim Treasury guidance has left developers in an uncomfortable position: the upside is real, but the compliance pathway is murky enough that "we bought it from a third-party distributor" no longer passes muster.

Direct Procurement: The Upside Nobody Wanted

When developers move into direct procurement, they don't just gain a new vendor relationship; they absorb an entirely different category of operational responsibility.

Gupta spelled it out without softening it: "Eliminating the EPC risk opens us up for a lot of risks, because now we're not just buying things. We are the project coordinator. We are the integrators. We are the installers. If something goes wrong — communication, BESS charging — all of that risk now falls on us."

That's a meaningful expansion of scope for organizations built around capital, not construction. The institutional knowledge required to manage logistics, technical specifications, and commissioning for a grid-scale battery energy storage system is not something a developer's procurement team acquires overnight.

Documentation is the new moat. To build what Gupta calls a "defensible supply chain," developers need full transparency into the origin of every component — not a letter of attestation from a distributor, but genuine supply chain traceability. That means establishing direct relationships with manufacturers, building internal processes for documentation, and maintaining records that can survive an IRS audit.

The insider reality here: many developers underestimate how labor-intensive that documentation infrastructure actually is. It's not just due diligence on the front end; it's an ongoing compliance function that has to be maintained across the full economic life of a project.

When CFOs Run the Hardware Conversation

Hugo Leduc's observation about the battery storage procurement environment cuts to something that rarely gets said plainly: the purchase of BESS equipment, as he put it, "has shifted from the playground of the CTO to the playground of the CFO."

That's a telling detail. When technical procurement decisions migrate from engineers to finance teams, priorities reorganize around cost, tax treatment, and balance sheet exposure. The engineering considerations — interoperability, warranty depth, long-term performance data — can get subordinated to whatever makes the ITC math work for a given project.

This is where quality control becomes a genuine vulnerability. Leduc emphasized that mitigating risk in the new procurement environment means ensuring proper technical quality control — not just price and origin compliance. The danger in a market where financial incentives are driving procurement decisions is that QC becomes an afterthought until something breaks.

For grid-scale storage, that failure mode isn't theoretical. A BESS system that underperforms degradation warranties, or that experiences cell chemistry issues five years in, can materially alter project economics on 20-year contracts. The ITC savings captured at acquisition don't offset revenue loss from a system that underdelivers on round-trip efficiency or cycle count.

The Domestic Manufacturing Horizon

The five-year outlook for domestic battery manufacturing in the US is genuinely complicated — and the panel's conversation reflects that complexity rather than resolving it.

The policy architecture favoring domestic production is real and substantial. The ITC adder, FEOC restrictions, and the broader industrial policy embedded in recent federal legislation all point in the same direction: make it more expensive to rely on foreign-manufactured cells and more lucrative to build supply chains that can survive geopolitical disruption.

Whether domestic manufacturing capacity will actually meet that demand in the near term is a different question entirely. The US battery manufacturing base, while growing, is still scaling. Facilities that have been announced, broken ground, or are in commissioning represent future capacity — not current availability. In the meantime, developers are trying to build FEOC-compliant projects against a backdrop of limited qualified supply and ongoing policy uncertainty.

The procurement professionals on this panel are living that gap daily. "Price volatility is a real thing," Gupta noted, and developers "can no longer absorb those margins that EPCs are charging." That compression is pushing developers toward direct manufacturer relationships not just for compliance reasons, but because the economics of the middleman layer are no longer workable at scale.

What Comes Next

The energy storage supply chain is being restructured, mostly by policy rather than market preference. Developers who move early to build direct procurement capability, supply chain documentation infrastructure, and internal technical quality control will operate from a fundamentally different cost position than those who wait.

The FEOC guidance will get clearer. Domestic manufacturing capacity will grow. But the developers who will capture 40% ITC on the projects that get built in the next 24 months are the ones building compliance infrastructure right now, not waiting for the Treasury to publish a final rule.

The EPC squeeze is real. The opportunity underneath it is also real — for developers willing to absorb the operational complexity that direct procurement demands. That's not a comfortable transition. But in the current policy environment, it's increasingly not optional.

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