Escalating tariffs and trade restrictions are reshaping the economics of clean-energy deployment. For investors, this necessitates a reassessment of capital allocation, supply chain exposure, and long-term portfolio construction.
The next phase of US clean-energy expansion will hinge less on technology readiness and more on geopolitics. A sweeping tranche of tariffs unveiled by the Trump administration, combined with China’s retaliatory export controls, is reshaping cost curves, elongating project timelines. This is forcing investors to rethink how and where they deploy capital into solar, storage, and the upstream materials value chain. Moreover, geographically concentrated supply chains and tariff uncertainty are now the dominant risk factors for growth-stage and mature clean-energy assets alike.
Policy Risk and Infrastructure Strain
Clean-energy technologies have already crossed the economic tipping point. Utility-scale solar and onshore wind are the cheapest forms of new generation in most US markets. Yet their commercial viability now hinges on trade policy. President Trump’s tariff program spans a wide range of inputs, from transformers to batteries. Limited exemptions and the potential for abrupt policy shifts are key aspects of it. This unpredictability complicates long-term planning for developers and introduces new layers of risk into clean-energy project execution, especially in capital budgeting and supply chain alignment.
Tariffs on critical infrastructure inputs such as steel, cement, and electrical transformers are inflating balance-of-plant budgets. These materials are not easily substitutable, leaving developers with binary choices: absorb rising costs or delay key milestones. Some are turning to recycled materials as a hedge. PitchBook reports that metals recycling startups raised $573.9 million in VC funding in 2024, betting that elevated steel prices would sustain stronger scrap economics. These domestic, tariff-immune business models are receiving growing investor interest.
Solar PV: Cost Leadership Disrupted by Trade Policy
Utility-scale solar continues to offer the lowest levelized cost of energy, ranging from $38─78/MWh in the US, as per Lazard’s June 2025 LCOE+ report. However, its hardware supply chain remains highly exposed to global trade disruptions. Gallium exports from China, a critical input in high-efficiency solar technologies, declined 75.3% YoY following newly imposed export restrictions, as per PitchBook. Simultaneously, US trade investigations have triggered steep tariffs, including a 42 percent rate on JinkoSolar’s Malaysian output and 3,521 percent on modules originating from Cambodia. In response, developers are exploring supply alternatives from countries like Laos and Indonesia, although this introduces additional foreign exchange and geopolitical risk.
Battery Supply Chains and the Rise of LFP
The US is projected to add 18.2 GW of utility-scale battery storage in 2025, with most lithium-ion units imported from China, as per the US Energy Information Administration. This reliance on foreign manufacturing is compounded by upstream risks. While the Democratic Republic of Congo dominates cobalt mining, only about 5% of its output comes from domestically owned firms, as per PitchBook. As mineral nationalism and export restrictions intensify, such concentrated and externally controlled supply chains expose developers to heightened uncertainty. Access to these inputs will remain vulnerable until supply chains are fully localized.
Among lithium-ion variants, lithium iron phosphate (LFP) has gained traction in stationary storage due to its independence from nickel and cobalt, both of which are trade-sensitive minerals, along with a longer cycle life with adequate energy density. In 2024, LFP accounted for nearly half of global EV battery deployment, underscoring its scalability and cross-sector relevance, as per the IEA Global EV Outlook 2025. As tariffs inflate costs for nickel-heavy chemistries like nickel manganese cobalt oxides, LFP’s cost profile becomes even more attractive. Its growing adoption is pressuring legacy integrators and opening opportunities for second-tier pack assemblers seeking domestic partnerships.
Venture Capital Shifts to Circular and Extraction Tech
Instead of pulling back from clean energy altogether, capital allocators are reallocating exposure toward upstream solutions addressing material constraints. Battery recycling raised $3.8 billion in VC in 2023, followed by a reset to $922.4 million in 2024 as valuations normalized, as per PitchBook. Moreover, green-mining VC investment totaled $687.7 million in 1Q25 alone. Direct lithium extraction (DLE) and geothermal-brine startups are also gaining traction. These upstream ventures offer long-term investment potential aligned with the growing demand for secure and localized resource access.
Conclusion: Active Risk Management Beats Passive Exposure
Tariffs and trade barriers have become defining features of the clean-energy landscape. Geopolitical tensions are constraining the availability and pricing of key materials. Investors who internalize these dynamics, revise models, stress test cost assumptions, and build thematic hedges will protect IRRs and potentially outperform them. Clean-energy deployment remains strong, but its geopolitical context demands smarter capital allocation. Portfolios that lean into domestic value chains, storage innovation, and recycling will be best positioned to generate resilient long-term returns.
About SG Analytics
SG Analytics (SGA) is a global leader in data-driven research and analytics, empowering Fortune 500 clients across BFSI, Technology, Media & Entertainment, and Healthcare. A trusted partner for lower middle market investment banks and private equity firms, SGA provides offshore analysts with seamless deal life cycle support. Our integrated back-office research ecosystem, including database access, design support, domain experts, and tech-enabled automation, helps clients win more mandates and execute deals with precision.
Founded in 2007, SGA is a Great Place to Work® certified firm with 1,600+ employees across the U.S., the UK, Switzerland, Poland, and India. Recognized by Gartner, Everest Group, and ISG and featured in the Deloitte Technology Fast 50 India 2023 and Financial Times APAC 2024 High Growth Companies, we continue to set industry benchmarks in data excellence.
