Applications: Stationary Energy Storage

Updated IRA Investment Tax Credit Guidelines FEOC

FEOC definition: “Foreign Entities of Concernˮ are companies owned, controlled, or significantly influenced by foreign adversaries (e.g., China, Russia, Iran, North Korea). 2 types:

Specified Foreign Entities SFEs: Directly owned or controlled by hostile governments.

Foreign-Influenced Entities FIEs Indirectly influenced via board control, debt, licensing, or IP agreements.

Material Assistance Rule: Prohibits projects from receiving significant cost contributions from FEOCs – financial support counts, not just physical components.

Material Assistance Cost Ratio MACR: Defines the share of system cost that must be FEOC-free to qualify for ITC

Policy impact: Projects tied to FEOC-linked suppliers may become ineligible for federal tax incentives, including the Investment Tax Credit ITC.

Relevance to BESS: The globalized battery industry is especially vulnerable, with major suppliers like CATL, BYD, and Gotion potentially triggering FEOC restrictions.

High-risk supply areas: Extraction and processing of critical minerals (lithium, cobalt, graphite), production of cells/modules, BMS components, and inverters/control systems.

Key vulnerability: Even if direct suppliers are compliant, upstream sub-suppliers may not be, requiring deep supply chain due diligence

100% recapture risk: Any payment made to a SFE or FIE within 10 years of claiming the credit triggers full ITC clawback, effectively creating a 10-year exposure period for recapture.

Industry response: Non-FEOC companies with U.S. cell/module manufacturing are pivoting from EVs to BESS, including Samsung in Indiana, LG in Michigan, and SK in Georgia.

Source: Norton Rose Fulbright, Norton Rose Fulbright, EticaAG, Reuters, Reuters,Reuters, S&P Global

Major Battery Energy Storage System Milestones under H.R.1

See the Policy section for wider commentary on US ESS-related policies.

Extracted from the PDF; charts and images may read imperfectly.