July 24, 2025: Battery energy storage system capacity in the EU could fall by 10% and 4% in the US over the next decade, according to latest analysis of trade tariff tensions by McKinsey & Company.
McKinsey’s scenario-based outlook, released on July 22, explores implications of rising trade tensions on five key clean energy technologies — solar, wind, BESS, transformers and EVs — through to 2035.
The study echoes warnings reported by Batteries International last month, when analysis published by Wood Mackenzie suggested trade tariffs turmoil in the US could lead to at least a 50% hike for energy storage costs.
McKinsey’s study examines three tariff scenarios, ranging from a continuation of current trade policies to a ‘global tensions escalate’ highest-tariff scenario, in which tariffs on clean energy technologies are substantially raised.
Analysis shows installed solar capacity could be 9% lower in the US and 7% lower in the EU by 2035 under the highest-tariff scenario, compared to the status quo in late 2024.
BESS deployment could also slow, with 4% less capacity in the US and 10% less in the EU under the same conditions.
In the EV sector, projected EU market penetration by 2030 drops to 41% under the highest-tariff scenario, compared to 50% in the baseline — which the study suggests could spark a rethink of the EU’s planned 2035 ban on internal combustion engine vehicles.
McKinsey said wind deployment appears more insulated to tariffs. In the US, tariff scenarios are unlikely to affect offshore wind deployment by 2035, while in the EU, the highest tariff scenario could lead to a 6% reduction in installed offshore wind capacity compared to the status quo.
Meanwhile, at the system level, tariffs could increase overall energy costs. McKinsey projects that by 2050, the total cost of resulting energy systems could be 2% higher in the US and 3% higher in Europe, compared to scenarios with lower or status quo tariffs. In the US, independent of tariffs, the analysis suggests a slightly greater share of gas in the 2035 energy mix under these conditions.
Nevertheless, McKinsey projects solar, wind, battery storage and EVs remain poised to grow through to 2050. However, the study warns capital deployment, supply chain strategy, and policy will all play critical roles in determining how that growth is realized.
Partner at McKinsey, Christian Therkelsen, said the clean energy landscape today is “bumpy, marked by broad uncertainties across a fast-changing space.
“While clean technologies are still projected to grow through 2050 and beyond, our scenario analysis shows that higher tariffs could impact the pace and cost of that transition, especially if they persist.”
Fellow partner Diego Hernandez Diaz said the study was designed to help executives think through the potential effects of higher tariffs, enabling them to stress-test their strategies and uncover opportunities to build greater resilience into the supply chains that underpin global decarbonization.
