ING | US Import Ban on New Inverters Adds Fresh Pressure to Clean Power Supply Chain

The new import ban adds medium-term uncertainty to clean power supply chains. Existing approved inverters are unaffected, but new foreign imports will be blocked. The measure could raise costs and further complicate supply chain strategies, but without materially altering the US renewables outlook.

The US clean power supply chain, already under strain, is facing another headwind. As solar and battery project developers grapple with tariffs and foreign entity of concern (FEOC) requirements to maintain tax-credit eligibility, the Federal Communications Commission (FCC) announced on 28 July an immediate import ban on new inverter products, citing “unacceptable risks” to national security. The move would further shake up solar and battery supply chains, with ripple effects for the rapidly expanding data centre industry.

What inverters are and where the security concerns come from

Inverters are electronic devices that convert direct current (DC) into alternating current (AC). They are a critical component of clean power projects: solar panels and batteries operate on DC, while the power grid runs on AC, making inverters necessary for compatibility. Demand for inverters is also rising alongside data centre growth, as battery systems are increasingly used to provide fast-response power and support on-site backup generators.

Concerns around inverters are increasingly focused on cybersecurity. Many modern inverters have remote monitoring and control capabilities, creating potential vulnerabilities. If compromised, they could be manipulated or shut down remotely, disrupting power assets and, in extreme cases, affecting grid stability.

Short-term calm, medium-term uncertainty

The ban applies to all countries, making it a broad measure that affects all foreign-made inverter products. In practice, China is likely to be hit hardest, as it accounts for roughly 80% of global inverter manufacturing capacity, compared with just 8% in Europe and 3% in North America.

Global power inverter manufacturing capacity by geography

Source: International Energy Agency, ING Research

However, there is an important exception – inverter models that have already received FCC approval are exempt. In the US, inverters and other devices that emit radio frequencies require an FCC ID before they can be legally imported. The new rule prevents the FCC from issuing approvals for new foreign-made inverter models, but developers can continue importing models that have already been certified.

This is a key provision that will contribute to market stability in the near term. But over time, developers may still need to reconfigure their supply chains. First, the new FCC rule places tight limits on post-authorisation software and firmware updates. As a result, upgrades to inverters already in service could require additional regulatory approval.

Second, the industry will inevitably shift to newer and more efficient inverter models. Under the current ban, new foreign-made models could not enter the US market. This risks further tightening a supply chain that remains heavily dependent on imports, with domestic manufacturing unlikely to meet demand in the foreseeable future. Bloomberg New Energy Finance estimates that US-produced inverters supplied only 18% of US solar installations last year.

Who benefits, who pays, and what to watch

US domestic producers stand to benefit from the ban. Demand for US-made inverters, including products from GE Vernova and EPC Power, is likely to surge.

For developers, however, tighter supply could further lift costs for solar and battery projects, which are already on the rise. Lazard estimates that the levelised cost of electricity (LCOE) for utility-scale solar increased 19% year-on-year (YoY). The levelised cost of storage for utility-scale standalone 100MW, 4-hour batteries increased by 36% YoY, reversing last year’s decline, amid a more complex supply chain environment. Developers that rely heavily on imported inverters may also need to rethink procurement strategies and build supply chains that are better positioned to withstand future policy shifts.

A key watch point is how quickly new non-Chinese inverter models can reach the US market. The Trump administration appears to be taking an “exclude first, exempt later” approach, meaning suppliers from Europe and other regions may gradually gain pathways to serve the US market. Chinese manufacturers, however, could face greater challenges given the limited clarity around the conditional exemption process.

Even so, the supply challenge is unlikely to be resolved structurally while China accounts for around 80% of global inverter manufacturing capacity. Demand for inverters from North America is 11% of the global total – without Chinese supply, the competition for compliant inverter supply would only get fiercer.

More government scrutiny could intensify competition for supply

Looking ahead, the clean power industry should expect greater scrutiny of inverters as governments place more emphasis on cybersecurity. The EU has already moved in this direction, restricting projects that use “high-risk” inverters from accessing funding from major public finance institutions, including the European Investment Bank (EIB), the European Investment Fund (EIF), and the European Bank for Reconstruction and Development (EBRD). The EU is also mulling over extending such restrictions to projects supported by EU member states’ national budgets. This would further intensify the competition globally for non-Chinese inverters and push supply chain costs higher.

A rockier way ahead, but there’s no turning back

While the near-term impact of the ban is likely to be limited, it could increase costs and supply chain pressures for the US clean power industry over the medium term. Competition for compliant inverters may also intensify as Europe steps up inverter regulation. Combined with ongoing tariff and FEOC uncertainty, this could modestly slow project development.

That said, we do not expect the ban to materially alter the outlook for US renewables. The industry remains supported by an estimated 216-240 GW of solar capacity safe-harboured between mid-2024 and the 4 July 2026 tax credit deadline. Strong growth in electricity demand, particularly from AI-driven data centres, should also continue to supercharge solar and battery storage deployment.

Compliments of ING – a member of the EACCNY