Progress of localization of lithium-ion battery for energy storage in the U.S.

The U.S. is now importing large volume of lithium-ion battery to meet demand from domestic EV manufacturing and energy storage connected to the power grid for transformation. Lithium-ion battery imports have nearly doubled for the third consecutive year in 2022, increasing from 2021’s 40 GWh to around 75 GWh. In the first quarter of this year, the U.S. imported almost 30 GWh of the battery. InfoLink projects that imports will surpass 130 GWh this year, with China dominating more than 85% of the market share.

The US government has noticed such as situation, and in response, the Biden administration published the National Blueprint for Lithium Batteries 2021-2030 on June 7, 2021, outlining a blueprint and objectives to guide investments in developing a domestic lithium-battery manufacturing value chain that creates equitable jobs while supports climate goals. Last August, President Biden signed the Inflation Reduction Act into law, under which it extends the $7,500 tax credit for EV purchases and offers the Advanced Manufacturing Production Credit for local production of batteries under Section 45X, showing the country’s determination to strengthen local manufacturing capacity. With high tax credits, companies start to change strategies. Tesla, for example, reschedules and adjusts the share of its investment in Europe and the U.S., while Norwegian battery start-up Freyr accelerates its investment in the U.S.  Tesla/Panasonic, LG Energy Solution, SK On and Samsung SDI are expected to be the first to benefit from the deployment of battery capacity in the United States. 

Taking Korean companies as an example, Ultium Cells, a joint venture between LG Energy Solution and General Motors, has been granted USD 2.5 billion loan from the United States Department of Energy (DOE) in December 2022 for the construction of its battery facilities in Ohio, Tennesse, and Michigan. The DOE is reportedly to grant USD 9.2 billion loan to BlueOval SK, the joint venture between SK On and Ford, for battery facilities in Tennessee and Kentucky. However, although Korean manufacturers have deployed capacity earlier in the US market, Korean manufacturers mainly focus on NCM battery technology, with nearly all the battery capacity planned or commissioned in the US for NCM battery production. Such a situation is obviously not conducive to the carbon neutrality goal of the United States. LFP batteries help bring down costs in EVs and  are  an important option for EV manufacturers to launch affordable models. For energy storage, LFP offers better performance in terms of safety, cycle life, and costs.. LFP has become the mainstream in the market. However, China currently dominates more than 99% of LFP battery production.

InfoLink’s global lithium-ion battery supply chain database shows that the capacity plan of cell makers in the U.S. from 2023 to 2026 is 0, 10, 72, and 149 GWh, respectively. Even if all planned capacities could come online and reach full capacity as scheduled and all lithium-ion battery capacities are dedicated to energy storage, the U.S. will not achieve 100% domestic manufacturing of lithium-ion battery for energy storage until 2025. In fact, nearly half of the capacities are planned for EVs by 2026. As Chinese manufacturers hold the key technology for LFP mass production, building partnership with them would be the fastest route to achieve domestic lithium-ion battery manufacturing for energy storage, or the U.S. will face a dilemma between compromising renewables development and importing battery from China. The partnership between Ford and Chinese battery company CATL that draw attention recently is one indicator example.
 

In a letter issued to Ford on July 20, the US House Committee on Ways and Means demands to investigate the partnership between Ford and CATL. The committee highlights the allegedly Xinjiang forced labor practices connected to CATL, as the Xinjiang-based Zhicun Lithium Industry Group is one of China’s largest LFP battery manufacturers, whose production of lithium carbonate in 2022 is 73,600 tons. CATL was once the second biggest shareholder of Zhicun Lithium, but it sold its share on March 7 after announcing its partnership with Ford. However, one of the major buyers include CD Capital, of which shares were once held by CATL. That is the reason behind the U.S. Customs and Border Protection’s (CBP) indication of potential increased scrutiny of battery technology under the Uyghur Forced Labor Prevention Act (UFLPA) in June. Although the CBP has not added lithium-ion batteries to the entity list, lithium-ion batteries now face the risks within the UFLPA’s scope along with polysilicon for PV and aluminum auto parts.

Judging from the CBP’s action on the solar industry, the CBP may target EV battery packs and battery energy storage systems produced by Chinese manufacturers in China and abroad. Yet, there’s relatively limited production of lithium carbonate in Xinjiang compared to silicon, making it easier for Chinese battery manufacturers to prove the absence of Xinjiang-made lithium carbonate in their products.