Billions in funding could kick-start the US battery materials industry

Both public and private funding have exploded for US battery manufacturing. This was accelerated by the passage of the Inflation Reduction Act earlier this year, which provides incentives to electric vehicles. The requirements for the new electric-vehicle tax credits , that battery components must be sourced from the US or its free trade partners. However, most of the investment in battery manufacturing has been made in the later stages of the supply chain, particularly in factories that produce battery cells for electric cars.

The new spending is an effort to expand the supply chain in order to make or source domestically the materials that go into a batteries. The US could make battery precursors to lower costs and ensure steady supply of new technologies. It could also help establish new companies and create jobs.

The funding will be a step towards “building the foundation for a domestic battery industry,” Jonas Nahm , an assistant professor of energy resources and environment at Johns Hopkins said in an email.

Multibillion-dollar manufacturing plants for battery cells and EVs are popping up all over the country. However, earlier parts of the supply chain remain largely based on Asia, particularly China, which accounts for the vast of global capacity to manufacture electrodes and mineral processing.

This funding announcement is a sign of the US’s attempt to catch up, particularly in the area of processing the minerals that are used to make batteries. Companies that work to extract and process lithium (a key metal in lithium-ion batteries) were four of the recipients of funding. The supply of lithium may need to increase by 20 times between now and 2050 to meet demand. Nahm states that lithium production is “one of the most vulnerable parts of the supply chain.”

Another important focus seems to be the production of lithium iron phosphate (LFP), a lower-cost chemistry. LFP batteries are different from other lithium-ion battery types in that they don’t contain nickel and cobalt, which could limit their availability in the future.

LFP technology could become a significant chunk of the battery market in the next few decades, potentially making up 40% of the global supply by 2030, according to some analysts. According to Evelina Steikou , an energy storage associate at BloombergNEF, the US has historically not been a major producer of LFP batteries.

While most of the grants are for batteries today, a few grants will be used to fund technologies that aren’t yet widely used. These include silicon-based anodes, which can increase the energy stored in lithium-ion batteries.

The scale of the funding just announced is striking–most of the grants are for hundreds of millions of dollars. All grants require investment from companies, even though federal funding is $2.8 billion. These projects amount to about $9 billion, including the private funding matches.

The money could help to make supply chains more efficient. Stoikou states that money is not a guarantee that projects will be completed. She points out that there were massive federal funding rounds for battery manufacturers in 2009, and many of those projects folded soon after. Stoikou states that the context of today is likely to be different. One, batteries are a well-established industry. The demand for domestically made batteries will only increase because EVs and their components must be made in the USA.

The new $2.8 billion in funding is part of the Bipartisan Infrastructure Law passed in late 2021, but there are also several other major funding bills that will help build other parts of the battery supply chain. There’s also funding for batteries and their supply chains in the Inflation Reduction Act, the CHIPS and Science Act that passed this summer, and even the Defense Production Act, which Biden invoked earlier this year to accelerate domestic production of clean energy technologies.

This funding will help build out the US battery industry, but there are still billions of dollars and many years ahead, says Jeff Chamberlain, CEO of battery-focused venture capital firm Volta. Still, he adds, “this looks like the beginning.”