The US Department of Energy is injecting $2.8 billion into companies that make raw materials for batteries. The agency’s goal is to advance a mix of established and start-up firms from the demonstration stage toward large-scale commercial production.
The 17 awardees will make lithium materials for battery cathodes, graphite and silicon materials for anodes, separators which divide the positive and negative sides of batteries, electrolytes, and additives to improve battery performance.
About three-quarters of all electric vehicle batteries are currently made in China, according to an International Energy Agency report. China also processes most of the world’s lithium, cobalt, and graphite—all key battery materials.
There are efforts to ramp up production in other countries. Carmakers plan to spend over $40 billion on battery factories in the US, according to a report from the Federal Reserve Bank of Dallas. But companies have only recently started to build plants for the materials needed to make those batteries.
The DOE program, funded by the 2021 Infrastructure Investment and Jobs Act, aims to close that gap. The average project costs about $400 million, but some are much larger. For example, Entek plans a $1.4 billion investment to increase battery separator manufacturing, supplying enough material for 1.4 million cars annually; Novonix Anode Materials plans to build a a $1 billion graphite anode plant in Chattanooga, Tennessee.
Entek has been making separators for lead-acid batteries for decades and recently expanded into lithium-ion batteries. Some participating companies are newer. Ascend Elements, founded in 2015, is receiving nearly half a billion dollars to build two facilities in Hopkinsville, Kentucky, that will recycle lithium-ion batteries and produce material for new cathodes.
The money from the DOE will cover as much as half the cost of these projects; firms must raise the rest on their own. Roee Furman, managing director of Doral Energy-Tech Ventures, a venture capital firm that backed Ascend Elements in 2021, says the agency’s vote of confidence makes that task easier. “It opens new horizons of funding opportunities,” he says.
Even with funding, young companies making the jump from demonstration project to commercial factory will face new operational hurdles, such as securing a consistent supply of raw materials. “They’ve shown that their technology works,” says Josh Stiling, an executive with the technology-focused investment fund Anzu Partners. “Now, the challenge is making a well-oiled machine.”
Most of the companies receiving funding are also promising to build factories with a smaller environmental footprint than competitors’ facilities. The start-up 6K says its cathode production technology generates 70% less greenhouse gas emissions than existing processes. Piedmont Lithium claims that its planned lithium hydroxide plant in Tennessee won’t use acid to extract lithium from ores and won’t produce sodium sulfate waste.
Jimmy Kan, a principal at Anzu, which backed 6K in 2017, says limiting environmental impact will be essential if the US wants to build up battery manufacturing capacity without sparking backlash. “Somebody in California doesn’t want all that toxicity and groundwater devastation,” he says.
The Energy Department awards primarily support expansion of current-generation technologies rather than newer, riskier innovations like solid-state batteries. Many of the projects being funded had already been announced.
Despite the maturity of their technology, Kan says, some companies will “flop in epic ways.” But he argues that even failures will benefit the US battery industry as a whole by making it less hazardous for other investors to jump in. “This is the government sending a message,” Kan says. “There’s going to be waves of this type of investment.”
More US money is already on the way. The White House estimates that the infrastructure law, the CHIPS and Science Act, and the Inflation Reduction Act include more than $135 billion in investments for mining and processing critical minerals and for manufacturing batteries.