US government funds a stalling battery industry

The US Department of Energy (DOE) is handing out more than $3 billion in grants for 25 battery materials projects to jump-start the country’s nascent industry. The funding comes as some US battery projects are stalling because of low demand, policy uncertainty, and competition from China.

The grants are designed to help companies making battery components in the US challenge more-experienced competitors in China. But some industry experts say the support is too little, too late.

“For something like this . . . $3 billion doesn’t get you in the game,” says Richard Wang, founder of the battery research firm Crevasse Consulting. “We’ve fallen behind, and catching up is way more expensive than leading.”

Many of the DOE grants, which require significant matching funding from recipients, aim to strengthen production of the building blocks needed to make lithium-ion batteries.

Dow is in line to receive $100 million to build an electrolyte solvent plant on the US Gulf Coast. Honeywell is expecting a $127 million grant that will fund an electrolyte facility in Louisiana. Braskem plans to use a $50 million grant to retrofit a Texas polyethylene facility to meet battery industry standards.

The funds will also support a handful of next-generation technologies. Mitra Chem landed a $100 million grant to start producing lithium-manganese-iron-phosphate cathode materials, a higher-capacity version of inexpensive lithium-iron-phosphate materials. A project owned by Standard Lithium and Equinor received a $225 million grant to build a plant in Arkansas that will chemically extract lithium from brine, a technology called direct lithium extraction.

But even with government support, companies making these materials face a litany of challenges, Wang says. Last year, Huntsman Corp. canceled an expansion of an electrolyte plant because Chinese competitors were flooding the US market with cheaper products. Meanwhile, Umicore and BASF have announced that they are slowing investment in battery materials because demand is growing slower than they anticipated.

The grants follow an initial round of awards granted to companies in 2022, but some of the firms have also experienced setbacks. For example, Piedmont Lithium was slated to get a $142 million DOE grant for a lithium refinery in Tennessee, but the firm has shelved the project until the price of lithium increases.

Given such obstacles, Wang says companies will be hard pressed to raise hundreds of millions of dollars in matching funds from private investors, who are less tolerant of risk than the DOE. “It’s very difficult to get financing for battery companies right now, especially for large-scale, first-of-a-kind factories,” he says.

While many US battery materials projects are struggling to get off the ground today, Jay Turner, a researcher at Wellesley College who tracks US battery investment, says the DOE grants are focused on building up manufacturing capacity for the future, when most industry watchers expect wider adoption of electric vehicles to drive demand for batteries.

“Clearly, the Department of Energy is playing the long game,” Turner says. “They’re looking out a decade from now, thinking about whether the US is going to be making cars or buying them from China.”

He says the US government’s battery policies, including tax credits for battery materials in the Inflation Reduction Act (IRA), are having an impact. A database created by Turner and student researchers tallies more than $100 billion in US battery investments since the IRA passed in 2022.

But Turner says the challenge for the US will be maintaining government support for batteries in the years to come. Those policies could change as early as next year. Donald Trump and many Republicans running for Congress have indicated that they don’t support industrial policy for batteries.

“This is just a starting point for building up the domestic supply chain,” Turner says. “So much of this depends on the stability of the policy landscape, and things could change very quickly.”