Join us for Part 1 of our new series exploring current efforts to revitalize U.S. manufacturing & strengthen domestic supply chains. In this post, we’ll focus on “reshoring” and the initiatives aimed at fortifying the U.S. battery supply chain & reducing reliance on foreign imports.
Contact: Betsy Barry
Communication Manager
706.206.7271
betsy.barry@acculonenergy.com
The global automotive industry plays a crucial role in worldwide economic growth. The industry as a whole is one of the largest employers in many countries and a significant part of the global economy, contributing to GDP, employment, and consumer spending worldwide. In the past several years, the shift toward electric vehicle (EV) technology has rapidly accelerated due to global policies on emissions and greenhouse gases, a push for more sustainable technologies, and a desire to move away from oil & gas dependency. This has triggered a demand for electric batteries that is prompting changes throughout the global supply chain. These changes are not only impacting the automotive industry but also the range of different sectors shifting to alternative power sources for commercial and industrial applications. And while the automotive industry may be the biggest mover of the EV battery supply chain, the electric battery market extends far beyond EVs and mobility applications at this point as we see a range of market segments opt for sustainable power sources.
Currently, China dominates the battery supply chain, controlling a large portion of the raw materials, manufacturing, and processing of EV batteries. China’s dominance in the supply chain has raised concerns about supply chain security and potential disruptions related to geopolitical tensions, trade restrictions, and other political considerations, all of which could impact the availability and cost of everything from critical materials for battery cells to battery components and technology, and from battery modules to battery management systems. As a result, the U.S. is increasingly focused on reshoring manufacturing, diversifying raw material sources, and strengthening partnerships with allied nations to ensure a more secure and resilient battery supply chain.
Bringing Manufacturing back to the U.S.
The Biden-Harris Administration, through the U.S. Department of Energy (DOE), has announced over $3 billion in funding for a range of projects aimed at boosting domestic production of advanced batteries and battery materials. These projects are a part of the administration’s “Investing in America” agenda and will support strengthening domestic manufacturing to reduce reliance on foreign competitors, bolster supply chain resilience, and enhance the nation’s competitive edge in energy storage market segments. Administered by the DOE’s Office of Manufacturing and Energy Supply Chains, the projects are designed to establish and expand facilities for processing critical minerals, manufacturing battery components, and recycling, which are crucial for enhancing U.S. energy security and supporting the clean energy transition, and which, importantly, bring jobs to communities outside of larger domestic urban centers.
This investment is part of a broader $16 billion initiative to strengthen the U.S. battery supply chain, including traditional and next-generation battery technologies, and importantly, puts a spotlight on rebuilding domestic manufacturing capabilities. Not only will this add to job growth in the energy storage sector, but rebuilding domestic manufacturing is central to overall US job creation and future economic growth, especially in communities that could benefit the most from diverse employment opportunities. These investments will also encourage innovation in battery technology through domestic research and development programs, allowing for cultivating the domestic strategy needed for the U.S. to emerge as a major player in the global battery industry–an industry that is rapidly expanding to meet EV and energy storage demands that are increasing here and abroad.
Overall, the U.S. battery industry seeks to reduce dependence on foreign imports, namely China, by bolstering reshoring efforts and through friend-shoring efforts as well. A strong, diversified supply chain will be needed not only for domestic demand but to address global demand as well. Additionally, the Biden-Harris administration is supporting initiatives to develop domestic mining and refining capacity for key minerals, ensuring a stable supply of materials for electric batteries. These and other initiatives, including a series of grants, federal funding programs, and tax incentives, are encouraging partnerships between the government and the private sector for building a robust supply chain, as well as encouraging investment in domestic battery manufacturing and processing plants, bolstering the intersection between the two sectors. In short, “Made in the USA” is now a top priority, driving economic growth and technological innovation, and adjusting to a changing political landscape that values a focus on domestic and regulatory policies that pave the way for this reality.
U.S. efforts to boost domestic production of advanced batteries, expand critical minerals processing, & develop recycling capabilities are working to together to build a resilient supply chain, drive job creation, & foster long-term economic growth, all while enhancing the nation’s competitive edge in energy storage technologies.
Broadly speaking, the focus on domestic EV battery production is part of a growing effort to promote EVs and the electrification movement, transitioning to alternative power sources in order to reduce carbon emissions and meet national climate goals. By strengthening domestic battery production, the administration aims to make electrification more accessible and affordable, accelerating the transition to clean energy storage solutions. Furthermore, by shoring up domestic EV production, including battery-related manufacturing, automotive OEMs can be competitive in global markets that are increasingly looking for EV options to fill demand.
Specifically speaking, the electric battery supply chain is composed of several key components that need to be efficiently managed, and the U.S. is poised to do so. These include raw materials like lithium, cobalt, nickel, and others; production processes for assembling cells and integrating electronics into battery modules and packs; distribution networks for transporting finished battery products; and end-use applications, ensuring optimal battery performance–and all of these phases are receiving a “domestic” focus. Effective management of these elements is crucial for delivering safe, high-quality, and cost-efficient products, which is not only what U.S. consumers demand, but what global markets also require. As such, U.S. companies in particular must strategically decide which parts and processes to handle internally versus outsourcing, with strong consideration to cost, time-to-market speed, regulatory compliance, environmental concerns, and policy-related factors, all of which can vary and fluctuate.
It is no secret that manufacturers play a crucial role in the battery supply chain. For example, global production of lithium-ion batteries is projected to rise to 1 terawatt-hour (TWh) annually by 2030, up from 0.24 TWh in 2019, highlighting the need for efficient manufacturing strategies from a range of global players. To mitigate risks, U.S. companies should develop contingency plans and explore long-term strategies to meet rising demand and capacity, all while striving to reduce costs and environmental impacts.
What has been described is an ebb and flow between policy and government partnering with U.S. companies to create a long-term strategy that will see the U.S emerge as a competitive player in the battery industry that will create jobs, stimulate the workforce to learn new technologies and skillsets, foster innovation, and long-term economic gains, but there is a long way to go yet. Domestic policymakers from both sides of the aisle continually voice a desire to re-shore manufacturing from China, as we will discuss in future posts for the battery industry re-shoring may need to follow a nuanced approach.
Next week, we’re going to look specifically at the current Inflation Reduction Act (IRA) tax credits introduced to fuel the growth of U.S. clean energy manufacturing, with a particular focus on reducing reliance on foreign imports. The tax credits are complex, and the administration has issued guidance along the way to better understand what is in place to help incentivize reshoring and create a strong foundation for battery manufacturing and supply chains within the context of the domestic landscape. Don’t forget to tune in for a deep dive into these tax incentives and what they mean for U.S. manufacturing.