Powering National Security: Why Domestic Batteries Are the Next Strategic Sector

Building domestic battery capacity has evolved from primarily an economic objective to a national security imperative, linked to the need to protect strategic sectors and supply chains from external pressure. The idea of “near-shoring” the entire battery value chain, from materials to modules, is becoming increasingly important.

In the midst of shifting our national attention to energy storage, utility-scale battery systems are no longer just supplementary components for the power grid: they are considered essential infrastructure. They are vital for balancing intermittent renewable energy sources, avoiding costly transmission upgrades, providing flexible capacity during peak demand and extreme weather, and generally supporting grid reliability. And dependence on foreign imports for this critical infrastructure makes the U.S. vulnerable to disruptions.

The U.S. faces significant vulnerabilities in critical components further up the supply chain. For instance, we rely entirely on imports for crucial midstream processing and the manufacturing of components like anode and cathode active materials. China concentrates a vast majority of global production in these areas, making reliance on imports a significant vulnerability. Even for dominant chemistries like LFP (lithium iron phosphate), much of the cathode active material and precursor cathode active material production is concentrated in China. Rare earth elements, essential for making permanent magnets used in wind turbines and electric vehicles, are largely refined in China, which dominates global production.

Under the previous and current administrations, themes like “energy independence” and “energy dominance” have been prominent in the context of political discourse. Companies are adapting this messaging to align with these priorities, connecting clean energy solutions, including battery systems, to strengthening the energy grid and enhancing national security. This suggests that reducing reliance on foreign energy sources and technologies is now seen as fundamental to national security.

The “How”: Tariffs, Incentives, and Strategic Maneuvers

Several strategies are being employed to bolster the US-based battery industry and address these national security concerns:

1. Tariffs: A key action has been the imposition of significant tariffs on imported goods from China. Although there is significant confusion around specifics at the moment, an aspect of the new administration’s trade policies included the United States imposing steep tariffs on most Chinese imports. These tariffs are intended to make imports more expensive and incentivize domestic production. The rationale includes protecting domestic industries, reshoring manufacturing, and promoting global competition.


2. Domestic Manufacturing: Legislation like the Inflation Reduction Act (IRA) has already spurred investment in U.S. battery manufacturing through mechanisms like the 45X manufacturing credit (implicitly mentioned as driving investment). Tariffs, alongside domestic content incentives, may further boost demand for US-made components and accelerate on-shoring efforts. Despite recent project cancellations by some industry players, battery manufacturing in the U.S. is still anticipated to grow over the next several years as larger suppliers proceed with their plans to increase domestic capacity.


3. Supply Chains: The tariffs and concerns about dependency are prompting US buyers to look for suppliers outside of China. While countries like South Korea and Japan are already significant players, there’s also a push to build domestic capacity and explore alternatives like Southeast Asia or resource-rich nations like Indonesia, and potentially Middle Eastern and Latin American countries for upstream supply.


4. Domestic R&D and Alternative Chemistries: Reliance on China for common chemistries like LFP is encouraging the development of alternative battery technologies and mining with the US. Domestic companies like Lyten out of California are exploring lithium-sulfur, which uses domestically abundant materials like sulfur instead of imported critical minerals refined in China. Amprius, also headquartered in California, produces high-performance silicon anode lithium-ion batteries. Forge Nano, a materials company based in Colorado, has developed nano-coating technology for battery cells. And Xerion, out of Ohio, is another example of a domestic manufacturer of critical minerals and components for lithium batteries. Sodium-ion batteries are another promising alternative, as the U.S. has ample domestic reserves of inputs like soda ash, iron, and phosphorus needed for this chemistry. Unigrid is another domestic company out of California producing sodium-ion battery cells in both cylindrical and prismatic form factors. A growing number of companies, like Acculon, are investing in domestic production of battery modules and packs to enable a U.S. cell-to-pack supply chain.


5. Foreign-Trade Zones (FTZs): Foreign-Trade Zones, administered by entities like the U.S. Customs and Border Protection (CBP), are tools designed to encourage domestic operations and global competitiveness. By designating a facility as an FTZ, companies can receive goods without immediately incurring U.S. import duties. Duties are typically paid only when the merchandise leaves the zone for consumption within the US. If products manufactured within an FTZ using imported components are then exported, duties on those components can often be avoided entirely. Companies like Acculon are seeking FTZ designations for their facilities to navigate tariff uncertainty and enhance cost efficiency, particularly for products being exported or used in equipment manufactured outside the U.S.

The Path Forward

While the push to build a US-based battery industry for national security is clear, the process is not without challenges. Tariffs can increase costs in the short term, impacting project economics and potentially slowing the deployment of energy storage necessary for grid reliability. Domestic production capacity, while growing, has not yet reached the scale needed to replace imports for large-scale applications. The supply chain for crucial components like cathode active materials is still heavily concentrated in China. Market uncertainty due to policy shifts is a significant concern for the industry.

Despite these hurdles, the framing of the battery industry as a national security priority underscores its critical importance to the U.S. economy and infrastructure. Through a combination of trade policy, domestic incentives, supply chain diversification, and technological innovation, the U.S. aims to build a more resilient and secure domestic battery ecosystem, reducing foreign dependency and strengthening its energy future.