U.S. Battery Expansion Surges Ahead of Demand Curve
- U.S. battery production capacity is growing so rapidly that it may exceed domestic demand by 2026
- Government incentives under the Inflation Reduction Act have driven major foreign investment and reduced manufacturing costs
- Despite expansion, the U.S. remains heavily dependent on China for critical battery materials and supply chain inputs
The United States is rapidly becoming a major international battery manufacturing power, as it works to compete with other producers, such as China. The battery manufacturing industry is forecast to grow so much in the coming years that supply may soon outstrip demand.
Demand for batteries in the United States has grown significantly in recent years, with demand for energy storage expected to increase by 21 percent this year. This has been driven primarily by the increase in the deployment of renewable energy capacity across the U.S., which requires battery storage to ensure a stable supply of energy through the day and night. Going forward, the accelerated rollout of data centres is expected to drive demand even further.
The U.S. battery manufacturing industry has been rapidly growing since the passing of the Inflation Reduction Act (IRA) in 2022, under President Biden. The IRA introduced incentives for both domestic battery manufacturers and for storage developers who use U.S.-made products. In addition to supporting the accelerated growth in the U.S. renewable energy and cleantech market, increasing domestic battery production has helped reduce the country’s reliance on foreign supply chains, and, particularly, on Chinese batteries
According to data from the Centre on Global Energy Policy, the IRA awarded credits for local investment and production that drove down battery-making costs by as much as 30 percent. This helped to attract foreign investment to the U.S. market and was particularly appealing to Korean producers who aimed to compete with China in a market in which they did not have access.
Last year, U.S. production plants had the capacity to manufacture around 70 GWh of complete grid storage systems annually, a figure that could rise to 145 GWh this year. This means that the U.S. can now produce enough batteries to meet domestic demand. In 2026, around 28 percent of new U.S. power plant capacity is expected to be dedicated to battery production, with domestic production expected to outstrip demand by the end of the year.
Noah Roberts, the executive director of the U.S. Energy Storage Coalition, stated, “For the first time, the United States now has the capacity to supply 100 percent of domestic energy storage project demand with American-built systems. That is a fundamental shift from where we were just a year and a half ago, when the majority of battery storage systems were imported.”
The current production capacity marks a significant shift from the situation just two years ago, when the U.S. had almost no factory capacity for battery cells designed for grid usage, which are different to those used in electric vehicles. The industry growth has been supported by major investments from foreign companies, such as LG and Samsung. South Korean producers have invested around $20 billion in expanding capacity and are expected to contribute over two-fifths of the growth in production between 2025 and 2029, Benchmark Minerals estimated in 2024.
In 2025, Korea’s LG Energy Solution Vertech developed a dedicated cell production line for grid storage in Holland, Michigan, expanding production capacity to 16.5 GWh through a $1.4 billion project. The firm is expected to continue growing its manufacturing capacity across North America to reach 50 GWh by the end of the year. LG had previously focused on producing EV batteries at the plant, but with the EV market struggling and the demand for grid-scale batteries increasing, LG shifted lanes.
Despite the massive growth in the U.S. battery manufacturing capacity, the country still relies heavily on imports of high-value battery materials from countries such as China. For storage alone, the U.S. has imported over $100 billion in batteries and components since 2021, according to S&P Global, around half of which came from China. According to the International Energy Agency (IEA), “The lack of investment in midstream supply chains in these markets poses a growing risk to global supply security.
The IEA adds that production capacity and technical expertise for essential components, such as active materials and their precursors, remain heavily concentrated in China. Korea and Japan are the only other countries with notable midstream battery industries, offering opportunities to diversify some component sources. Nearly all batteries used for power grids rely on China for at least one step of their supply chain.”
With the introduction of high tariffs on multiple Chinese products under the Trump administration, there are always fears of retaliatory duties from China. Beijing still controls supply chains for the raw materials, such as graphite, meaning that battery producers in the U.S. must maintain good relations with their Chinese counterparts, which could be hindered if political relations between the two countries become strained.
The United States has significantly increased its battery manufacturing capacity in recent years, shifting from a focus on EV battery production to grid-scale storage. Significant incentives, introduced by the Biden administration, have encouraged high levels of foreign investment in the sector, particularly from Korean companies. However, the continued dependence on China and other countries for raw materials presents a risk to the supply chain, particularly with the ongoing geopolitical tensions and conflicts being seen across the globe.
By Felicity Bradstock for Oilprice.com
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