Regional spotlight: Battery chemistry & next-gen storage materials in US — what's different and why it matters

The United States installed 16.3 GW of new battery storage capacity in 2025, more than doubling the 7.9 GW added in 2024, making it the world's largest market for grid-scale energy storage by annual deployment (Wood Mackenzie, 2026). Yet over 90% of battery cells installed in US projects were manufactured in China or by Chinese-owned facilities in Southeast Asia, even as the Inflation Reduction Act (IRA) poured $136 billion in tax credits and incentives into reshoring the entire battery supply chain. For procurement professionals sourcing storage materials and technologies, the US market presents a unique combination of aggressive policy support, emerging domestic manufacturing capacity, intensifying trade restrictions, and technology diversification that creates a fundamentally different operating environment from any other region.

Why It Matters

The US battery chemistry landscape is diverging from global patterns in ways that directly affect procurement strategy, supply chain design, and long-term cost structures. Globally, lithium iron phosphate (LFP) chemistry dominates new installations, capturing roughly 70% of global grid storage deployments in 2025 (BloombergNEF, 2026). In the US, however, the interplay between IRA manufacturing credits, Department of Energy (DOE) loan guarantees, and escalating Foreign Entity of Concern (FEOC) restrictions is reshaping which chemistries are commercially viable, which suppliers can participate in federally supported projects, and which next-generation materials pathways are receiving disproportionate investment.

The domestic content bonus under IRA Section 45X provides a production tax credit of $35 per kWh for battery cells manufactured in the US and $10 per kWh for battery modules, creating a cumulative incentive of up to $45 per kWh that can reduce effective cell costs by 30 to 40% for qualifying domestic production. However, qualifying requires meeting critical mineral sourcing requirements that increase annually: by 2027, 80% of critical minerals (by value) must be extracted or processed in the US or a free trade agreement (FTA) partner country, and 100% of battery components must be manufactured or assembled in North America. These escalating thresholds are fundamentally altering procurement decisions and supplier selection in the US market.

China controls approximately 75% of global lithium-ion cell manufacturing capacity, 90% of anode material production, and 70% of cathode material processing (International Energy Agency, 2025). The FEOC restrictions embedded in the IRA effectively disqualify batteries with Chinese-entity involvement from receiving the full consumer and commercial EV tax credits and production tax credits beginning in 2025 for components and 2027 for critical minerals. This regulatory architecture has no equivalent in Europe, Japan, or Australia, and it forces US-focused procurement teams to build supply chains that are structurally distinct from global norms.

Key Concepts

IRA Manufacturing Credits and Domestic Content Requirements

The IRA's Advanced Manufacturing Production Credit (Section 45X) provides per-unit tax credits for domestically produced battery components: $35/kWh for electrode active materials, $10/kWh for battery cells, and $35/kWh for battery modules. The Investment Tax Credit (Section 48) provides an additional 10% domestic content bonus for energy storage projects using qualifying US-manufactured equipment. Combined, these credits can offset 25 to 45% of total installed storage system costs for projects that meet the requirements.

The practical impact on procurement is significant. A 100 MWh grid storage project using imported Chinese LFP cells might achieve a total installed cost of $180 to $220 per kWh. The same project using domestically manufactured cells with qualifying critical mineral sourcing could achieve an effective cost of $140 to $170 per kWh after credits, despite higher upfront cell costs of $90 to $110 per kWh compared to $55 to $70 per kWh for imported Chinese cells. This credit-adjusted cost advantage creates a strong financial incentive for domestic sourcing, but only for buyers who can navigate the complex qualification requirements.

FEOC Restrictions and Supply Chain Compliance

The Treasury Department's final FEOC guidance, issued in December 2024, defines a Foreign Entity of Concern as any entity that is owned by, controlled by, or subject to the jurisdiction of China, Russia, North Korea, or Iran. The definition extends to entities where a covered nation's government holds a 25% or greater board seat, voting right, or equity interest. For battery supply chains, this effectively excludes CATL, BYD, EVE Energy, CALB, and other Chinese cell manufacturers from IRA-qualifying supply chains.

The compliance burden falls heavily on procurement teams. Tracing critical mineral provenance through multi-tier supply chains requires documentation from mine to cathode to cell. Lithium processed in Chinese facilities, even if originally extracted in Australia, does not qualify. Cobalt refined in Chinese-owned facilities in the Democratic Republic of Congo does not qualify. Graphite, where China controls over 90% of global anode-grade processing capacity, presents the most challenging supply chain bottleneck, as qualifying non-Chinese sources of battery-grade synthetic or natural graphite remain limited.

Next-Generation Chemistry Priorities

The US market is placing outsized bets on chemistries that reduce or eliminate dependence on Chinese-controlled supply chains. The DOE's Battery500 Consortium and ARPA-E's SCALEUP program have directed over $1.2 billion toward lithium-metal anodes, solid-state electrolytes, sodium-ion batteries, and iron-air chemistries since 2022 (DOE, 2025). These investments reflect a strategic calculation: even if LFP offers the lowest near-term cost globally, the US cannot achieve supply chain security using a chemistry where the dominant supplier base is concentrated in a single geopolitical competitor.

Sodium-ion batteries have emerged as a particular focus for US grid storage applications. Using abundant sodium, iron, and manganese rather than lithium, cobalt, or nickel, sodium-ion cells avoid the most constrained supply chains entirely. Natron Energy began commercial production of Prussian blue sodium-ion batteries at its Michigan facility in 2025, targeting data center UPS and short-duration grid applications at costs of $80 to $100 per kWh at the cell level.

Iron-air batteries, championed by Form Energy, represent another distinctly US-prioritized pathway. Form Energy's first commercial-scale factory in Weirton, West Virginia (capacity: 500 MWh/year, scaling to several GWh) began equipment installation in 2025, with initial deliveries to Great River Energy in Minnesota planned for 2026. Iron-air technology offers 100-hour discharge duration at projected costs of $20 to $30 per kWh, targeting a market segment (multi-day storage) where lithium-ion is economically unviable.

What's Working

The IRA-driven domestic manufacturing buildout is producing tangible results. As of early 2026, over 40 battery cell and component manufacturing facilities have been announced in the US, representing combined investment commitments exceeding $110 billion and projected annual cell production capacity of over 1,000 GWh by 2030 (Benchmark Mineral Intelligence, 2026). While many projects are still under construction, several have reached or are approaching commercial production.

Panasonic's $4 billion factory in De Soto, Kansas, began producing 2170-format NMC cells in late 2025 with an initial capacity of 30 GWh per year. LG Energy Solution's $5.5 billion joint venture with General Motors (Ultium Cells) operates three plants in Ohio, Tennessee, and Michigan with combined capacity of 140 GWh. SK On's Georgia facilities produce 43 GWh annually. These facilities provide procurement teams with domestically manufactured cell options that qualify for IRA credits, though current production is predominantly allocated to automotive OEMs rather than grid storage.

For grid storage specifically, several domestic LFP suppliers are scaling. American Battery Technology Company (ABTC) is commissioning its Nevada-based cathode production facility using domestically sourced lithium from its Tonopah extraction operation. Mitra Chem, backed by $90 million in venture funding, is scaling LFP and LMFP (lithium manganese iron phosphate) cathode production in Mountain View, California, targeting cell manufacturers building US capacity. Alsym Energy, based in Woburn, Massachusetts, has developed a non-lithium, non-cobalt aqueous electrolyte battery chemistry with projected cell costs below $30 per kWh for stationary storage, entering pilot production in 2025.

Solid-state battery development has attracted particular attention. QuantumScape reported its first B-sample deliveries to automotive OEMs in 2025, demonstrating solid-state lithium-metal cells with energy density exceeding 400 Wh/kg. Solid Power, partnered with BMW and SK On, shipped sulfide-based solid electrolyte material from its Thornton, Colorado facility. While solid-state remains pre-commercial for grid storage, the technology pathway promises to eliminate liquid electrolyte flammability risks and enable higher energy density that reduces system footprint.

What's Not Working

Despite the policy tailwind, several structural challenges constrain the US battery materials ecosystem.

Critical mineral processing remains the most significant bottleneck. The US processes less than 5% of the world's lithium into battery-grade lithium hydroxide or carbonate, less than 1% of graphite into anode material, and negligible volumes of manganese sulfate or nickel sulfate at battery grade (US Geological Survey, 2025). New processing facilities from Albemarle (Kings Mountain, North Carolina lithium), Piedmont Lithium (Tennessee), and Syrah Resources (Vidalia, Louisiana anode graphite) are under construction but face 2 to 4 year ramp timelines and persistent permitting delays.

Permitting timelines for mining and processing facilities exceed those in competing jurisdictions. The average time from mine permit application to production in the US is 7 to 10 years, compared to 2 to 3 years in Australia and Canada. Lithium Americas' Thacker Pass mine in Nevada, one of the largest known lithium deposits in North America, required over 5 years of permitting and survived multiple legal challenges before breaking ground in 2023, with first production not expected until 2027. For procurement teams, this means domestic critical mineral supply will remain constrained through at least 2028 to 2029.

The cost gap between US and Chinese cell manufacturing remains substantial. BloombergNEF estimates that US LFP cell production costs in 2025 averaged $95 to $115 per kWh, compared to $50 to $65 per kWh for Chinese manufacturers. Even after IRA credits, the effective cost gap persists for applications that do not qualify for the full credit stack (such as standalone storage projects that use the ITC rather than the production tax credit). This cost differential incentivizes creative procurement structures, including tolling arrangements, joint ventures with FTA-partner manufacturers, and long-term offtake agreements that lock in credit-adjusted pricing.

Workforce shortages compound manufacturing challenges. The battery industry requires an estimated 100,000 additional skilled workers in the US by 2030, spanning electrochemistry, process engineering, quality control, and equipment maintenance (National Alliance for Advanced Technology Batteries, 2025). Training pipeline capacity at community colleges and technical programs near new factory locations has expanded but cannot yet match the pace of factory construction. Several announced projects have delayed production start dates by 6 to 18 months due to workforce recruitment and training challenges.

Key Players

Established companies: Panasonic Energy (cell manufacturing in Kansas and Nevada), LG Energy Solution (joint ventures with GM, Hyundai, and Honda across multiple US sites), SK On (Georgia cell manufacturing for automotive and emerging grid applications), Samsung SDI (planned Indiana cell factory), Albemarle (domestic lithium extraction and processing in North Carolina and Nevada), Tesla (4680 cell production at Giga Texas and Giga Nevada)

Startups and technology providers: Form Energy (iron-air long-duration storage, West Virginia factory), Natron Energy (sodium-ion batteries, Michigan production), QuantumScape (solid-state lithium-metal cells, California), Alsym Energy (non-lithium aqueous chemistry, Massachusetts), Mitra Chem (LFP/LMFP cathode materials, California), American Battery Technology Company (integrated lithium extraction and cathode production, Nevada), Group14 Technologies (silicon-carbon anode materials, Washington state)

Investors and government programs: DOE Loan Programs Office ($40+ billion in conditional commitments to battery supply chain projects), ARPA-E (next-generation chemistry R&D funding), Breakthrough Energy Ventures (early-stage battery technology portfolio), The Engine by MIT (deep-tech battery startup investor), Clean Energy Finance Corporation partnerships (cross-border FTA supply chain investments)

Action Checklist

• Map your current battery cell and component suppliers against FEOC restriction criteria to identify disqualification risks for IRA-eligible projects
• Model total cost of ownership including IRA Section 45X and Section 48 credits for domestically sourced vs. imported cells to determine the credit-adjusted cost advantage
• Establish direct relationships with emerging US cathode and anode material suppliers (Mitra Chem, ABTC, Group14, Syrah Resources) to secure early supply commitments
• Evaluate sodium-ion and iron-air chemistries for applications where lithium-ion supply chain constraints create delivery risk or cost uncertainty
• Monitor DOE Loan Programs Office conditional commitments and final loan closings as leading indicators of which domestic manufacturers will reach commercial scale
• Develop critical mineral sourcing documentation protocols that can demonstrate FTA-partner provenance through the full supply chain
• Assess workforce availability at or near planned procurement sites and factor training timeline requirements into project schedules
• Negotiate long-term offtake agreements with domestic cell manufacturers that lock in IRA credit-adjusted pricing for 5 to 10 year terms

FAQ

Q: How do IRA credits change the effective cost comparison between US-made and Chinese battery cells? A: Chinese LFP cells landed in the US cost approximately $55 to $70 per kWh in 2025. US-manufactured LFP cells cost $95 to $115 per kWh before credits. The Section 45X production tax credit provides up to $45 per kWh ($35 for cells plus $10 for modules), reducing effective domestic cell costs to $50 to $70 per kWh. For projects qualifying for the Section 48 ITC domestic content bonus (an additional 10%), the total effective cost advantage shifts decisively toward domestic sourcing. However, qualification requires meeting escalating critical mineral and component sourcing thresholds that add compliance costs of $3 to $8 per kWh for supply chain documentation and auditing.

Q: Which next-generation battery chemistries are closest to commercial deployment in the US? A: Sodium-ion is nearest to commercial scale, with Natron Energy already shipping cells from its Michigan factory for data center and short-duration storage applications. Iron-air technology from Form Energy is expected to deliver its first commercial systems in 2026 for multi-day storage use cases. Solid-state lithium-metal batteries from QuantumScape and Solid Power have delivered B-samples but remain 3 to 5 years from grid-storage-scale commercialization. Silicon-carbon composite anodes from Group14 Technologies are in commercial production and being integrated into next-generation lithium-ion cells by multiple manufacturers to boost energy density by 20 to 40%.

Q: What happens to US battery supply chain economics if IRA credits are reduced or repealed? A: The risk is real but mitigated by several factors. The IRA's tax credits are structured as 10-year incentives running through 2032, and many are transferable, meaning they have created a secondary market that generates broad constituency support. Congressional Budget Office estimates indicate that early repeal would eliminate over 100,000 manufacturing jobs concentrated in Republican-leaning districts, creating bipartisan political resistance. However, procurement teams should stress-test project economics under scenarios where credits are reduced by 25 to 50% after 2027. The most resilient projects are those where domestic sourcing provides strategic value (supply security, delivery speed, reduced tariff exposure) beyond credit-adjusted cost savings.

Q: How should procurement teams handle the graphite supply chain bottleneck? A: Anode-grade graphite is the most supply-constrained material for IRA-compliant battery manufacturing. China processes over 90% of global natural and synthetic graphite for battery applications. Near-term solutions include sourcing from Syrah Resources' Vidalia, Louisiana facility (the only operating battery-grade graphite processor in the US), from Nouveau Monde Graphite in Quebec (FTA-qualifying Canadian supply), and from synthetic graphite producers using petroleum coke feedstock in the US. Longer-term, silicon-dominant anodes from companies like Group14 and Sila Nanotechnologies could reduce graphite dependency by replacing 30 to 80% of anode graphite content with silicon-carbon composites, though this shifts the supply chain challenge from graphite to high-purity silicon.

Sources

• Wood Mackenzie. (2026). US Energy Storage Monitor: 2025 Year in Review and Q1 2026 Outlook. Edinburgh: Wood Mackenzie.
• BloombergNEF. (2026). Global Battery Chemistry Outlook: Cell Cost Benchmarks by Region and Chemistry. London: BloombergNEF.
• International Energy Agency. (2025). Global EV Outlook 2025: Battery Supply Chain Analysis. Paris: IEA.
• US Department of Energy. (2025). Battery Manufacturing and Supply Chain: Domestic Production Capacity Assessment. Washington, DC: DOE Office of Energy Efficiency and Renewable Energy.
• Benchmark Mineral Intelligence. (2026). North American Battery Gigafactory Assessment: Construction Status and Capacity Projections. London: Benchmark.
• US Geological Survey. (2025). Mineral Commodity Summaries 2025: Lithium, Graphite, Cobalt, Nickel, Manganese. Reston, VA: USGS.
• National Alliance for Advanced Technology Batteries. (2025). US Battery Workforce Development: Gap Analysis and Training Pipeline Assessment. Washington, DC: NAATBatt International.