While federal incentives in the 2022 climate law are strengthening competitiveness of US energy storage manufacturing, domestic production will fall short of demand as early as 2025 “without strategic action,” according to a new report by Solar Energy Industries Association (SEIA), a national trade group.

“America’s ability to lead the global clean energy transition and boost grid reliability depends on how quickly we scale domestic production and deploy battery storage technology,” said CEO Abigail Ross Hopper.

Strategic action should include facilitating access to raw materials and incentives at the state level to reduce upfront costs and expedite project timelines, leveraging US manufacturing experience, partnerships with allied nations, and skilled workforce development.

“US manufacturers must be able to offer in-demand products, sell at a competitive price and deliver consistently high-quality goods in sufficient quantities on time,” notes the report, Energising American Battery Storage Manufacturing.

SEIA forecasts the US will see a six-fold increase in battery energy storage systems (BESS) demand this decade, from 18GWh last year to 119GWh in 2030.

US manufacturing capacity for all applications of lithium-ion (Li-on) batteries, the main form of energy storage for renewables, is currently at 60GWh. New factories announced here and in 20 countries with a US free trade agreement including Australia, Canada, and South Korea, will boost total capacity to more than 1TWh.

About 90% of planned manufacturing capacity is known to be dedicated to the electric vehicle sector. This will leave 10% for non-automotive applications which is primarily, but not exclusively BESS.

The report hopefully notes that “there is some upside” because over 25% of the planned facilities have not publicly stated which markets they will serve and may dedicate some capacity to BESS.

Still, the US must contend with surging global demand for batteries in all applications, from roughly 670GWh in 2022 to more than 4TWh by 2030. Of that, BESS demand will jump from 60GWh to 840GWh at the end of this decade.

SEIA’s research found availability of raw materials and cost is the biggest barrier to spurring US cost-competitive energy storage manufacturing.

While lithium and phosphorus from the US and its trading partners are accessible in sufficient quantities, availability of graphite and other processed materials, like anode and cathode active materials, “could create a shortfall,” notes the report.

Graphite supply is “one potential chokepoint” for the US battery industry, it acknowledges, noting the country has no natural graphite production sites. While Australia and Canada could help with supply, it would be insufficient to meet 2030 US demand. More than 60% of global natural graphite mining occurs in China.

The Inflation Reduction Act (IRA) broadened the range of federal incentives for energy storage to include domestic manufacturing through new tax credits, low-cost loans, government procurement, research and development support, and public-private partnerships. The tax credits cover production of electrode active materials, battery cells, and battery modules.

SEIA estimates these production incentives could reduce energy storage costs by 40% or more, helping improve US competitiveness.

“If factories can access raw materials at reasonable costs and improve their production yields to 90% the IRA incentives could make US batteries cost competitive with products produced in China,” said the report.