Renewable Energy Finance: LG Energy Solution (LGES) to invest $5.5bn to set up a battery manufacturing complex in the US

The announcement represents the single largest investment ever for a battery manufacturing complex in North America

The complex - to be located in Arizona - will comprise two separate manufacturing facilities. A $3.2bn facility will be dedicated to the manufacturing of cylindrical batteries for electric vehicles (EVs) with a production capacity of 27 GWh/year. The second $2.3bn facility will be dedicated to the manufacturing of lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS) with a production capacity of 16 GWh/year. Construction of the complex is expected to start later this year with commercial operations at the EV and ESS facilities to begin from 2025 and 2026, respectively. 

The move represents a significant scale-up of LGES’ original plan to set up a 11 GWh/year EV battery manufacturing facility with an investment of $1.4bn, announced Apr’22, LGES announced its intention to. The scale-up follows the company’s announcement to more than double its global battery production capacity to 520 GWh/year by 2025, over 41% of which will be located in North America.

Enerdatics observes that as the supply chain for lithium-ion battery components remains strained amid high demand from the EV industry, players involved in the ESS sector are diversifying their investments in battery manufacturing to other technologies. Recently,  American Battery Factory and ICL Group announced plans to set up LFP battery manufacturing facilities in the US for a capital investment of $1.2bn and $400mn, respectively. Other major moves include Canada-based energy solution provider Zinc8’s establishment of its first commercial production facility for zinc-air batteries in New York. Enerdatics understands that political pressure to reduce reliance on China, which currently hosts as much as 90% of the global production of some of the key components for batteries, is causing the US government to incentivize investments in the domestic battery manufacturing industry. These incentives include a production tax credit (PTC) of up to 10% of the production cost for battery mineral and material processing and $35/kWh for the cell manufacturers under the Advanced Manufacturing Production Credits of Inflation Reduction Act. Amid plans by US utilities to triple their battery storage capacity to 30 GW by 2025, investments in domestic battery manufacturing will ease the impact of supply chain bottlenecks on developers and help lower the cumulative system installment cost.

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.

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