Energizing American Battery Storage Manufacturing
The U.S. solar and energy storage industry has faced a variety of supply chain and policy challenges in recent years, some of which significantly reduced deployment. While our country can overcome these challenges, we must keep two important lessons in mind. One, the United States will continue to face barriers in meeting its full solar and energy storage potential without a robust domestic manufacturing base. And two, the country’s overreliance on imports is an economic and national security vulnerability.
It is essential to the nation’s continued economic health, global competitiveness and energy security to quickly address our overdependence on solar and energy storage component imports and lay the foundation for a robust solar and energy storage manufacturing base here in America.
As the White House recognized in 2021, energy storage “offer[s] an important and growing market that can support the creation of American jobs, help meet our national security needs, and bring ambitious climate targets within reach.” In order to realize this potential, the United States must significantly invest in domestic clean energy manufacturing, including support for energy storage supply chains from raw material production to end use product manufacturing.
Achieving these goals, however, will require a balanced manufacturing and trade policy. History shows that tariffs in general have not had the desired effect of adding U.S. manufacturing capacity. In the case of tariffs on photovoltaic modules and cells, they have limited U.S. solar deployment, which has reduced the likelihood of investments in domestic manufacturing. Tariffs can also blunt domestic manufacturing. For example, the Section 301 tariffs cover most products coming from China, including manufacturing equipment and various inputs that cannot be readily sourced outside of the country.
It is well documented that federal industrial policies can launch massive private sector investments. In referencing multiple research studies, the U.S. Department of Energy (DOE) has concluded that:
policies and practices such as heavily subsidizing manufacturing and associated supply chains; streamlining siting and permitting; investing in necessary infrastructure; creating workforce education and training programs; and ensuring procurement with environmental conditions that preference their own domestic manufacturers have encouraged the development of in situ manufacturing needed to support the energy sector.
Historically, federal policy has focused on incentivizing solar and energy storage deployment. However, with passage of the Inflation Reduction Act (IRA), the United States broadened its federal incentive program to include domestic manufacturing through new tax credits, grants, low-cost loans, government procurement, research and development support, and public-private partnerships.
The IRA has the potential to greatly expand solar and energy storage manufacturing in the United States. For energy storage, the IRA offers incentives to produce electrode active materials, battery cells, and battery modules.
While the IRA can make domestically produced batteries cost competitive with Chinese products, one cannot overlook the importance of manufacturing experience, access to raw materials, partnerships with allies, and workforce in ensuring the success of domestic manufacturing.