The site of a former aluminum smelter in West Virginia is a microcosm of the clean energy economy that Sen. Joe Manchin (D-W.Va.) envisioned when he announced a breakthrough on the most consequential climate law in US history one year ago. Harnessing the Inflation Reduction Act (IRA) of 2022, Berkshire Hathaway Energy subsidiary BHE Renewables LLC in March broke ground on a $500 million solar- and battery-powered industrial manufacturing complex in Ravenwood, W.Va., that Manchin said was "exactly what I had in mind."

. This story is part of a series examining the impact and implementation of the Inflation Reduction Act since it was enacted. Click on the links below as they become available to see other stories in the series. US heralds clean energy manufacturing 'renaissance' US solar manufacturing rises from rubble US climate law cues $63B spending spree on battery factories Speed of mining investments surprises experts Hydrogen developers hold off construction, ramp up lobbying US boost to offshore wind imperiled by struggling projects .

A key participant is Michigan-based battery upstart Our Next Energy Inc. (ONE), which BHE Renewables enlisted to supply energy storage systems for a 420-MWh microgrid. ONE plans to invest $22 million to assemble the systems at a repurposed building onsite, using lithium-ion battery cells from a planned $1.6 billion factory in Van Buren Township, Mich.

Since President Joe Biden signed Manchin's bill Aug. 16, 2022, at least $63 billion in public- and private-sector funds have been committed to invigorating the country's nascent battery supply chain, according to S&P Global Commodity Insights and other public information, unleashing a fast-paced industrialization that aspires to decarbonize the world's largest economy largely from within.

"A part of the IRA is it values speed," Deeana Ahmed, chief strategy officer at ONE, said in an interview. "We're doing a lot domestically."

ONE is among many domestic and international battery makers scrambling to meet surging US demand for electric vehicles and electrochemical energy storage, including heavyweights Tesla Inc., LG Energy Solution Ltd., Samsung SDI Co. Ltd., General Motors Co. and Ford Motor Co. Based on their disclosed plans, US lithium-ion battery cell manufacturing capacity could roughly quadruple from 2022 to an annual capacity of 360 GWh by 2024, and then within another year nearly double, to 678 GWh, Commodity Insights data shows.

Almost 1 TWh of US cell production capacity is planned by end of the decade, enough for about a 15% share of global capacity in 2030, according to Commodity Insights data, up from 4.4% in 2022. China-based cell factories, on which the US is now heavily reliant, would see their share of global capacity decline to about 57% in 2030 from nearly 79% in 2022, amid expansion in both the US and Europe, if the manufacturing plans tracked by Commodity Insights come to fruition.

Upstart ambitions

The US battery manufacturing surge leans heavily on the IRA's 10-year tax credit for cell production, at $35 per kWh, which Ahmed called "phenomenal," as well as another $10 per kWh for battery modules.

Those tax credits could amount to $30.6 billion in federal support for manufacturers, the Congressional Budget Office estimated. Or it could amount to considerably more. An economist at George Mason University's Mercatus Center, for instance, has calculated the battery cell and module incentives could approach $200 billion.

By meeting certain domestic content requirements, developers of energy storage stations can qualify for a 10% bonus incentive on top of a 30% investment tax credit, which is further encouraging US-made batteries.

How much battery manufacturing capacity the US adds this decade, and how much that ends up costing the federal government, depends on the success of both major producers and startups like ONE, KORE Power Inc. and FREYR Battery.

ONE, founded in 2020 by CEO Mujeeb Ijaz, plans to complete an initial battery cell pilot production line at its Michigan factory later this year, with high-volume manufacturing targeted for late 2024 or 2025. The company, which specializes in iron-infused lithium-ion batteries, also has a research and development facility in Silicon Valley.

So far, the company has raised $325.6 million from a dozen investors in two disclosed funding rounds, Commodity Insights data shows, including from Breakthrough Energy LLC, a venture firm founded by Bill Gates. ONE is seeking another roughly $300 million in a third round of financing and also has applied for a US Energy Department loan to further fuel its growth, according to Ahmed.

Idaho-based KORE Power, another battery startup, in June celebrated a conditional $850 million DOE loan to support its planned more than $1 billion cell and module complex in Buckeye, Ariz., on which ground was broken at the end of 2022. The company also has financial backing from Charlotte, NC-headquartered Honeywell International Inc. and Germany's Siemens AG, which in November 2022 both participated in the first tranche of a $150 million equity funding round.

"Our goal from the very beginning of KORE was to be able to bring the supply chain here," KORE President Jay Bellows said in an interview. "We very clearly can see that the US is dependent on foreign products."

KORE, which plans to begin shipments from Buckeye to EV makers and energy storage developers in late 2024 or early 2025, intends to source as much battery feedstock material and components from the US as possible.

"If we have to reach out further than that, we go into the free-trade countries, as the IRA suggested," Bellows said.

Currently, KORE assembles modules at a Vermont factory using imported cells.

'Ahead of schedule'

ONE and KORE factories are part of battery supply chain clusters forming around the US Southeast, Midwest and Southwest.

The biggest battery factory deal since the IRA came into force is the DOE's conditional loan of up to $9.5 billion for a joint venture between Ford and South Korean battery maker SK on Co. Ltd. to build a trio of plants in Kentucky and Tennessee to make batteries for Ford electric vehicles. Ford also has committed $3.5 billion to set up a battery plant in Michigan, relying on technology from China's Contemporary Amperex Technology Co. Ltd., the world's largest battery maker.

But the company faces uncertain demand signals and has slowed its EV rollout, highlighting the risks battery and EV makers face in ramping up their multibillion-dollar investments.

"There are plenty of customers," Ford CEO Jim Farley said on a July 27 second-quarter earnings call. "The issue is the price they are willing to pay has come down."

Ultium Cells LLC, a joint venture of GM and South Korea-based LG Energy Solution, a subsidiary of LG Chem Ltd., in November secured a $2.5 billion DOE debt deal for battery cell factories in Michigan, Ohio and Tennessee. Cell production is underway at the Warren, Ohio, plant, while the facility in Spring Hill, Tenn., is on track to start producing later this year, GM said in a July 25 earnings presentation.

The company has "experienced delays" in ramping up EV production, but the Ultium Cells venture "is delivering great quality and production is ahead of schedule," GM CEO Mary Barra said on the call.

LG is also partnered with Honda Motor Co. Ltd. on an initial $3.5 billion joint venture battery plant under construction in Ohio and plans to break ground later this year on a $5.5 billion lithium-ion battery hub in Queen Creek, Ariz., touted as North America's "single largest investment ever for a stand-alone battery manufacturing facility." The Arizona investment, announced in March, includes one factory to make cylindrical cells for EVs and another to manufacture pouch-type lithium-iron-phosphate cells for stationary storage.

Tesla jumped ahead of its EV and battery rivals several years ago, relying on a joint venture factory near Reno, Nev., with Japan's Panasonic Holdings Corp. The plant, which had 10 GWh of cell capacity in 2017, has since expanded to 37 GWh. In January, Tesla announced it would invest more than $3.6 billion to expand EV and battery cell manufacturing at the complex, dubbed Gigafactory Nevada, including manufacturing of its own cell.

In addition, Tesla recently signed a lease for a new building near its existing cell pilot line in Fremont, Calif., to increase cell production there, according to a San Francisco Business Times report in June. The vertically integrated EV, energy storage and battery company is also scaling up production of proprietary cell in Austin, Texas, while ramping a utility-scale storage assembly factory in Lathrop, Calif., and investing further up the supply chain as well.

'Renaissance of manufacturing' requires electrons

Despite the IRA's undeniable boost, battery makers are quick to flag the challenges they face, which include somewhat uncoordinated policies, uneven supply and demand, uncertain upstream materials, enormous financing needs and onerous project permitting.

Tesla CEO Elon Musk recently sounded alarm bells over the power grid itself.

"My biggest concern is that there's insufficient urgency, and people just don't understand how much electricity demand there will be," Musk said in Oakland, Calif., in late July at a symposium hosted by Pacific Gas and Electric Co., the utility operating arm of PG&E Corp. "Whatever your demand predictions are for electricity ... I suspect they are too low."

Musk, who anticipates three times more electricity demand in the US by roughly 2045, is far from the only executive to express worries over the speed of grid infrastructure and power plant development. Grid interconnection capacity for EV charging stations, new renewable power plants and battery storage stations has become a widely recognized bottleneck.

"As we scale ... in this renaissance of manufacturing, we don't have enough infrastructure actually to manage the load of these facilities," said ONE's Ahmed.

GM, which in July joined a coalition of major US retailers and tech companies seeking closer ties with grid operators, also has concerns.

"It gets back to the reliability of the grid because we've got to make sure that we have that [significant] amount of power available for us to be able to make those battery cells and, ultimately, the batteries and the EVs," Rob Threlkeld, GM's director of global energy strategy, said in an interview. Battery factories, with their cleanroom environments and complex, heavy machinery, "are definitely energy hogs," he said.

In response to those concerns, a spokesperson for the Edison Electric Institute, which represents US investor-owned utilities, defended its members, citing substantial investments to make the grid "stronger, cleaner, more dynamic, and more secure."

"Over the past decade, electric companies have invested more than $1 trillion in critical energy infrastructure, including more than $154 billion in 2022 alone," Edison Electric Institute spokesperson Sarah Duldaller said in an email. Many utilities are currently seeing demand rise "and are adjusting their plans accordingly," she added.