➤ Dependence on foreign countries for lithium-ion batteries may stunt U.S. progress on energy transition

➤ Environmental degradation issues and costs loom as major obstacles in the U.S.

➤ Developing technologies aim to break down barriers to accelerating domestic supply chains

In May, Koch Strategic Platforms LLC, an investment arm of industrial giant Koch Industries Inc., led a series D funding round that raised $102 million in its first tranche for 6K Inc., a lithium battery startup.

The Massachusetts-based company aims to advance the domestic production of battery materials, including metal powders and cathodes, to accelerate the development of a domestic U.S. supply chain.

Manufacturers of lithium-ion batteries have invested billions of dollars into new factories across the U.S. as the Biden administration aims to reduce dependence on China for materials related to an energy transition. However, the U.S. imported a record 142,053 tonnes of lithium-ion batteries in the first quarter of 2022, up 153.9% from the year-ago quarter. China accounted for 77.5% of U.S. lithium-ion battery imports in the period. 6K CEO Aaron Bent said more of these materials should be produced on U.S. soil, but implementing the production technologies used in Asia on a mass scale could lead to environmental disaster.

6K is part of a new tactical move for Koch. An S&P Global Commodity Insights analysis found earlier this year that Koch, a company that traditionally has invested in oil and gas, has pumped roughly $1.7 billion into 18 companies focused on the energy transition.

Commodity Insights spoke with Bent about creating a domestic supply chain in the U.S. and the challenges facing the battery industry. The following conversation has been edited for clarity and length.

S&P Global Commodity Insights: What is your outlook for the battery industry in the United States, and what are some of the key factors driving that outlook?

Aaron Bent: In general, I would say the outlook is very strong. I think Tesla will sell something like 1.5 million vehicles this year. General Motors Co. has upped its guidance to something like a million in its fleet by 2025. Ford Motor Co. keeps increasing its guidance for one of its most popular vehicles, the Ford Lightning, which is all good news.

However, there's a backstory to this. It's a story about domestic production, maintaining U.S. technology leadership and national security. Our dependence on foreign countries for lithium-ion batteries has the potential to become the next OPEC.

The adoption of electric vehicles will grow 1,000% between 2020 and 2030, obviously enabled by mandates, lowered costs, that sort of thing. That's all excellent. But most people don't recognize that. That batteries also backup our critical infrastructure, our telecommunications infrastructure, our data centers and our power plants.

What are some of the greatest challenges and obstacles the industry faces when trying to make more batteries in the U.S. with materials mostly from the U.S.?

There's been a lot of announcements of domestic production of cells, which are the downstream portion below materials. A lot of people consider that we've solved the problem: fully 400 GWh of announced capacity for 2025, which is enough to do four to five million cars. It sounds fantastic, but those materials will still be sourced outside the United States.

The reason why battery materials remain offshore today is due to the two traditional reasons — cost and environmental impact. In fact, if you were to onshore the amount of battery materials required to satisfy U.S. demand [with technologies traditionally used by the industry], it would be an environmental disaster.

You're talking about over the course of five years, 135,000 Olympic pools worth of waste and the need to plant trees [in an area equivalent to] close to one of your medium-sized states to offset the CO2 footprint.

So, onshoring isn't really an option. Not only because of the environmental impact, but you wouldn't have an industry that is economically viable long term. You take those technologies from Asia, you put them on U.S. soil, you're talking about a 20% cost premium and no auto manufacturer that I know will be willing to pay a 20% cost premium long term, just because it's produced domestically.

That's the issue. We're talking about setting up an industry to fail, much like what has happened with the semiconductor industry.

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Why is it important to the average consumer to encourage a more domestic battery supply chain?

It really comes back to a national security issue, and we're seeing more and more heightened awareness around the war in Ukraine and concerns about China and Taiwan. I think there's heightened security and people have seen the influence on a daily basis of the shortage of [semiconductor] chips, whether it's the fact that they can't buy a car or some other aspect of it. That same heightened awareness and issue are going to be paramount in batteries as well.

Just to break it down very simply, we have to change the rules. We change the rules by implementing technologies that allow us to produce those materials on U.S. soil at costs lower than in China in a way that is not environmentally impactful.

That's what 6K enables. That's what this entire investment is around — it's about scaling battery materials production on U.S. soil in ways that do not hurt the environment, in ways that are competitively advantaged versus China.

What exactly is 6K's technology that makes it capable of producing these batteries at a lower cost than producers in Asia?

Essentially, we're harnessing 6,000-degree plasma, you can imagine, like a large lightsaber, something that's maybe four inches in diameter, six to eight feet long. We encapsulate that into a production system. We can produce materials in two seconds, with the same electric vehicle quality end result that takes today's chemical process three days to do in a situation that's environmentally unfriendly, wasteful and takes a lot of water.

We can do the same thing with an ultrafast, ultraclean, low-cost production method using plasma. This is something that's been in development for about a decade, it comes out of the Massachusetts Institute of Technology. We actually have it in production at high volume today, in another operating division, our 6K additive division, which is producing premium metal powders for 3D printing.

So, it's in production, the technology works, and it has been industrialized. We're now applying it to batteries so we can produce these on U.S. soil.

Aside from the funding itself, what sort of advantages does 6K see in partnering with an affiliate of Koch Industries — a company more often associated with oil and gas — on an energy transition project?

Koch is pretty good at looking down the road and seeing key trends and getting involved early. They're investing in affordable energy companies and projects both on the renewable side and with traditional approaches. They think that's critically important for the long-term future of the United States. They believe in the importance to the U.S. future, they believe that it's good business.

They're a natural partner for 6K. I mean, they are one of the largest private companies in the entire world and they have the reach and the expertise at scaling that few others have. [They have] massive infrastructure and deployment expertise and are highly tied into the supply chain. They hold a long-term view. That's important to 6K's future as we look to sort of transform and transition the industry as we see it today.

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