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While the Inflation Reduction Act aims to boost domestic production of lithium-ion batteries that are widely used for solar energy storage and electrified transportation, the availability of components needed by manufacturers could drop below demand by 2025, a new report concludes. 

The Solar Energy Industries Association, a trade association of the U.S. solar industry, said in a report released Nov. 16 that the cost of raw materials represents a major hurdle to ramping up domestic energy storage manufacturing in the United States. 

Supplies of certain raw materials, such as phosphorus and lithium, are likely to be adequately available in the U.S. as well as from its trading partners, the report said. However, the availability of graphite and other processed materials, like cathode and anode active materials, could create a shortfall. 

“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,” the report said. 

The lithium-ion battery is the main form of energy storage for renewable energy and over the next decade, there will be a surge in global demand for it due to the unprecedented investment in solar as a result of the Inflation Reduction Act’s production incentives, the SEIA said. 

Globally, total demand for batteries in all applications, including solar and electric vehicles, will grow from roughly 670 GWh in 2022 to over 4,000 GWh by 2030 while U.S. demand for battery energy storage systems is likely to increase over six-fold from 18 GWh to 119 GWh by 2030, according to the report. U.S. manufacturing capacity for all lithium-ion battery applications is currently at 60 GWh 

The U.S. 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. For energy storage, the Inflation Reduction Act. (IRA) offers incentives to produce electrode active materials, battery cells, and battery modules. 

These production incentives could reduce energy storage costs by 40% or more, helping to improve U.S. competitiveness. If factories can access raw materials at reasonable costs and improve their production yields to 90%, the IRA incentives could make U.S. batteries cost competitive with products produced in China, the report said. 

Manufacturers will face challenges like longer development times and training and recruitment to address workforce shortfalls. Production elements including siting, permitting, constructing and commissioning new factories influence how quickly domestic manufacturing can scale. These builders must work to recruit, train, and retain a high-quality workforce, focusing on roles for machine operators, production technicians, and mining, chemical, and electrical engineers.  

Effective state regulations and industrial policies can provide early-stage support for mining and refining of materials to ensure manufacturers can meet demand. State economic development offices are also positioned to unleash domestic energy storage production through incentive packages that reduce upfront costs and expedite project timelines.  

“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,” SEIA president and CEO Abigail Ross Hopper said. 

“Smart and strategic investments across the supply chain are needed because building a domestic energy storage base is a strategic imperative for U.S. energy security,” Hopper said. 

More details can be found in the SEIA report, Energizing American Battery Storage Manufacturing.