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  • Writer's pictureMDEA

Trade Settlement Reached as U.S. Battery Factories Are Urgently Needed

Updated: Apr 26, 2021

Increasing U.S. battery production is critical to the future of sectors such as electric vehicles and will create high-paying clean energy jobs. In a potential blow to the sector’s growth, earlier this year, the U.S. International Trade Commission (ITC) announced a 10-year ban on battery and material imports by SK Innovation, a leading battery manufacturer based in South Korea. An investigation into SK Innovation began when LG Energy Solutions (LG), another South Korean battery manufacturer, reported that SK was stealing trade secrets. Although the growth of the green economy is a key priority of the Biden Administration, after the investigation, the U.S. ITC agreed and announced the ban.

LG supplies batteries for Tesla and General Motors (GM), while SK Innovation’s batteries are used to power Ford and Volkswagen vehicles. The ban came amidst SK Innovation’s building of two U.S. battery factories at an estimated cost of $2.6 billion in Georgia, which are slated to begin production in 2022. Georgia has already provided $300 million in grants and other incentives to SK Innovation to build the factories. A 10-year ban would make those plans non-viable.

Fortunately, SK Innovation and LG reached a settlement. Under the agreement, SK Innovation will pay LG Energy Solutions $1.8 billion in cash and future royalties. LG Energy will drop the lawsuit with the U.S. ITC and other courts. The two companies also agreed not to sue each other for the next 10 years.

Securing a robust, U.S. battery supply chain is critical to energy storage in general, but, more specifically, the majority of the investments are planned to manufacture batteries for EVs. In accordance, battery factories are being built all across the country. GM and LG currently have a plant under construction in Lordstown, Ohio. They recently announced a second battery factory will be built in Tennessee at an estimated cost of $2.3 billion. The factory will produce the Ultium battery, which backs a three-motor setup capable of developing up to 1,000 horsepower. Meanwhile, Tesla and Panasonic are expanding their Gigafactory 1 battery plant in Nevada, with a roughly $100 million investment.

These investments are part of a strategy to help the U.S. catch up to Asia and Europe. To date, China dominates global battery production, which means the U.S. would need to depend on China and other trading partners to supply batteries for the auto industry, military and other sectors. It would also mean the U.S. could miss a significant technology and economic boom and make decarbonizing these sectors that much more difficult.

As President Biden said: “If we don’t get moving, they’re going to eat our lunch.”

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