Battery tech is where climate change and geopolitics come crashing together. We need batteries, lots of them, to make the transition from internal combustion engines to electric vehicles. We need them on the grid and in our buildings to soak up and discharge renewable power 24/7.

But we have a few big problems:

• China: The Chinese ran circles around us in securing the lithium-ion battery supply chain. The country produces nearly 80% of the world’s lithium-ion batteries and is home to four of the ten largest manufacturers, including CATL, which produces nearly ⅓ of global supply. China has forged strong partnerships with nations rich in battery resources, like Congo, home to large cobalt and copper deposits. We shouldn't just swap Saudi oil and Russian gas with batteries controlled by China. The dream of making China a reliable, rules-following member of the global economic system is dead. The Trump tariffs (now Biden’s too) are a by-product. Building a domestic battery supply chain is essential to our national security.

• Electric Vehicles Drive the Market for Lithium-Ion: The EV market accounts for nearly 80% of lithium-ion battery demand, and now gobbles up more of what had previously been left for energy storage developers. Energy storage companies have benefited from lithium-ion cost declines driven by automotive volumes, but lithium ion's overwhelming momentum has marginalized investment in battery technologies that are optimized for the grid. Meanwhile, supply chain bottlenecks are leading to rising cell prices, right when the world's largest automakers were getting into hurry up mode. Energy storage developers are falling further back in line and, per a friend, are being told by manufacturers that a ~10 Gigawatt hour commitment is needed for a dedicated production line. That's a lot of juice!

• New Battery Tech is Not Ready for Prime Time: US companies like SolidPower and QuantumScape are developing solid state, lithium-metal batteries that promise to unlock longer range EVs, long-haul electric trucks, and even electric aviation. US upstarts like Natron Energy and Chinese incumbents are building sodium ion batteries, which they claim will be cheaper, faster and longer-lasting than lithium-ion. Startups like eZinc, Form, and ESS are developing batteries from abundant metals like zinc and iron to balance a renewable grid. These technologies are years away from meaningful scale, but without an established US manufacturing base, we risk losing their advantage to China as well.

Policy-makers need to do three things in parallel - fast:

1. Support Domestic Lithium-Ion Manufacturing, Processing, and Extraction

We can’t just manufacture batteries; we have to secure the materials and processing too. To get there, the federal government needs to go beyond the $7 Billion from last year's infrastructure bill to support the U.S. battery supply chain. The new Coalition for American Battery Independence, backed by companies like GM, Tesla, and Panasonic, is pushing to wedge incentives into a hail mary reconciliation energy package, which would support battery manufacturing and upstream domestic critical materials supply chains. I’m not holding my breath that this gets done, but this makes a lot of sense.

Policy-makers may benefit from some favorable tailwinds. I spoke with a friend at an energy storage company who was recently in Korea with the big battery manufacturers who are moving aggressively to set up battery plants in the US. Why? US tariffs on China and Covid supply chain issues. They don’t want their batteries to get stranded; they want them near their US customers. Recent evidence backs this up. Hyundai announced a big EV and battery plant in Georgia last week, while Stellantis said they’re going to build one in Indiana. Red America to the rescue? Cultivating a domestic battery industry to counter China feels like a bipartisan winner.

2. Support the Next Generation of Batteries 

We need to make sure we’re preparing our manufacturing base for new battery tech. ARPA-E’s SCALEUP program provides a model; however with only $175M allocated to date, it needs to be replicated and expanded across the battery ecosystem. We also need to bring larger pools of low cost capital to the table. The DOE Loan Programs Office continues to target nine figure investments into sure wins, but it should also support strategically critical technologies, even if they are "riskier". We can't be pennywise and pound foolish because someone might whisper "Solyndra". States and utilities need to do more too. Georgia Power’s planned 1500 MWh demonstration of Form’s system is a positive step. And states can follow the lead of California and New York which fund field demonstration programs for non-lithium-ion solutions.

3. Bolster Domestic Battery Demand

Biden’s struggling Build Back Better initiative would tip the scales significantly, increasing tax incentives for EVs using domestic batteries and establishing an energy storage Investment Tax Credit. If Congress fails to act, states will need to continue to drive demand for EVs and energy storage, and support their own economic case for local production. California has a rebate that can reduce the cost of an EV by up to $7,000; Connecticut’s rebate offers up to $4500; Michigan Governor Whitmer has proposed a $2000 rebate. Nine states have energy storage targets. Virginia has mandated over 3 GW by 2035, New York and California are also racing ahead with plans for 6 GW and 15 GW targets.

We need robust and secure supply chains for the lithium-ion technology of today, and the next generation of EV and grid batteries of tomorrow. The Chinese word for crisis may not actually mean what JFK thought it did, but the US is sitting at the crossroads of danger and opportunity when it comes to the future of batteries.