U.S. battery startups have been facing a significant challenge in recent years, particularly after the One Big Beautiful Bill eliminated battery and EV incentives. This move not only undercut a substantial chunk of future demand but also left many startups struggling to stay afloat. However, a recent development in the defense sector has provided these companies with a much-needed lifeline.

The Defense Connection

The Trump administration, despite its apparent disdain for EVs, has come to realize the importance of batteries in modern life. As a result, it has been leveraging national security as a justification for its recent decisions. The latest example of this is the Department of Energy’s recent announcement that it is awarding $500 million in grants to bolster the battery supply chain in the United States.

The program aims to reduce reliance on foreign sources, bolster national security, and advance American energy dominance. A significant portion of the funds have been allocated to startups, which are seen as crucial in driving innovation and growth in the sector. Coreshell, a battery materials startup, has been one of the beneficiaries of this program. The company has received a $50 million award from the DOE to expand manufacturing for its metallurgical silicon anode material.

Other Startups Benefit

Lilac Solutions, a company that extracts lithium from brines, has also received a significant grant of $100 million. This funding will be used to build a processing facility on Utah’s Great Salt Lake, which will produce 5,000 metric tons of lithium carbonate annually by 2028. Lithium carbonate is a key precursor used in battery production, making this facility a vital component of the U.S. battery supply chain.

Nth Cycle, a startup that refines black mass from recycled lithium-ion batteries, has also received $100 million to build a facility that will produce lithium and nickel compounds. These compounds can be used to make new batteries, further reducing the reliance on foreign sources. Megan O’Connor, the co-founder and CEO of Nth Cycle, has stated that the company is seeing clear demand drivers from the defense sector. However, she also noted that there is still significant demand in the automotive space.

Defense Sector Demand

The demand for batteries in the defense sector is substantial. In 2021, the U.S. Defense Logistics Agency was purchasing $200 million worth of batteries annually. While this figure is dwarfed by the automotive industry’s expected spend of nearly $18 billion on battery manufacturing in the U.S. alone this year, it still represents a significant opportunity for U.S. battery startups.

As the defense sector continues to play a crucial role in the development of U.S. battery startups, it is clear that the future of the industry is electric. However, the timing of this shift is far from settled. The recent grants from the DOE are a testament to the importance of the defense sector in driving innovation and growth in the U.S. battery industry.