Over 20 GWh of US Battery Storage Manufacturing Hit by Policy and Financing Challenges

More than 20 GWh of planned US battery energy storage manufacturing capacity, initially pencilled in for 2028, has been scrapped in the first half of 2025, as per a new report from energy consultancy Clean Energy Associates (CEA). This abrupt reversal marks a major blow to the country’s energy transition goals.

Major Cancellations Threaten 2028 Targets

The cancelled capacity includes two major projects: KORE Power’s 9.6 GWh-per-year plant in Arizona and FREYR’s 10.2 GWh facility in Georgia. 

Several smaller projects, ranging from 1 GWh to 5 GWh, across the Midwest and Southeast have also been delayed or shelved due to regulatory uncertainty and difficulty securing financing.

Notably, these cancellations put a dent in the US’s 2028 energy storage target of 100 GWh per year, with the 21 GWh shortfall representing a significant setback, as per projections.

Domestic Integration Gains Momentum

Despite the cancellations, CEA’s Q2 2025 analysis highlights encouraging developments in local integration. 

Original equipment manufacturers (OEMs) and domestic integrators are increasing their capacity, enabling the creation of more regionally integrated energy storage systems (ESS).

The report also notes that these domestic integrators are co-locating manufacturing facilities with their target markets. 

Cost Premium vs Tariff Risk

Although integrated systems manufactured domestically come at a cost premium of 15 to 20 percent, CEA said the trade-off is justified. “Siting manufacturing in the US is the best choice for minimizing tariff risk, even if costs are higher,” the report noted, especially as it reduces exposure to Chinese content.

However, sourcing cathode and anode materials remains an issue. Tariffs on battery components, steel, and aluminium mean that building a fully tariff-resilient North American supply chain is possible, though difficult.

Southeast Asia Emerges as Strategic Supplier

The manufacturers may still look outside the US for cheaper options, such as South Korea and Southeast Asia, to reduce costs. CEA estimates that importing from these regions could help companies avoid as much as USD 40/kWh in tariffs.

While current Southeast Asian capacity is primarily geared toward electric vehicle batteries, the report expects lithium-ion ESS production to follow a similar growth trajectory. 

CEA forecasts an uptick in joint ventures and plant expansions in countries like Malaysia and Indonesia over the coming months.

Outlook for LFP, Recycling, and Alternatives

The report also provided an outlook for lithium-iron-phosphate (LFP) battery manufacturing, which remains in the early stages outside China. 

By early 2026, more options are expected to emerge in the US, South Korea, and Southeast Asia. However, the new “foreign entities of concern” (FEOC) rules introduced in the US budget bill may pose challenges.

Notably, stable and low lithium prices, which are expected to stay below USD 10/kg through the decade, are a bright spot for developers.