A few years ago, battery manufacturer LG Energy Solution (373220.KS) was racing to make cells for electric vehicles. Today, its focus has mostly flipped to a new product: energy storage batteries.
Most of LG Energy’s North American factories are making energy-storage batteries, or gearing up to, said Robert Lee, the company’s president for the region. Demand for large battery cells to store power is booming from the buildout of AI data centers.
It has been a frenetic pivot for battery companies and automakers, which poured tens of billions into U.S. battery factories early this decade in anticipation of an EV boom that has not materialized.
South Korea’s LG Energy, which says it is North America’s largest battery maker by number of cells produced, said five of its eight factories in the region will be making batteries for energy storage systems, or ESS, by the end of this year.
“We’re highlighting ESS right now because that was the growth that we didn't expect,” Lee told Reuters during an opening event on Tuesday at LG Energy’s factory in Lansing, Michigan.
The Lansing plant recently began making energy-storage cells for Tesla (TSLA.O) and for utilities. Tesla is among the leaders in the ESS market. The factory is also making batteries for Toyota Motor (7203.T) EVs.
SWITCHING TO A NEW CHEMISTRY
Moving to ESS batteries has been more complicated than flipping a switch. LG Energy needed to develop a new battery chemistry that it had little experience with: lithium iron phosphate (LFP), a market that has been dominated by Chinese manufacturers.
LFP batteries also are used in EVs, but they have lower energy density than nickel-based batteries — LG Energy’s specialty — which means shorter driving ranges. But the LFP chemistry also is considered safer and more durable, making it suitable for storing large amounts of energy from a power plant.
The move to ESS was well-timed for battery and car companies that had sunk so much money into plants to make EV batteries. But it likely will not fully absorb all of that factory space.
Consultancy Benchmark Mineral Intelligence expects demand for stationary batteries in North America to hit 76 gigawatt-hours this year, Reuters reported earlier this year. And while storage demand is expected to nearly double over the next five years, to 125 GWh, Benchmark does not expect that to be enough to cover excess capacity installed for EVs.
LG is still making nickel-based EV batteries. The joint-venture plant it has with General Motors (GM.N) in northeast Ohio this week restarted production of cells for GM EVs after a seven-month shutdown.
“EVs will come back, and it will account for a majority of the passenger vehicles in the U.S. eventually,” Lee said. “It's really just a matter of time.”
