– Qualifying for the 10% domestic content adder to the 48E ITC for using domestically-produced BESS is unclear and further guidance is expected
– Accessing the 45X tax credit for battery cell manufacturing is crucial for BESS companies
– Most announced cell manufacturing capacity in the US is focused on the electric vehicle market due to limitations in lithium iron phosphate technology and form factor considerations
The requirements to qualify for the 10% domestic content adder to the 48E ITC for using domestically-produced BESS remain unclear, with further guidance expected soon. The US$35 per kWh 45X tax credit for battery cell manufacturing is clearer, and companies should focus on accessing this credit at the cell level. Most announced cell manufacturing capacity in the US is for the electric vehicle market, limiting uptake in the energy storage system (ESS) market.
System integrators like Wärtsilä and IHI Terrasun are tracking US manufactured cells for their future BESS products to meet domestic content requirements and address concerns around forced labor. While there is some activity in cell manufacturing for BESS, most companies are focusing on module and DC block manufacturing. Nidec ASI expanded its BESS manufacturing facility in Ohio to support a 75MW project in Texas.
The idea of system integrators manufacturing their own battery cells is unlikely due to the long-term commitment required to specific cell technology. However, companies like Trina Storage in China have both cell and BESS operations. Tesla and BYD can make long-term bets on lithium-ion chemistry for EVs, a dominant technology.