The U.S. is expected to have an annual production capacity of 50GWh of battery cells for energy storage systems (ESS) by the end of next year, according to recent announcements from various companies .

The Inflation Reduction Act increased the importance of domestic manufacturing for energy storage system (ESS) suppliers trying to capture the U.S. market. It made it more attractive to establish a manufacturing facility in the U.S., making it eligible for the Production Tax Credit and the Investment Tax Credit, in addition to the Domestic Content Credit.

This has led to significant investment in US factories, though primarily in the electric vehicle (EV) sector. Energy storage has also benefited, with several ESS manufacturers working to secure US supply chains in recent years.

The growing emphasis on manufacturing has been added to by tariffs and the recent Big Beautiful Act, which is still under negotiation, which increases domestic content requirements for integrated components and limits tax credits if a component is produced through the “effective control” of certain foreign entities.

Battery manufacturing for energy storage is still relatively new in the United States . Envision AESC and LG Energy Solution only began producing lithium iron phosphate (LFP) batteries for energy storage this year. Both companies utilized factories originally designed for electric vehicle battery production , but the increase in energy storage applications and slowing growth in electric vehicle demand in recent years provided the business case for this shift.

They will be joined by Tesla and Canadian Solar, with Tesla planning to start production this year and Canadian Solar's Kentucky plant expected to be completed in the first quarter of 2026. If LG Energy Solution's expansion plans also materialize, battery manufacturing capacity will exceed 50GWh by the end of 2026.

On the other hand, most ESS manufacturing is still only for module or system assembly, while battery cells are still dependent on imports.

In addition to higher manufacturing costs in the United States, the longer time and investment required to build new battery production lines are likely major factors contributing to this situation. ESS assembly capacity is expected to exceed 50GWh by 2025, thanks to the expansion of Haichen Energy Storage's new Texas factory, which opened in May of this year.

Suppliers with a large manufacturing presence in the United States include companies like Fluence and LG Energy Solution, which have a high business share in the U.S. energy storage market, as well as companies like Haichen that are actively exploring the U.S. market.

While the United States is a leading nation in energy storage deployment, the market is currently in a state of uncertainty given trade policy uncertainty and numerous projects being delayed or cancelled.

Overall, domestic manufacturing can help alleviate concerns among US developers, and there are still overseas companies planning to establish energy storage manufacturing locally. SK On is a prime example, reportedly planning to divert some of its electric vehicle battery production lines to energy storage systems. However, in the current market situation, it remains uncertain whether the substantial investment required to build a factory from scratch is worthwhile, especially given the series of factory cancellations and postponements. Smaller companies may have greater difficulty securing the necessary investment to build factories.

The uncertain outlook for trade policy, combined with restrictions imposed by the OBBB, particularly on the use of “material assistance” from prohibited foreign entities, means that US manufacturing is now unlikely to reach the levels hoped for when the Inflation Reduction Act (IRA) was first enacted.