US battery startups have found a lifeline in defense

US battery startups have discovered a crucial new avenue for survival in the defense sector, offering them a much-needed reprieve amid the fallout from the One Big Beautiful Bill, which stripped away incentives for battery and electric vehicle (EV) production. With the loss of federal support for clean energy initiatives, many startups faced uncertainty about their future. However, recent developments suggest that the defense industry is stepping in to fill this gap, providing a fresh wave of funding and opportunities for innovation. The Department of Energy (DOE) announced on Thursday that it would allocate $500 million in grants aimed at strengthening the U.S. battery supply chain. This initiative seeks to reduce dependence on foreign suppliers, enhance national security, and promote American energy leadership. A substantial portion of these funds has gone toward supporting emerging battery startups. The shift reflects a growing recognition within government circles that while the automotive sector faces challenges, the defense industry continues to require advanced battery technology for a wide array of military applications. Among the recipients of these grants is Coreshell, a battery materials startup that specializes in metallurgical silicon anode material. The company received a $50 million investment to scale up its manufacturing capabilities. According to a spokesperson, discussions around the defense applications of lithium-ion batteries are ongoing, indicating a potential expansion into military-grade products. Coreshell's collaboration with ADS Ventures, a defense supplier, underscores the increasing overlap between civilian and military battery technologies. Another notable recipient is Lilac Solutions, which focuses on extracting lithium from brines. The company secured $100 million to construct a processing facility on Utah’s Great Salt Lake, targeting annual production of 5,000 metric tons of lithium carbonate by 2028. Lithium carbonate serves as a critical component in battery production, making this project vital for both commercial and defense sectors. Nth Cycle, which deals in recycling lithium-ion batteries, also received a $100 million grant to develop a facility that refines black mass into reusable lithium and nickel compounds. Megan O’Connor, co-founder and CEO of Nth Cycle, noted that demand from the defense sector is evident, though she acknowledged continued interest from the automotive industry as well. Despite setbacks in the EV market, automakers remain committed to long-term growth, albeit delayed. While the automotive industry is expected to invest nearly $18 billion in battery manufacturing within the U.S. this year, the defense sector is currently spending approximately $200 million annually on batteries, according to data from the U.S. Defense Logistics Agency. This disparity highlights the relative importance of the automotive industry in driving battery demand, yet the defense sector's role remains significant. The Trump administration, despite its skepticism towards EVs, has implicitly accepted the inevitability of electrification. The recent DOE grants may signal a reluctant acknowledgment that aggressive policies against the EV industry have pushed the sector beyond recovery. As a result, the Pentagon may have had to seek alternative domestic sources for essential battery supplies, potentially leading to increased investment in U.S.-based manufacturers. With soldiers and drones relying on reliable and efficient power sources, the need for domestically produced batteries persists. Although the Inflation Reduction Act initially spurred the growth of domestic battery production, the One Big Beautiful Bill significantly reduced these incentives. The current DOE grants may represent an indirect effort to counteract the adverse effects of such policy changes, ensuring that the U.S. maintains control over its energy infrastructure.