Domestic battery makers looking to build out their manufacturing footprints are increasingly running up against high costs. And in an environment where it’s still challenging to raise capital for first-of-a-kind projects, some are scaling back ambitious plans to build factories in the United States.
In the last month, both Kore Power and Freyr Battery have scrapped plans for greenfield factories, in Arizona and Georgia, respectively. Both cited climbing costs and interest rates.
The two companies are different in a few key ways — Freyr is a larger, diversified company that had plans to expand into battery manufacturing, while Kore Power is a battery manufacturer — but the announcements are indicative of a broader trend, said Sam Jaffe, principal at 1019 Technologies.
“They fall into the same category of jumping on the bandwagon two years ago when things were really hot, and now it looks like they’re stepping off as money gets harder to come by, and also as government support wanes,” Jaffe explained.
Freyr appears to be walking back its U.S. battery manufacturing ambitions completely. But Kore Power confirmed to Latitude Media that it will still make LFP batteries domestically — but it’s hoping it can do it faster and more cheaply via a retrofit.
To be successful in the world of lithium-ion phosphate batteries, Jaffe said, companies have to be able to compete with Chinese manufacturers, who produce essentially all of the current supply.
In the time it takes for a domestic company to build up the manufacturing footprint it would need to compete, Jaffe said many realize they just can’t do it. In the years it can take to go from announcements to steel in the ground, prices can go up and policy environments can change.
Tax credits created by the Inflation Reduction Act “spurred a lot of hope that there would be a U.S. LFP manufacturing buildout,” Jaffe added. Now, given the new administration’s focus on pulling back many of those credits, “all of that is in question.”
And the impacts are being felt regardless of whether those repeals actually happen, he added: “Uncertainty kills projects, and kills factories.”
Pricing changes
As Kore Power CEO Jay Bellows explained, building a greenfield facility is attractive because it allows a company to custom design a facility exactly suited to their needs. That was the reasoning behind Kore’s choice of a site in Buckeye, Arizona in June of 2021. In June of 2023, the company received a conditional commitment for a $850 million loan from the Department of Energy’s Loan Programs Office to help build a 1.3 million square foot facility.
“There wasn’t really any lithium battery manufacturing in the U.S. when we started this process, so the thought process was really, we need to do what everybody else was doing, and that was building battery manufacturing” Bellows said.
Uncertainty kills projects, and kills factories.
But in the three and a half years since the Buckeye selection, the landscape changed significantly. (The city of Buckeye first submitted site proposals to Kore Power back in May 2019.)
“Over the last several years, especially since we got the commitment from the [LPO] loan, the costs have gone up,” Bellows said. “The cost of building has gone up quite a bit, and this past summer is when we started thinking…maybe building a facility may not be the best way of doing this.”
But it wasn’t just rising costs, he added. There was also timeline pressure, driven by looming tariffs on battery component imports.
“For us, the faster we can get product into market, the less we have to deal with that tariff,” Bellows said. “One of the things that people are forgetting is that even under the prior administration the tariff was going to go up to 25% in 2026.” The Trump administration has mulled upping that number even more — and at a faster pace.
“Having the existing building…allows us to potentially expedite the process of getting our product into the market,” he added. Many of the sites Kore has considered already have existing water and gas resources they’d need, and others “barely need any retrofit.”
The original timeline for the Buckeye facility would have brought it online sometime in 2025, but that date had already been pushed back two years. Meanwhile, even though a brownfield build is getting a later start, Bellows anticipates that getting to full production on an existing site could happen as soon as 2026. The company has already narrowed their options down to a few potential new sites, Bellows said, and is currently in the process of “working with the states and different programs in place” to finalize a new location.
Election impact?
It’s far from unusual for recipients of LPO guarantees to take a while — months or even years — to finalize their contracts with the federal government.
For Kore Power, one reason their loan wasn’t finalized by the time President Donald Trump took office for a second time was that shoring up the additional funding proved challenging. (LPO loans can cover up to a maximum of 80% of a project, though most cover between 50-70%.)
Last year, with the election looming, the market was “waiting to see what happened,” Bellows said, and Kore Power was waiting too. And today, the Trump administration’s posture toward clean energy and cost-cutting has made even federal sources of funding uncertain — especially conditional commitments from LPO.
As Jaffe put it, “making batteries is hard, and raising money to make batteries in the U.S. is even harder.” That’s why many companies today are struggling, he added; at the same time, there’s so much activity in the space that construction companies, equipment makers, and labor unions are able to drastically increase their rates.
“When I model battery factory costs, the cost of construction is somewhere between 20% and 40% of the overall cost,” he explained. “Most of the cost is in the equipment and the installation of the equipment.”
Jaffe is skeptical, however, that bringing construction costs down to, say, 10% via a retrofit will save enough money to forgo an already-negotiated LPO loan.
“I think the most important element of this is that the whole subsidization picture and incentivization picture from the federal government is going to change,” Jaffe said. “We don’t know precisely how it’s going to change, but it is going to change. And that, I think, more than anything else, is probably the cause for their reluctance to go through with the factory.”
Officials in Arizona also connect Kore Power’s move directly to federal funding shifts. In response to questions about the news at an event earlier this month, Susan Boyles, the economic development director for Buckeye, told the audience that federal funding “played a big part of this.”
Bellows, meanwhile, emphasized that Kore Power had been mulling a “pivot” to a brownfield site since before the election. The decision, finalized “within the last month or so,” was more about increased costs and timelines, he said, than about the Trump administration.
In fact, armed with its new plans for a manufacturing facility, Kore Power still intends to pursue debt financing through LPO, Bellows confirmed. The pivot, he said, will allow the company to “get the most out of the money we are getting from DOE.”
And by cutting costs, he said Kore Power will be mirroring the administration’s own efforts and priorities: “I think us going to them and saying ‘hey, we have a way to do the same thing and do it for way cheaper,’ would be very attractive to them, and ultimately a win win for the industry, and for the incoming administration.”
That said, he acknowledged that at the moment there isn’t much of an LPO for the Kore Power team to negotiate with, thanks to widespread layoffs across DOE. When those vacant roles are eventually filled, he said, Kore Power plans circle back to the office — with its new cost models, employment models, and a new site selection in hand.
