LG Energy, once fixed on EV batteries, jumps to Plan B

A few years ago, LG Energy Solution was racing to manufacture cells for electric vehicles. Now, its attention is largely shifted towards energy storage batteries. The majority of LG Energy’s North American factories are producing energy-storage batteries or preparing to do so, according to Robert Lee, the company's president for the region.

The surge in demand for large battery cells to power data centers has driven this pivot for battery companies and automakers, who invested billions in U.S. battery factories anticipating an EV boom that has not come to fruition. Currently, five of LG Energy's eight factories in the region are set to produce energy storage system (ESS) batteries by the end of this year.

"We're emphasizing ESS now because the growth we didn't anticipate is in that direction," Lee explained to Reuters during a recent factory opening event in Lansing, Michigan. The Lansing plant has recently commenced production of energy-storage cells for Tesla and utilities. Tesla is recognized as a leader in the ESS market. The facility is also manufacturing batteries for Toyota Motor's EVs.

Transitioning to ESS batteries has been more challenging than a quick changeover. LG Energy had to develop a new battery chemistry it had little experience with: lithium iron phosphate (LFP), a sector that has been dominated by Chinese manufacturers. While LFP batteries are also utilized in EVs, they possess lower energy density than nickel-based batteries – LG Energy's forte – resulting in shorter driving ranges.

However, LFP chemistry is deemed safer and more durable, making it ideal for storing substantial amounts of energy from power plants. This shift towards ESS batteries was opportune for the battery and car companies that had committed substantial resources to building EV batteries. Nonetheless, this move is unlikely to fully utilize all the factory space.

According to consultancy Benchmark Mineral Intelligence, demand for stationary batteries in North America is projected to reach 76 gigawatt-hours this year. Although storage demand is expected to nearly double over the next five years to 125 GWh, Benchmark does not anticipate it to be sufficient to cover the excess capacity installed for EVs.

LG is still producing nickel-based EV batteries. The joint-venture plant with General Motors in northeast Ohio restarted production of cells for GM EVs recently, after a seven-month shutdown. "EVs will come back, and they will become the majority of passenger vehicles in the U.S. eventually," Lee stated. "It's just a matter of time."