The U.S. Department of Energy allocated $500 million in grants aimed at supporting the battery supply chain within the United States, benefiting startups at a time when expectations for the electric-vehicle market have declined following the cancellation of battery and electric-vehicle incentives under the One Big Beautiful Bill. The department says the program aims to reduce reliance on foreign sources, strengthen national security, and support what it describes as U.S. dominance in the energy sector.
The distribution of the grants reveals growing reliance on defense applications as a source of demand for battery technologies, including batteries used in drones, torpedoes, field communications equipment, and fighter aircraft. TechCrunch quoted a spokesperson for battery-materials specialist Coreshell as saying that defense uses for lithium-ion batteries have become clearly present in discussions about the market.
Funding for Materials Technologies and Recycling
Coreshell received a $50 million grant to expand manufacturing of a metallic-silicon anode material. The company had added ADS Ventures to its list of investors; the investment firm is affiliated with ADS, which operates as a supplier in the defense sector, while ADS also collaborates with another supplier of autonomous systems.
Lilac Solutions, which extracts lithium from brines, received $100 million to build a processing facility in Utah’s Great Salt Lake region. The facility aims to produce 5,000 metric tons of lithium carbonate annually by 2028, a key raw material in battery manufacturing.
Nth Cycle also said it received $100 million to build a facility for processing black mass generated by the recycling of lithium-ion batteries, with the goal of producing lithium and nickel compounds that can be used to manufacture new batteries.
Why Does This Matter?
The funding provides startups with a potential institutional source of demand at a stage when the electric-vehicle market has become less clear in terms of the timing of its growth, but it does not eliminate the sector’s reliance on the automotive market. Megan O’Connor, Nth Cycle’s co-founder and chief executive, said the company sees clear demand drivers in the defense sector, while demand in the automotive sector also continues.
Available figures show a significant disparity between the two markets. The U.S. Defense Logistics Agency purchased approximately $200 million worth of batteries annually through 2021, according to the report, while the automotive sector is expected to spend nearly $18 billion on battery manufacturing in the United States this year, according to Mordor Intelligence.
What has actually changed is that the defense sector is playing a larger role in keeping some domestic battery projects financeable after legislative changes weakened production incentives and demand linked to electric vehicles. But the grants alone do not prove that defense demand can replace the automotive market; the cited defense spending is far smaller than the expected spending in the automotive sector, and the timeline for project expansion remains a critical factor.
According to the report, military forces and drones need lightweight, capable batteries from U.S. sources, making supply security an objective that extends beyond the electric-vehicle market. Open questions remain about how long government funding will continue, whether the new facilities can meet their production targets, and whether defense demand will sustain the companies’ momentum until the electric-vehicle market regains its growth rate.