The annual capacity of battery cell manufacturing for energy storage systems (ESS) in the United States is projected to reach 50GWh by the end of 2026, based on recent company announcements. This growth represents a significant expansion in domestic manufacturing capabilities driven by policy changes and industry investments.

Policy Drivers Behind Manufacturing Growth

The 2022 Inflation Reduction Act increased the importance of domestic manufacturing for energy storage system suppliers attempting to capture the US market. The legislation enhanced the appeal of establishing manufacturing facilities in the US through production tax credits and investment tax credits, alongside a domestic content bonus. 

This policy framework caused a flurry of investments into US facilities, primarily within the electric vehicle sphere initially, though energy storage has also benefited. Multiple ESS manufacturers have been working to secure a US supply chain in recent years. 

The emphasis on US manufacturing was further strengthened by ongoing tariff negotiations and the recent One Big Beautiful Bill Act, which increased domestic content requirements for integrated components and restricts tax credits if a component is produced through "effective control" by a specified foreign entity.

Current Manufacturing Landscape

Cell manufacturing for energy storage in America represents a very recent development. The first lithium iron phosphate (LFP) cells for energy storage were produced this year from Envision AESC and LG Energy Solution. Both companies utilized facilities originally designed for EV batteries, but the uptick in energy storage adoption alongside slowed growth for EV demand in recent years provided a business case for the transition. 

Tesla and Canadian Solar are scheduled to join the domestic manufacturing roster. Tesla plans to begin production this year, while Canadian Solar's Kentucky factory is on track for completion in Q1 2026. These additions would bring cell manufacturing capacity to over 50GWh by the end of 2026, contingent on LG Energy Solution also achieving its ramping up plans. The majority of ESS manufacturing currently remains focused on modules or system assembly while continuing to use cells produced abroad. 

The higher cost of manufacturing in America, combined with typically longer timeframes and higher investments required for implementing new cell production lines, represent strong factors influencing this approach. As of 2025, ESS assembly capacity is estimated to already exceed 50 GWh, aided by Hithium's new Texas factory that opened in May. 

Suppliers with expanded US manufacturing include a mix of companies with high US exposure for energy storage, such as Fluence and LG Energy Solution, and companies actively pursuing the US market like Hithium.

Market Challenges and Future Outlook

Despite the US being a leading country in energy storage deployment, the market currently exists in a state of uncertainty due to unclear trade policies and numerous projects being delayed or cancelled. Having domestic manufacturing could help ease concerns of US developers, and plans remain for establishing energy storage manufacturing facilities by overseas companies. 

SK On represents a prime example of this trend, reportedly planning to utilize some of its EV battery lines for ESS applications. However, given the market's current situation, it remains undetermined whether the large investment required, especially for building facilities from the ground up, is worthwhile at present. 

This uncertainty is reflected in a string of factory cancellations and delays, while smaller companies may struggle to secure the investment needed to build out factories. The unclear future of trade policies, combined with restrictions imposed by the OBBB Act, particularly limiting the use of "material assistance" from prohibited foreign entities, means US manufacturing is currently unlikely to reach the levels initially hoped for when the IRA was first introduced. 

The OBBB Act's restrictions on material assistance from prohibited foreign entities add another layer of complexity for companies considering US manufacturing investments, potentially limiting the scale of domestic production expansion that policymakers originally envisioned.