U.S. Department of Energy (DoE) Announces $3 billion in Funding for New Battery Projects
September 21, 2024
NOTE: THIS BLOG IS NOT FINANCIAL ADVICE NOR INVESTMENT ADVICE AND DOES NOT REFLECT THE VIEW OR OPINIONS OF MY EMPLOYER
The U.S. Department of Energy (DoE) has recently announced significant funding of $3 billion for new battery projects in the United States. In summary:
- 25 projects across 14 states
- Focus on critical minerals (specifically lithium), building batteries and their components, and battery recycling
- Creates ~12,00 jobs (8,000 of which will be in construction)
- This initiative is part of Biden's push to increase domestic manufacturing to support the administration's climate goals
Of the funding, a lithium brine joint venture (JV) between Standard Lithium 55% (NYSEAM: SLI | US$258 million market cap) and Equinor 45% (NYSE: EQNR | US$68 billion market cap) is expected to receive conditional funding of US$225 million. Which will support the construction of the central processing facility for Phase 1 of the Southwest Arkansas project, the project is expected to produce 22,500 tonnes of lithium carbonate through direct lithium extraction (DLE). Additionally, TerraVolta Resources is expected to receive US$225 million to support the creation of a $1+ billion lithium production facility in the Texarkana region, which spans through Arkansas and Texas. TerraVolta's Project Liberty Owl will be a commercial-scale lithium production and conversion facility that will produce battery-grade lithium using DLE methods and will have initial annual production of 25,000 tonnes of lithium carbonate (can power ~500,000 electric vehicles (EVs) annually).
The lithium market is currently facing challenges, as it is oversupplied in the short-term with an outlook of a market deficit over the longer-term. From its peak in December 2022 of ~US$68,366/T the global average lithium carbonate price is down ~85% to US$10,346/T. The depression of the price has resulted in projects being delayed and deferrals of capital expenditure (CapEx) spending.
Finally, due to the weaker demand some automakers have begun slowing the production of EVs, switching to hybrid production and lowering prices on current EVs. The slow EV sales have also been due to the delayed implementation of adequate charging stations and price competition from Chinese competitors. Ford recently slowed its EV rollout plans due to sluggish demand by canceling plans for its three-row electric SUV and delaying production of its electric pickup truck. Ford has said its EV business is on pace to lose about $5 billion this year. In the three-month period ended in June, the automaker lost about $44,000 on every electric vehicle that it sold. General Motors also delayed the timeline for opening its suburban Detroit factory that is being renovated to build electric pickups and postponed the release of a Buick EV.
With this, it is positive to see continued government support for domestic critical metals to build up the production required to meet long-term climate goals.
NOTE: THIS BLOG IS NOT FINANCIAL ADVICE NOR INVESTMENT ADVICE AND DOES NOT REFLECT THE VIEW OR OPINIONS OF MY EMPLOYER
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