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US Battery Startups Turn to Defense Sector Following Cuts to Clean Energy Incentives

American battery startups that faced significant hurdles following policy changes have found crucial support within the defense sector. After the One Big Beautiful Bill removed incentives for batteries and electric vehicles (EVs) and dampened projected demand, military needs for energy storage—spanning drones, torpedoes, infantry radios, and fighter jets—are helping sustain the domestic industry.

What Happened

The United States Department of Energy (DOE) announced $500 million in grants aimed at reinforcing the domestic battery supply chain. According to the department, the funding is designed to advance American energy dominance, bolster national security, and reduce dependency on overseas suppliers. A substantial share of the awarded funding has been directed toward emerging startups.

The announcement comes amid broader shifts under the Trump administration, which has framed support for battery manufacturing around national defense priorities rather than consumer electric vehicles.

Key Highlights

  • Total Federal Support: The DOE is distributing $500 million in grants across the domestic battery supply chain.
  • Coreshell Allocation: Battery materials firm Coreshell secured a $50 million award to expand production of its metallurgical silicon anode material. The company also added defense-linked investor ADS Ventures and is collaborating with a supplier of autonomous systems.
  • Lithium Processing: Lilac Solutions was awarded $100 million to construct a facility at Utah’s Great Salt Lake, designed to extract lithium from brines and produce 5,000 metric tons of lithium carbonate annually by 2028.
  • Recycling Infrastructure: Nth Cycle received $100 million to construct a plant refining black mass from recycled lithium-ion batteries into lithium and nickel compounds.
  • Defense Procurement Scale: In 2021, the U.S. Defense Logistics Agency purchased $200 million worth of batteries per year.
  • Automotive Comparison: According to Mordor Intelligence, the automotive sector is projected to spend nearly $18 billion on battery manufacturing in the U.S. this year alone.

Why This Matters

Earlier domestic factory growth tied to the Inflation Reduction Act faced disruptions when the One Big Beautiful Bill eliminated key battery production incentives. Despite policy shifts against commercial EVs, military operations continue to require lightweight, capable, domestically sourced batteries.

Industry leaders note that while defense requirements are generating clear commercial traction, automotive demand remains an essential target. Megan O’Connor, co-founder and CEO of Nth Cycle, noted that strong demand drivers are emerging from defense, even as automakers continue to roll out new electric vehicle models over an extended timeline.

What to Watch Next

Attention will turn to the construction and operational timelines of the funded facilities. Lilac Solutions is slated to target its production milestone of 5,000 metric tons of lithium carbonate annually by 2028, while firms like Coreshell and Nth Cycle proceed with scaling anode manufacturing and recycling operations for both military suppliers and commercial automotive clients.

Frequently Asked Questions

Why are battery startups partnering with defense contractors?

Startups are collaborating with defense suppliers to supply batteries for equipment such as autonomous systems, drones, infantry radios, torpedoes, and fighter aircraft, compensating for slower-than-expected commercial EV growth.

How much funding did the Department of Energy announce?

The Department of Energy announced $500 million in grants to support domestic battery supply chain companies, with significant portions allocated to materials, extraction, and recycling startups.

How does military battery demand compare to the automotive sector?

While the Defense Logistics Agency was purchasing approximately $200 million in batteries annually as of 2021, the automotive sector is projected by Mordor Intelligence to spend nearly $18 billion on U.S. battery manufacturing this year.

Source: TechCrunch