Analysts at Stifel welcomed news that the Biden administration has awarded $2.8 billion in grants to boost the domestic manufacturing of batteries for electric vehicles (EV) under the Infrastructure Investment and Jobs Act.
In a note the broker pointed out this represents a significant shift in EV supply chain incentives which had previously focused on downstream EV OEM/battery manufacturing subsidies, and was the first bulk tranche of funds targeting critical mineral production.
The $2.8 billion has been awarded to 20 companies across 12 states with funds allocated as grants with a cap of $150 million per project.
The chosen projects are expected to expand domestic manufacturing of batteries for EVs, the electrical grid, and increase production capacity for those critical minerals which are currently imported.
READ: Talon Metals soars on $114M US Department of Energy grant to build battery minerals processing facility
The funds announced are the first phase of $7 billion in total provided by the Infrastructure Investment and Jobs Act and selected projects include Albemarle's Kings Mountain project, with 45ktpa lithium carbonate equivalent (LCE) capacity, and Piedmont's Tennessee Lithium project, with 27ktpa LCE capacity.
Talon Metals Corp was another beneficiary, with its subsidiary, Talon Nickel LLC, chosen to receive a $114 million grant as part of the plan.
Stifel said the move is another welcome shift to a policy focus on upstream critical mineral production, which began with the Defence Production Act and most recently the Inflation Reduction Act, which requires EVs eligible for the $7,500 tax credit to contain 40% of battery critical minerals to be mined/processed in the US or by an FTA partner by 2024 (80% by 2026).
“If electric vehicles need lithium-ion batteries, electric vehicles need mining,” Stifel analysts wrote, adding public incentives for upstream critical mineral production have been lacking.
More upstream funding needed
But the broker commented that significantly more upstream funding was required to meet the demand intimated by Biden's 50% sero-emissions vehicles (ZEV) 2030 target.
The broker pointed out that the funding announced would aim to have LCE capacity for just a 12% ZEV penetration rate, a far cry from the 50% ZEV goal.
Stifel calculated that the 50% ZEV sales goal by 2030, would equate to approximately 565kt LCE demand by 2030, which compares to current US production of 6ktpa LCE.
“We forecast a North American supply deficit of 241kt LCE by 2030,” Stifel said, adding: “We expect a continued focus on funding critical mineral projects via the DoE and DoD.”
In addition to the remaining $4.2 billion to be awarded as grants under the Infrastructure Investment and Jobs Act, Stifel also noted the DoE's Advanced Technology Vehicles Manufacturing Loan Program has $17 billion for projects that upgrade the EV supply chain, for which the processing capital of mining projects qualify.
Contact Jeremy at jeremy@proactiveinvestors.com