As the dynamics of the electric vehicle market change in the wake of the end of purchase subsidies for customers and supply chain challenges, U.S. automakers have turned to the energy storage industry as a way to utilize their production capacity for batteries and protect their investments.
This change in product enables the carmakers to keep their battery factories open and capable of making EV batteries if market conditions change for the better. The factories are being retooled to make stationary battery energy storage systems (BESS) and the production lines can be changed, at a cost, to resume EV battery production.
Ford Energy, a subsidiary of Ford Motor Co., is one such company making the switch. The firm is redirecting production capacity at a battery plant in Kentucky to make energy storage systems. Production is expected to commence in 2027 and the company is looking at data centers, utility companies and industries as potential clients.
Ultium Cells LLC, a joint venture between LG Energy and General Motors, also started producing energy storage batteries in July this year. The company’s initial focus is on residential customers, but it could later expand its target market to include larger-scale energy storage users.
These measures to redirect production capacity come at a time when the energy market is experiencing volatility due to the ongoing conflict between the U.S. and Iran. Crude oil prices have remained elevated above pre-war levels and renewable energy has seen a jump in deployment as companies and residential users seek to cushion the blow from energy supply disruptions and price fluctuations.
Given that renewable sources of energy like solar and wind are intermittent due to weather changes, battery systems offer a way to store energy generated during conducive conditions so that this energy can later be used when demand peaks yet generation has slowed or stopped due to the sun not shining or the wind not blowing sufficiently to run windmills.
Another tailwind that carmakers are looking to benefit from is the backlash that the energy hunger of AI data centers has triggered in communities that host these facilities. Battery storage offers a way to ease the demand placed on utilities and batteries make a strong case for onsite renewable energy generation at data centers.
For car companies like Tesla Inc. (NASDAQ: TSLA) that have for been producing BESS for a long time, this latest wave of interest in energy storage systems provides an additional force to help them deepen their market penetration, especially in the utility-scale energy storage segment.
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