Gloves are off as Korea joins fight over US battery aid

Gloves are off as Korea joins fight over US battery aid

Gloves are off as Korea joins fight over US battery aid 296 310 Energy Storage Journal

April 13, 2023: South Korea is launching a multibillion dollar program to defend and expand its battery industry amid fears lucrative US tax breaks and incentives are tipping the global battery trade balance stateside.

Trade, industry and energy minister Lee Chang-yang (pictured) announced the move on April 7 after chairing a meeting of the government-backed Korean Battery Alliance.

Lee said the government’s new ‘post Inflation Reduction Act (IRA) public-private joint strategy’ policy was needed to support domestic manufacturing and battery material suppliers following the introduction of the US government’s own IRA.

A leading industry commentator told Energy Storage Journal: “The gloves are really off now and Korea, just like the Europeans, is concerned about US incentives.

“Korea fears its battery and EV industry could suffer because they source a significant amount of battery raw materials from China, which the US has designated as a foreign entity of concern.”

The Export-Import Bank of Korea and the Korea Trade Insurance Corporation (K-Sure) will support investments by battery firms and material suppliers in facilities within North America with KRW7 trillion ($5.3 billion) of loans and guarantees over the next five years.

Firms will also qualify for  Korea-backed higher credit lines, interest rate cuts, lower insurance premiums and other financial incentives.

Overseas markets

Lee also pledged support for market penetration schemes for Korean-made lithium iron phosphate batteries.

Starting this year, the government plans to launch more than KRW50 billion ($38 million) of LFP battery projects to support companies entering overseas markets, the minister said.

Korean companies are already developing LFP batteries with some close to activating production lines.

In a related move, at the end of March, Korea’s National Assembly passed a bill proposing to boost tax credit rates for investments related to national strategic technologies for large firms of up to 15% and SMEs, 25%.

The government said that meant major incentives were lined up for firms throughout the battery supply chain. Lee said the public and private sectors must work together “to solve major challenges and respond effectively to the rapidly changing post-IRA global landscape”.

Pre-feasibility study

He said the government would aggressively push for a KRW150 billion next-generation battery R&D pre-feasibility study as part of investments to secure cutting-edge technology.

Meanwhile, an existing cap on how much industrial firms can expand floorspace in Korea will be increased by 1.4x for battery companies and others designated as being of strategic national importance and who invest in a new high-tech industrial complex to be unveiled in the first half of this year.

Lee said “mother factories” would also be established in the country to nurture and expand competitiveness within the domestic battery industry.

He said three major battery makers were aiming to invest KRW1.6 trillion in developing batteries over the next five years and building an all-solid-state battery pilot line in Korea.

Lee said the government would “fully support domestic firms’ efforts to keep achieving the best outcomes in the global market”.

Korea is the latest country to formally express concern fears that battery investors are being lured away by lucrative tax breaks and incentives in the US.

Last month, EU leaders and battery industry chiefs agreed to expand funding to support gigafactory projects and speed-up permitting processes in response to the US and China’s ramping up of incentives for its battery businesses.

Cylindrical batteries

Energy Storage Journal reported earlier this month that Korean battery giant LG Energy Solution planned to  shore up its battery materials supply chain by producing lithium hydroxide in Morocco, in partnership with China’s Sichuan Yahua Industrial Group.

On March 24, the company announced it would invest KRW7.2 trillion to build two battery production facilities in Arizona.

One plant will produce cylindrical batteries for EVs while the other will manufacture LFP pouch-type batteries for energy storage systems.

From 2024, under the IRA in the US, credits will not be available for consumers to buy a ‘clean energy vehicle if it contains any battery components manufactured by a ‘foreign entity of concern’ — one of which designated is China.

From 2025, credits will not be allowed for vehicles containing any critical minerals that were extracted, processed, or recycled by a foreign entity of concern.

According to the US Treasury, at least $45 billion in private-sector investment has been announced to support the EVs and battery supply chain across the country since the IRA was introduced.