The U.S. Department of Energy announced Thursday that it is awarding $500 million in grants to strengthen the domestic battery supply chain, a move that signals a quiet pivot in Washington’s industrial policy: batteries are now a matter of national security, not just electric vehicle adoption. The funding, distributed across materials processing, recycling, and component manufacturing, arrives as battery startups recalibrate their business models after the One Big Beautiful Bill stripped away EV and battery incentives earlier this year.
Much of the money is flowing directly to young companies. Coreshell, a battery materials startup, received $50 million to expand manufacturing for its metallurgical silicon anode material. Lilac Solutions landed $100 million to build a lithium processing facility on Utah’s Great Salt Lake, targeting 5,000 metric tons of lithium carbonate annually by 2028. Nth Cycle, which refines black mass from recycled lithium-ion batteries, told TechCrunch it received $100 million for a new facility producing lithium and nickel compounds.
Also read: Senator Wyden asks U.S. watchdog to investigate federal use of hacking tools and spyware
From EV subsidies to Pentagon supply chains
The shift in funding priorities reflects a broader realignment. When the One Big Beautiful Bill eliminated consumer EV tax credits and manufacturing subsidies, it undercut a significant chunk of projected battery demand. Automakers are still launching new EV models and expect years of growth, but the timeline has stretched. In the meantime, battery startups need customers today.
They are finding them in the defense world. The Pentagon and its suppliers need lightweight, high-capacity batteries for drones, torpedoes, infantry radios, and fighter jets. “We’re seeing clear demand drivers from the defense sector,” Megan O’Connor, co-founder and CEO of Nth Cycle, told TechCrunch. “But there’s still that in the automotive space as well.”
The scale of defense demand is modest compared to automotive. The U.S. Defense Logistics Agency was buying about $200 million worth of batteries annually as of 2021. By contrast, Mordor Intelligence projects the automotive industry will spend nearly $18 billion on battery manufacturing in the U.S. alone this year. But defense contracts offer something startups value as much as revenue: stability and urgency.
What the $500 million grant package covers
The DOE program aims to “reduce reliance on foreign sources, bolster national security, and advance American energy dominance,” according to the announcement. The grants target several points in the supply chain where the U.S. remains heavily dependent on imports, particularly China.
- Materials extraction: Lilac Solutions’ Utah facility will process lithium from geothermal brines, a domestic alternative to imported lithium.
- Component manufacturing: Coreshell’s silicon anode material is designed to boost battery energy density without the cost premium of traditional silicon anodes.
- Recycling infrastructure: Nth Cycle’s black mass refining facility closes the loop on battery materials, reducing the need for virgin mining.
For Coreshell, the defense angle is explicit. The company recently brought on ADS Ventures as an investor; the strategic VC’s parent company, ADS, is a defense supplier working with another supplier of autonomous systems. “Defense applications of lithium-ion batteries are absolutely playing out in discussions,” a Coreshell spokesperson told TechCrunch.
An awkward admission from Washington
The grant program carries an implicit acknowledgment that the push to dismantle EV incentives may have gone further than intended. Domestic battery factories that sprang up under the Inflation Reduction Act were built on expectations of sustained EV demand. When that demand faltered, the Pentagon faced the prospect of a hollowed-out domestic supply base.
The new DOE grants are a stopgap — a way to keep domestic battery manufacturing alive even as the consumer EV market cools. The Trump administration, despite its open disdain for EVs, recognizes that batteries are inescapable. Soldiers need them, drones need them, and fighter jets increasingly need them.
The result is a bifurcated market. Automotive remains the largest customer for batteries, and automakers are still planning for growth, just on a longer timeline. Defense is the smaller but more reliable buyer, willing to pay premiums for domestic sourcing and supply chain security. For startups that survived the incentive cut, that combination is proving to be a viable path forward.
As the timing of the EV transition remains unsettled, one thing is clear: the U.S. battery industry is no longer betting on a single customer. The companies that adapt to serve both the showroom and the battlefield are the ones positioning themselves for the next decade.
