Chinese firms 'using state support' to dominate US utility battery market, DHS warns

Internal report warns reliance on Chinese batteries may create economic risks during US transition to renewable energy

The US Department of Homeland Security (DHS) has raised concerns about the country’s dependence on Chinese-made lithium batteries, citing threats to the US energy grid and supply chain security.

An internal report shared with local agencies in August warns that the reliance on Chinese batteries could create economic vulnerabilities as the US transitions to renewable energy.

The DHS document, obtained by Property of the People and reviewed by WIRED, highlights three Chinese companies—Contemporary Amperex Technology Co. Limited (CATL), Build Your Dreams (BYD), and Ruipu Energy Co. Ltd. (REPT)—for leveraging state support to dominate the global battery market.

“These firms are using government backing to quickly enter the US utility battery storage industry and create supply chain dependencies on China,” the report states.

The report builds on prior analyses of Chinese companies’ influence in electric vehicle (EV) and battery supply chains. It urges local agencies to report suspicious activity involving these firms. CATL and BYD currently hold 40% and 12% of the global energy storage battery market, respectively, according to SNE Research.

“Chinese manufacturers supply about 90% of energy storage system batteries, a larger share than for EVs,” said Vanessa Witte, senior research analyst at Wood Mackenzie.

The oversupply in the market, partly driven by softening EV demand, has led to price reductions, allowing Chinese firms to maintain market dominance.

The DHS report also points to national security concerns, particularly as Chinese batteries are increasingly used in US infrastructure projects.

CATL’s partnership with Primergy Solar in Nevada and Duke Energy’s prior use of CATL products raised alarms about foreign control over critical energy storage.

Fred Zhang, a spokesperson for CATL, rejected claims of unfair advantages, saying, “CATL has grown through innovation and strategic planning, not state support.” BYD and REPT did not respond to requests for comment.

As the US ramps up investment in domestic battery production through the Inflation Reduction Act and the Bipartisan Infrastructure Bill, DHS warned that Chinese firms are targeting US incentives to expand their market share.

The report notes that BYD advertised US state incentives as a way to attract investors in its utility storage systems.

Despite efforts to reduce dependency, experts warn that Chinese companies still hold a significant pricing advantage.

“The US government’s incentives are generous, but competing with established Chinese supply chains remains a challenge,” said Yayoi Sekine, head of energy storage research at BloombergNEF.

The DHS report underscores the need to monitor economic and supply chain risks as Chinese dominance in the battery industry continues to grow.