There are projections that a joint venture between SK On and the American automotive company Ford, called Blue Oval SK, will manufacture batteries for energy storage systems (ESS) in a plant in Kentucky, USA. SK On aims to achieve results in the U.S. ESS market within this year and there is also a possibility that ESS batteries will be produced at a standalone plant, not at the joint venture plant with Ford.
Jim Farley, Ford's Chief Executive Officer, appeared on Bloomberg TV on the 7th (local time) and said, "We plan to change the purpose of the unused battery factory." Industry interpretations suggest that this statement was referring to the Blue Oval SK plant, as only one of the three plants established by Blue Oval SK is expected to operate as originally planned.
Blue Oval SK decided to build three battery plants in Kentucky and Tennessee, investing a total of 10.2 trillion won in May 2022. The goal was to launch the Kentucky plant 1 this year, and the plant 2 was scheduled to be operational next year, but the plans have changed due to a decrease in electric vehicle demand.
An SK On official said, "Kentucky plant 1 will begin commercial mass production of batteries for electric vehicles in the third quarter of this year, but the operational schedule for Kentucky plant 2 has been pushed back to after 2026." The operational goal for the Blue Oval SK plant located in Tennessee was 2026, but there is also a possibility of changes. An industry official noted, "The 'unused battery factory' mentioned by the Ford CEO could be the Tennessee plant."
SK On has expressed its intention to seriously target the U.S. ESS market. Lee Seok-hee, CEO of SK On, stated during the second-quarter earnings conference call that "we expect to expand our order achievements within this year." Jeon Hyun-wook, head of financial support at SK On, also mentioned in the conference call, "We are in discussions for gigawatt (GW) level supply contracts with multiple customers, and results will come out this year." If SK On manages to secure ESS contracts as declared, it will need to convert the electric vehicle battery production line to ESS.
There is also a possibility that SK On will manufacture ESS batteries at a standalone plant in the U.S. SK On has two standalone plants in Georgia. If ESS batteries are manufactured at a standalone plant rather than the joint venture plant with Ford, they will not have to share the advanced manufacturing production tax credit (AMPC) with Ford under the U.S. Inflation Reduction Act (IRA).
AMPC is a benefit given to manufacturing corporations when producing clean energy-related components and materials in the U.S., with battery cells receiving $35 per kilowatt-hour (kWh). The AMPC received by SK On in the 1st and 2nd quarters of this year was 170.8 billion won and 273.4 billion won, respectively.
According to global market research firm Mordor Intelligence, the U.S. ESS market is expected to grow from $3.68 billion this year to $5.09 billion by 2030. As the growth of the artificial intelligence (AI) industry causes a surge in electricity demand in the U.S., ESS demand is also expected to increase. ESS can store excess electricity and transmit it when electricity demand peaks.