LG Energy Solution to ramp up investment in planned Valley battery manufacturing plant
South Korean battery giant LG Energy Solution Ltd. has confirmed its plans to move forward with building a battery complex in Arizona and will be significantly increasing its investment in the project.
LGES, one of the largest battery makers in the world, said Friday that now it plans to invest $5.5 billion to construct two manufacturing plants in Queen Creek, a town located just south of the Phoenix-Mesa Gateway Airport.
The company said it will build a $3.2 billion cylindrical battery manufacturing facility for electric vehicles with a capacity of 27 gigawatt hours and a $2.3 billion lithium-iron phosphate pouch-type battery plant for energy storage systems with a capacity of 16 gigawatt hours.
This is nearly four times the original investment of $1.4 billion for a battery plant that LG announced last year for a 1 million-square-foot battery factory, although town documents have said the company’s investment was expected to total $2.8 billion and bring 2,800 jobs.
Both facilities are expected to break ground in 2023 and create “thousands of jobs,” according to a statement from the town of Queen Creek. The new plants will be built across hundreds of acres purchased by LGES in a state land auction last year at Ironwood and Pecos Roads.
LGES said in a statement that its decision to increase its investment in cylindrical battery production in North America is to help meet rising demand from electric vehicle manufacturers for “locally manufactured high-quality, high-performance batteries in an effort to satisfy the Inflation Reduction Act’s EV tax credits.”
The Inflation Reduction Act became effective in August 2022 and includes incentives for the electric vehicle industry in the U.S. in an attempt to compete with China for battery manufacturing, according to media reports. A number of other companies have since made plans to build battery manufacturing plants across the country, including Ford’s new $3.5 billion plant in Michigan.
LGES plant to begin operations in 2025
The new cylindrical battery facility is expected to start mass production of 2170 cells in 2025 mostly for electric vehicle manufacturers in North America. LGES claims it’s the first U.S. cylindrical battery plant that’s solely invested by a Korean battery maker.
“Our decision to invest in Arizona demonstrates our strategic initiative to continue expanding our global production network, which is already the largest in the world, to further advance our innovative and top-quality products in scale and with speed,” said Youngsoo Kwon, CEO of LGES in a prepared statement. “We believe it’s the right move at the right time in order to empower clean energy transition in the U.S.”
The new battery complex will also use a “smart factory system” to increase yield and improve manufacturing processes to help meet demand for batteries in the region.
The lithium-iron phosphate battery plant, which the company said is the first energy storage system-exclusive battery production facility globally, is expected to start production in 2026.
News of the company’s commitment to Arizona comes months after LGES said it was pausing to reevaluate its plans to build the factory in Queen Creek due to economic conditions.
But in January LGES sent a letter to the Arizona Commerce Authority confirming its plans to invest in a plant so that Queen Creek could qualify for a public infrastructure reimbursement program to support LGES, the Business Journal reported.
Through the program, the town said it expects to be reimbursed $30 million for public infrastructure improvements, which will account for about 38% of the town’s project costs totaling $80 million for new roads and water and wastewater infrastructure around the battery manufacturing facility, according to a recent town report.
The Arizona Commerce Authority recognized Gov. Katie Hobbs, Pinal County, Queen Creek, Sen. Mark Kelly, Greater Phoenix Economic Council and several others for their work in the project.
LGES plant eligible for incentives
Last year, LGES said it chose Queen Creek for its plant after looking at multiple sites in Arizona and across the U.S. over a year because of access to workforce and the town’s business-friendly environment. The company will also be located in Pinal County, which has become a growing hub for advanced manufacturing, and electric vehicle manufacturers Lucid Group. Inc. and Nikola Corp., which have announced plans to partner with LGES. Nikola also said it is planning to move its battery manufacturing operations from California to its plant in Coolidge.
The LGES site also sits close to the Phoenix-Mesa Gateway Airport, a big economic driver in the region, Union Pacific rail line, and State Route 24, which connects Queen Creek and Pinal County to the Loop 202 in southeast Mesa, one of the hottest industrial markets in the country.
The ACA said on Friday that LGES is eligible for a maximum of $100.15 million in state incentives for its facilities, including $91 million from the Qualified Facility program and $8 million from the Arizona Competes Fund, which are both performance-based.
Bills moving through the State Legislature are also working to increase reimbursement or grant programs for manufacturers in Arizona to support the building out of infrastructure for new plants such as Lucid Motors, LGES and Taiwan Semiconductor Manufacturing Co.
Other battery factories planned for Arizona include KORE Power in Buckeye, American Battery Factory in Tucson and related companies such as Ecobat’s recycling plant in Casa Grande.