SK On has secured a major battery cell supply contract in the U.S. energy storage system (ESS) market. This deal is set to accelerate SK On’s expansion in the North American ESS sector.
On August 27, SK On announced the signing of a supply agreement for ESS battery cells with American company NeoVolta Power at its Seoul headquarters.
The contract stipulates that SK On will provide NeoVolta Power with 9 gigawatt-hours (GWh) of lithium iron phosphate (LFP) pouch battery cells from 2027 to 2031. Industry experts value the deal at approximately 1.5 trillion KRW (1.09 billion USD). Production will take place at SK On’s Georgia facility in the United States.
Five-Year Commitment in the U.S. ESS Market is Expected to Boost the Georgia Plant’s Operational Efficiency
This agreement establishes SK On as a long-term supplier of LFP batteries for ESS in North America. It’s also anticipated to broaden the company’s local customer base in the rapidly expanding U.S. ESS market. SK On’s selection as the primary cell supplier for NeoVolta Power’s LFP pouch battery-based ESS products underscores its technological prowess and local manufacturing capabilities.
SK On has been strategically expanding its presence in the growing U.S. ESS market. The company is diversifying beyond its core high-nickel batteries for electric vehicles, incorporating LFP batteries for ESS. Leveraging its local production capacity, SK On is aggressively pursuing new customers.
The contract’s significance extends to SK On’s financial performance. The five-year supply commitment will enhance the U.S. factory’s utilization rate and is expected to improve overall performance through customer diversification.
Both companies aim to broaden their collaboration across the ESS sector. SK On plans to supply an additional 9 GWh of ESS LFP battery cells to NeoVolta Power through a separate agreement this year. This strategic partnership will involve NeoVolta Power purchasing these cells as pack products, capitalizing on their expertise. If successful, this could double the scope of their business cooperation to 18 GWh.
Choi Jae-jin, head of SK On’s ESS business, stated that this agreement will solidify SK On’s position in the U.S. ESS market. It’s committed to expanding the customer base and business opportunities, leveraging the local production capabilities and tailored battery solutions.
NeoVolta Power’s president, Steve Bond, commented that SK On’s battery technology and U.S. production capacity, combined with the ESS manufacturing expertise, form the cornerstone of this strategic partnership. It’s confident this collaboration will effectively address the growing U.S. demand and accelerate both companies’ ESS business growth.
Plans For Additional 9 GWh Supply Collaboration Could Expand Partnership to 18 GWh
NeoVolta Power, a subsidiary of the prominent U.S. energy technology firm NeoVolta, operates its ESS manufacturing facility in Pendergrass, Georgia.
SK On is rapidly expanding its ESS business both domestically and internationally. In February, the company secured 50.3% (284 MW) of the total 565 MW in Korea’s second ESS central bidding market. In the U.S., it inked a 1 GWh ESS supply deal with renewable energy developer Flatiron last September.
The company is particularly focused on penetrating the U.S. market. In June, SK On hosted an industry event in Texas to unveil its ESS product brand, GRIDON. The name embodies the concept of turning on the grid, reflecting the company’s commitment to facilitating energy transition through grid stabilization.
SK On has established a robust production foundation to support its ESS business expansion. The company boasts approximately 100 GWh of local production capacity, combining its standalone facilities SK Battery America and SK On Tennessee, along with Hyundai SK Battery Manufacturing America (HSBMA), a joint venture with Hyundai Motor Group.
In its preliminary Q2 2023 financial report, SK On posted sales of 2.946 trillion KRW (2.14 billion USD) and an operating profit of 821.8 billion KRW (about 598 million USD). This marks SK On’s first profitable quarter since Q3 2024 and represents its largest operating profit in 19 quarters since the company’s spin-off.
