The One Big Battery Bill

It's time for US LFP

The One Big Beautiful Bill (OBBB) was signed into law on July 4, 2025, and I’ve been kind of obsessed with figuring out what it means for batteries. TL;DR: it’s time to onshore.

Tucked into this sweeping tax package are provisions that tighten the screws on battery supply chains. Starting in 2026, any battery component made with significant input from a “Foreign Entity of Concern” (read: China) becomes ineligible for the Inflation Reduction Act’s most generous credits. That one change has ripple effects across the entire value chain and puts a spotlight on one material in particular: LFP.

📦 LFP: The Linchpin of the Battery Supply Chain

That’s lithium iron phosphate, the workhorse cathode chemistry that powers most grid storage systems and an increasing share of EVs. It’s cheap, safe, cobalt-free, and dominates China’s battery exports. And with the OBBB, it just became the biggest bottleneck in America’s clean energy supply chain.

Time to dive in ⬇️

🧱 The Building Block That Drives It All

The Inflation Reduction Act created a wave of clean energy tax credits. But with the OBBB it’s now clear: starting in 2026, if more than 40% of a component’s cost comes from a “prohibited foreign entity” (read: China), no credits for you. Not even the downstream credits.

No §45X $35/kWh credit at cell level.
No §45X $10/kWh credit at module level.
No §48E 10% domestic content bonus at project level.
Nothing.

So what’s the biggest cost driver in an LFP cell? The LFP powder itself. It’s typically ~35–40% of cell cost, and literally 99% of it is made in China. Use Chinese LFP and you’re immediately disqualified from any credits. Even if it’s assembled in Nevada, wrapped in a U.S. steel box, and blessed by union labor.

The Geopolitics Just Got Real

Before the OBBB, there were loopholes. You could use imported LFP powder, assemble the cell in the U.S., and some folks still claimed the credits. That door is closing. The new Material Assistance Cost Ratio rules, cost-thresholds, and FEOC enforcement provisions are laser-focused on cutting China out of the supply chain.

This is why domestic LFP production is no longer a “nice to have.” It’s the unlock for the entire battery tax credit stack. Without it, U.S. gigafactories are stranded. With it, they print tax-efficient capacity.

We’re entering a phase where LFP is not just the cheapest cathode. It’s the most strategic. It’s the one thing that can make or break eligibility for the tens of billions in credits that the IRA + OBBB have now put into motion.

If you’re a battery company, developer, or policymaker, it’s time to treat LFP not as a commodity, but as critical infrastructure for energy prosperity.