U.S. Battery Startups Gain $500M DOE Boost as Defence Demand Grows

U.S. battery startups are finding a growing source of demand in defence and national security as federal funding shifts toward domestic critical-mineral processing, battery materials and recycling.

The Department of Energy is directing $500 million to seven projects aimed at strengthening U.S. battery supply chains and reducing dependence on foreign sources. The funding covers lithium, cobalt, recycling, cathode materials, electrolytes and next-generation anodes, with several startups receiving major awards.

Battery startups secure major DOE awards

Coreshell Technologies was selected for $50 million to expand manufacturing of its metallurgical silicon anode material. Silicon-based anodes are being developed as an alternative to conventional graphite-based designs, with potential applications across transportation, defence,e and other battery-dependent industries.

Lilac Solutions received a $100 million award for its planned lithium extraction and refining facility in Utah’s Great Salt Lake. The first phase is designed to produce 5,000 metric tons of battery-grade lithium carbonate annually, with production targeted for 2028.

Nth Cycle was also selected for up to $100 million to develop a commercial refining facility in the southeastern United States. The project is designed to process up to 24,000 metric tons of domestic battery black mass each year and recover lithium and nickel compounds for reuse in new batteries.

Defence is becoming a larger part of the market.

Nth Cycle CEO MeganO’Connorr said the company is seeing clear demand from the defence sector while automotive demand remains important. Its planned facility is intended to supply materials for military systems, AI data centres, grid storage, and transportation.

Coreshell has also been expanding its ties to the defence sector. The company brought on ADS Ventures, whose parent company supplies the defence industry, as an investor and has been working with another supplier focused on autonomous systems.

The connection is significant because modern military equipment increasingly depends on advanced batteries for systems ranging from communications equipment and drones to aircraft and other mobile platforms. The federal government has long identified domestic lithium-ion battery production as strategically important. The Department of Energy’s National Blueprint for Lithium Batteries called for a secure domestic supply chain capable of supporting transportation, defence and stationary storage applications.

Automotive demand still dwarfs defence

Defence may provide an important additional customer base, but the automotive sector remains far larger. The U.S. electric vehicle battery manufacturing market continues to represent billions of dollars in investment, according to Mordor Intelligence.

The emerging opportunity for startups, therefore, is not necessarily a replacement for EV demand with defence spending. Instead, companies developing lithium, recycling and advanced battery materials increasingly have several potential customers across transportation, national security, grid storage and computing infrastructure.

For startups seeking to build expensive domestic processing and manufacturing facilities, the latest DOE awards offer another source of capital as U.S. policymakers continue to treat batteries and critical minerals as strategic supply-chain priorities.