Grid Storage Still Runs Through China

LFP moved the bottleneck upstream

Stationary storage has converged around lithium iron phosphate because the chemistry offers attractive cost, cycle life, and safety characteristics for applications where weight matters less than it does in vehicles. The International Energy Agency estimates that LFP accounted for more than 90% of global stationary battery storage installations in 2025.[1] That makes the LFP supply chain unusually important to grid investment.

It is also unusually concentrated.

The IEA says production of LFP cathode material and its precursors remains almost entirely concentrated in China. China also produces more than 90% of global anode active material, predominantly graphite. Even as manufacturers expand cell production in the United States and Europe, these upstream stages remain much harder to localize.[1]

The separator layer creates another dependency between the electrodes and the finished cell. SNE Research reported that Chinese companies represented more than 90% of the global EV battery separator market in late 2025, with SEMCORP, Senior, Sinoma, and other Chinese producers among the major suppliers.[2]

That creates a useful way to think about storage localization: cathode material, graphite anode, separator, LFP cell, battery container, inverter and power conversion, system integrator, and finally the grid project.

The West is adding capacity near the right side of this chain faster than it is replacing China on the left.

A new American cell factory therefore does not automatically represent an independent American battery supply chain. It may instead convert dependence on imported finished cells into dependence on imported battery materials.

The US is localizing cells before materials

This distinction is becoming more important as excess EV battery capacity is redirected toward stationary storage. The IEA reported that more than 50 GWh of US battery manufacturing capacity associated with companies including LG Energy Solution and Ford was reallocated toward LFP production in 2025, with stationary storage becoming an increasingly important destination. Battery stationary storage accounted for roughly one-third of US battery deployment that year.[1]

For investors, LG Energy Solution illustrates how this shift can redistribute economic exposure.

Altsets data shows that Tesla represents 19.03% of LG Energy Solution revenue, while LG Energy Solution represents 3.41% of Tesla COGS. The relationship data is company-wide and does not prove that those percentages are attributable to stationary storage or LFP specifically. But the asymmetry is still important.

Tesla is economically much more significant to LG Energy Solution's revenue base than LG Energy Solution is to Tesla's consolidated cost base. If Tesla expands domestic storage sourcing through LG Energy Solution, the incremental relationship can therefore matter differently to the two companies. For LG Energy Solution, a large customer can materially affect factory utilization and revenue concentration. For Tesla, the supplier is one input inside a much larger manufacturing and energy business.

The deeper supply-chain issue is that moving the cell relationship to Michigan or another US location does not necessarily remove Chinese exposure farther upstream. Until non-Chinese LFP cathode, graphite, and separator capacity expands with the cell factories, localization remains incomplete.

Europe is importing more of the finished system

Europe presents a different form of exposure. Chinese suppliers are not merely selling battery materials into European manufacturing. They are increasingly competing for the complete storage project.

Sungrow provides a clear example. In 2026, the Chinese power electronics and storage company signed a 1 GWh European battery storage framework agreement with Delta Capacity for projects across several European markets. Its PowerTitan 2.0 platform combines battery storage with thermal management, power conversion, controls, and system integration rather than selling a standalone cell.[3]

This moves Chinese industrial exposure another step downstream.

The inverter and power-conversion layer deserves particular attention because batteries store DC electricity while the grid operates in AC. Grid-scale projects therefore require sophisticated bidirectional power electronics, controls, and increasingly grid-forming capabilities. Sungrow entered storage with an existing global inverter business, allowing it to combine battery procurement with power electronics and controls.

CATL and BYD have followed a similar strategic direction from the battery side. Instead of remaining cell suppliers, Chinese manufacturers increasingly sell complete storage platforms.

For European developers, that can lower procurement complexity and system cost. For competing Western integrators such as Fluence, Wartsila, and Tesla, however, it changes the competitive benchmark. They are not simply competing against inexpensive Chinese cells. They are competing against vertically integrated supply chains that can internalize cells, electronics, enclosures, thermal management, software, and procurement.

The investment exposure is not just CATL

The more useful conclusion is therefore not that grid storage depends on one Chinese battery manufacturer. It is that dependence appears repeatedly across the same physical chain.

LFP cathode producers sit upstream of the cell. Graphite processors and separator manufacturers occupy different but equally necessary material layers. CATL and BYD turn those materials into cells and battery systems. Sungrow connects storage to another Chinese strength in power electronics. Western companies can own the project, provide software, manufacture packs, or perform integration while still relying on these upstream nodes.

This also explains why tariffs on finished Chinese batteries cannot by themselves recreate the supply chain elsewhere. They can change where final assembly happens and improve the economics of domestic cell production. They do much less if cathode active material, battery-grade graphite, separators, production equipment, and manufacturing expertise remain concentrated in China.

The companies that matter most are therefore not always the companies whose logos appear on the storage site.

Conclusion

Grid storage is becoming a major new source of battery demand in the United States and Europe, but it has not yet become an independent Western battery supply chain.

The critical transition is from importing Chinese storage systems to building local cells from diversified materials, separators, electronics, and equipment. Until that happens, localization can move the border where Chinese exposure enters the system without eliminating the exposure itself.

For investors, the important question is not simply where a battery was assembled. It is how far upstream the supply chain actually changed.

Scope and limitations

This article maps battery-storage dependencies using the supplied draft, IEA analysis, SNE Research, Sungrow disclosures, and the Altsets company relationship supplied with the article.

The IEA's LFP figure describes global stationary battery storage installations in 2025. The anode figure describes China's share of global anode active material production. The separator figure comes from SNE Research's EV battery separator market. These are different denominators and are not combined into a single concentration measure.

The LG Energy Solution and Tesla percentages are company-wide relationship metrics. Supplier Revenue Percentage measures the customer's share of supplier revenue. Customer Cost Percentage measures the supplier's share of customer COGS. Neither metric is specific to grid storage, LFP, or a particular factory.

The supply-chain diagram is intentionally incomplete. It does not imply that every storage project uses every named company, that every component is sourced from China, or that the listed stages represent the complete battery-storage value chain.

For evidence limits and relationship methodology, see the Altsets methodology.

Sources

1. International Energy Agency, "Electric vehicle batteries," Global EV Outlook 2026, 2026. https://www.iea.org/reports/global-ev-outlook-2026/electric-vehicle-batteries

2. SNE Research, "From Jan to Nov 2025, Global Electric Vehicle Battery Separator Installment Reached 16,321Mil m2," January 14, 2026. https://sneresearch.com/en/insight/release_view/576/page/72

3. Sungrow, "Sungrow and Delta Capacity Deepen Partnership with 1 GWh BESS Framework Agreement Signed at Energy Storage Summit," March 6, 2026. https://www.sungrowpower.com/uk/en/uk/en/sungrow/deltacapacity/signing

How to Cite This

For research inquiries or data access: press@altsets.com

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