SK On is on the verge of securing major battery supply deals for the U.S. energy storage market, a move that could reshape its business.
The company is currently negotiating contracts totaling over 10 gigawatt-hours (GWh), with a potential value of up to 1.2 trillion Korean won (approximately $810 million). These aren't just for any batteries; they are for grid-scale Energy Storage Systems (ESS), which are giant batteries that help stabilize the power grid. This deal represents about half of SK On's global ESS order target for 2026 and marks a significant push into the North American market with its new LFP batteries.
So, why is this happening now? First, the primary driver is a "super-cycle" in U.S. energy storage demand. The U.S. is installing record amounts of grid batteries, with projections showing another 24.3 GW to be added in 2026 alone. Developers in states like Texas, California, and Arizona are scrambling to secure a stable supply of batteries from reliable, non-Chinese manufacturers.
Second, U.S. government policies are creating a powerful tailwind. Rules like the Foreign Entity of Concern (FEOC) restrictions and Section 301 tariffs are designed to reduce reliance on Chinese supply chains. These policies make it more difficult and costly for projects to use Chinese-made batteries if they want to qualify for valuable tax credits. This directly benefits South Korean suppliers like SK On, who are seen as bankable, policy-compliant alternatives.
Third, market dynamics are also playing a crucial role. After bottoming out in mid-2025, lithium prices have started to rebound. This trend encourages energy developers to lock in battery prices through long-term contracts now, fearing further cost increases. It creates an ideal environment for SK On to close large-volume deals.
Finally, SK On has laid the groundwork for this success. A smaller deal signed in September 2025 with a U.S. developer, Flatiron Energy, served as a critical stepping stone. It not only validated SK On's technology but also established a commercial relationship and preferential rights for future negotiations, paving the way for the massive 10+ GWh pipeline being discussed today. This strategic expansion is also vital for improving the profitability of SK On's battery division.
- Energy Storage System (ESS): A large-scale battery system used to store electrical energy and release it when needed, helping to stabilize the power grid.
- Foreign Entity of Concern (FEOC): A term used in U.S. regulations to define entities controlled by or subject to the jurisdiction of certain foreign governments, including China. Projects with ties to FEOCs may be ineligible for federal tax credits.
- LFP Battery: Lithium Iron Phosphate battery, a type of lithium-ion battery known for its safety, long lifespan, and lower cost, making it ideal for stationary energy storage.