LG Energy Solutions recently announced a deal to produce battery inputs for Tesla’s Megapack, an energy storage solution.
Manufacturing, data center, and power infrastructure construction starts have rapidly accelerated over the past 5 years
The interconnectedness of these sectors may provide opportunities for firms as construction starts remain strong.
According to ConstructConnect data, manufacturing facilities, offices—including data centers—and power infrastructure have grown significantly over the past five years, with average annual growth rates of 19.5%, 43.7%, and 39.9% over that period, respectively.
This rapid pace of construction has significantly increased electricity demand on the grid, creating a pressing need for enhanced energy storage capacity.
In response to this challenge, LG Energy Solution (LGES) and Tesla recently announced a $4.3 billion supply agreement aimed at bridging part of the gap. Under the deal, LGES will manufacture lithium iron phosphate (LFP) prismatic battery cells at its Lansing, Michigan facility.
According to manufacturer LG Energy Solutions, " LFP batteries are lithium-ion batteries that use lithium iron phosphate (LiFePO₄) as the cathode material. They are chemically stable, long-lasting, and highly cost-efficient. In particular, their excellent thermal stability makes them widely used in applications where safety is a top priority." Image: LG Energy Solutions
These cells will power Tesla's Megapack 3 grid-scale energy storage systems. Production is slated to begin in 2027, with the contract running through 2030 and options for extension.
Since the passage of the Inflation Reduction Act (IRA) in 2022, LG Energy Solution (LGES) has been aggressively expanding its U.S. battery manufacturing operations, securing significant amounts of domestic advanced manufacturing tax credits. Its Lansing, Michigan facility now serves as the cornerstone of a $4.3 billion partnership with Tesla.
Currently, Chinese-made LFP battery cells are subject to significant import tariffs, which may have been cutting into Tesla’s profit margins. By shifting to domestic production, Tesla can sidestep these tariffs entirely.
This supply agreement ensures that advantage remains in place through at least 2030, with options to extend further.
Data centers and manufacturing plants consume power on an industrial scale, and five years of double-digit construction growth in both sectors has intensified the strain on the grid. As construction activity continues to happen, so does the need for grid generation and storage to handle the growing electricity loads.
The Megapack 3 systems that LGES will produce in Lansing are designed to support this demand. These systems are deployed alongside data centers, manufacturing campuses, and other commercial developments, the same sectors that have or are experiencing record construction starts.
For contractors and developers, the connection between manufacturing, data center, and power infrastructure construction is critical. Manufacturing plants and data centers consume massive amounts of electricity, driving demand for grid generation and storage.
At the same time, power infrastructure projects depend on manufacturing to supply the components needed to support growing energy requirements.
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