Save the date: The Biden administration, armed with $125 billion in loans, grants and tax credits, is trying to nudge American entrepreneurs into creating a U.S. battery supply chain and reviving the nation as an industrial powerhouse. How is that going—and what exactly does the U.S. battery master plan look like? To discuss and get your questions answered, join me as I host host Jigar Shah, head of the Department of Energy loans program, at Live Chat With The Electric, Dec. 1 at 3 pm ET. Register here. If you'd like to invite a guest, email me directly.

Tens of billions of dollars thrown at a long cash-starved industry can fundamentally shape which technology gets ahead, and which is shunted aside. This week, we look at the potential shakeout that the Inflation Reduction Act is causing in the U.S. battery industry.     

In the last couple of years, several next-generation battery startups have gone public based on investor conviction that electric vehicle makers will adopt their technology, opening the door to big profits. The $125 billion climate law, and the threat of imminent recession, have roiled that calculus, posing a new challenge to these upstarts.

Three of these companies—QuantumScape, Enovix and SES—have hit technological, commercial or manufacturing struggles in recent weeks (more on this below). But the Inflation Reduction Act, which for the next decade will be awarding large subsidies to companies making battery cells in the U.S., has further shaken up the industry. Both the subsidies to battery makers and separate tax credits to buyers of EVs made in the U.S. expire at the end of 2032, placing a premium on batteries that are primed to go today or will be soon, and erecting a hurdle for those that won’t be ready until late in the decade or beyond. That potentially will create a moat that excludes the most exotic battery technologies and sets up a race among next-generation startups to be on the right side of the wall before the subsidies expire.