US executive order further strengthens the behind-the-meter energy storage growth thesis; Goldman Sachs' top picks among Korean battery stocks are LGES and LG Chem
AI summary card
US executive order further strengthens the behind-the-meter energy storage growth thesis; Goldman Sachs' top picks among Korean battery stocks are LGES and LG Chem
Executive Order 14420 restricts certain foreign entities from supplying bulk-power system equipment but explicitly excludes facilities behind the meter; Goldman Sachs believes this could intensify constraints on front-of-the-meter projects and drive US behind-the-meter energy storage demand. Its base and bull cases for the US energy storage market in 2030 are approximately 170 and 210 GWh/year, respectively.
- The executive order explicitly includes battery energy storage systems and grid-connected inverters among restricted bulk-power system equipment but excludes local distribution facilities to which behind-the-meter assets are connected.
- The US Department of Energy must issue implementing rules within 120 days, by late December.
- The base case projects the US energy storage TAM at approximately 170 GWh/year in 2030, corresponding to approximately 30 GW of cumulative behind-the-meter capacity.
- The bull case projects a TAM of approximately 210 GWh/year in 2030, corresponding to more than 40 GW of cumulative behind-the-meter capacity.
- LGES and LG Chem are the top picks among battery cell manufacturers, based on the increasing contribution from energy storage and the path to recovering capacity utilization.
- Among cathode material companies, L&F is preferred but remains rated Neutral; Ecopro BM and Posco Future M are rated Sell because their valuations already largely reflect the bull-case energy storage scenario.
Report interpretation
Overview
The report analyzes the impact of US Executive Order 14420 on energy storage deployment pathways and the Korean battery value chain. Goldman Sachs believes the policy imposes additional supply constraints on front-of-the-meter energy storage equipment while explicitly exempting behind-the-meter facilities, further strengthening the behind-the-meter energy storage growth thesis driven by data center expansion and grid bottlenecks. Among the related Korean battery stocks, the report considers LGES and LG Chem to offer the most attractive long-term risk-reward.
Core views
The policy change is the report's starting point. On August 26, the US government signed Executive Order 14420, prohibiting foreign-produced bulk-power system equipment supplied by “covered foreign entities” such as China and explicitly covering battery energy storage systems and grid-connected inverters. In contrast, local distribution facilities are explicitly excluded, and behind-the-meter energy storage assets are connected to precisely these types of facilities. The US Department of Energy must issue implementing rules within 120 days, by late December, so the actual constraints on specific equipment, suppliers, and projects will still depend on the subsequent detailed rules. Goldman Sachs interprets this policy change in the context of US data center expansion and existing grid constraints. Previous reports had already identified data center construction as a structural growth driver for battery demand and noted that interconnection queues, supply chain bottlenecks, and regulatory delays continue to impede the construction of conventional grids and front-of-the-meter projects, increasing demand for on-site behind-the-meter energy storage deployment. This executive order could further constrain front-of-the-meter energy storage development. Goldman Sachs therefore believes the relative attractiveness and growth prospects of behind-the-meter energy storage have received an incremental boost, rather than merely continuing the previous demand thesis. The key difference between the market-size scenarios comes from assumptions about behind-the-meter power supply capacity. The base case projects the total addressable US energy storage market to reach approximately 170 GWh/year by 2030, assuming approximately 30 GW of cumulative behind-the-meter capacity. Based on industry feedback obtained through channel checks, the bull case assumes more than 40 GW of cumulative behind-the-meter capacity, corresponding to a market size of approximately 210 GWh/year in 2030. The approximately 40 GWh/year difference between the two scenarios is driven primarily by different assumptions regarding behind-the-meter power supply and capacity buildout, indicating that whether the policy can genuinely accelerate behind-the-meter project deployment is the core mechanism for raising market-size estimates. At the company level, Goldman Sachs continues to believe that LG Energy Solution and LG Chem offer superior risk-reward to other Korean battery companies under the long-term illustrative scenarios and rates both Buy. The rationale includes the expanding contribution from energy storage and the path to recovering capacity utilization emphasized in previous industry research. In the bull-case energy storage scenario, Goldman Sachs raises its long-term assumptions for energy storage shipments, market share, and margins; the more optimistic “EV+ESS” scenario further raises assumptions for long-term EV-related shipments, market share, and margins. The scenario valuations are all compared against closing prices on August 27, 2026. The assessment of cathode material companies is more cautious. Goldman Sachs continues to prefer L&F within this segment, mainly because of its positioning in lithium iron phosphate (LFP) for US energy storage, but maintains a Neutral rating. Ecopro BM and Posco Future M are both rated Sell. Even under the bull-case energy storage scenario, their implied 2030 exit multiples remain significantly above the typical range for Japanese specialty chemical companies, indicating that current valuations already largely price in Goldman Sachs' bull-case energy storage outcome. The valuation backdrop also supports this stock-selection divergence. The report notes that during the rally in early 2026, valuation multiples for Korean battery pure plays returned to previous highs and exceeded those of other Korean and Japanese beneficiaries of US reindustrialization. Therefore, improving behind-the-meter energy storage demand does not mean that all battery value-chain stocks offer the same risk-reward. Goldman Sachs prefers LGES and LG Chem, which can benefit from an improving energy storage business mix and recovering utilization, while remaining cautious on cathode material companies whose valuations already fully reflect optimistic outcomes.
Analysis framework
The report first defines the scope of equipment restricted by Executive Order 14420 and the exemption for behind-the-meter facilities, then incorporates the policy impact into a grid-constraint framework comprising data center expansion, interconnection queues, supply chain bottlenecks, and regulatory delays. It subsequently uses cumulative behind-the-meter capacity as the core variable to construct base and bull market-size scenarios for 2030, estimates long-term company-level valuations based on assumptions for energy storage shipments, market share, margins, and EV operations, and finally selects Korean battery value-chain stocks by combining exit-multiple analysis with cross-industry valuation comparisons.
Methodology notes
Executive order event impact analysis
The report uses Executive Order 14420 as the triggering event, distinguishes restrictions on front-of-the-meter equipment from the exemption for behind-the-meter facilities, and assesses how the policy changes the relative growth prospects of different energy storage deployment pathways.
Energy storage TAM and behind-the-meter capacity assumptions
Based on demand arising from US data centers and grid constraints, the report uses cumulative behind-the-meter capacity assumptions of approximately 30 GW and more than 40 GW to derive 2030 energy storage market sizes of approximately 170 and 210 GWh/year, respectively.
Base, bull-case energy storage, and bull-case EV+ESS scenario analysis
The report progressively raises long-term assumptions for energy storage shipments, market share, and margins, and further increases EV business assumptions in the more optimistic scenario to compare the risk-reward of different Korean battery companies under each scenario relative to their latest closing prices.
Comparison of implied 2030 exit multiples
The report compares the implied 2030 exit multiples of Ecopro BM and Posco Future M under the bull-case energy storage scenario with the typical multiple range of Japanese specialty chemical companies to determine whether their valuations already reflect optimistic operating outcomes.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- LG Energy SolutionThe report believes it can benefit from the increasing contribution of energy storage and recovering capacity utilization, offering relatively favorable risk-reward in the long-term scenarios.
- Strengths
- Expansion of the energy storage business mix and a path to recovering utilization.
- Comparison
- Its risk-reward is superior to that of other Korean battery companies in the base and bull-case energy storage scenarios.
- LG ChemThe report believes it can benefit from its energy storage exposure and recovering utilization, making it one of the top picks in the Korean battery value chain.
- Strengths
- An increasing contribution from energy storage and potential utilization recovery.
- Comparison
- Its risk-reward in the long-term scenarios is more attractive than that of other Korean battery companies.
- L&FAmong cathode material companies, the report relatively favors its positioning in LFP for US energy storage but maintains a Neutral rating.
- Strengths
- Positioning in the US energy storage LFP market.
- Weaknesses
- The report's relative preference is not sufficient to support a Buy rating.
- Comparison
- Preferred relative to Ecopro BM and Posco Future M.
- Ecopro BMThe report assigns a Sell rating, believing its valuation already largely reflects the bull-case energy storage scenario.
- Weaknesses
- Even under the bull-case energy storage scenario, its implied 2030 exit multiple remains relatively high.
- Comparison
- Its exit multiple is significantly above the typical range for Japanese specialty chemical companies.
- Risks
- The bull-case energy storage outcome is already largely reflected in the valuation.
- Posco Future MThe report assigns a Sell rating, believing its valuation already largely reflects the bull-case energy storage scenario.
- Weaknesses
- Even under the bull-case energy storage scenario, its implied 2030 exit multiple remains relatively high.
- Comparison
- Its exit multiple is significantly above the typical range for Japanese specialty chemical companies.
- Risks
- The bull-case energy storage outcome is already largely reflected in the valuation.
Key data
- US executive orderExecutive Order 14420Signed on August 26, restricting foreign-produced bulk-power system equipment supplied by covered foreign entities.
- Deadline for implementing rulesWithin 120 daysThe US Department of Energy's implementing rules should be issued by late December.
- Base case for 2030 US energy storage TAMApproximately 170 GWh/yearAssumes approximately 30 GW of cumulative behind-the-meter capacity.
- Bull case for 2030 US energy storage TAMApproximately 210 GWh/yearAssumes more than 40 GW of cumulative behind-the-meter capacity, based in part on industry feedback obtained through channel checks.
- Difference between TAM scenariosApproximately 40 GWh/yearDriven primarily by different assumptions for behind-the-meter power supply and capacity.
- LGES rating and priceBuy; W37050The price reference is the August 27, 2026 close.
- LG Chem rating and priceBuy; W274,500The price reference is the August 27, 2026 close.
- L&F rating and priceNeutral; W129800Among cathode material companies, the report relatively favors L&F's positioning in LFP for US energy storage.
- Ecopro BM rating and priceSell; W118,000The report believes the valuation already largely reflects the bull-case energy storage scenario.
- Posco Future M rating and priceSell; W184,000Its implied 2030 exit multiple under the bull case remains above the typical range for Japanese specialty chemical companies.
Impact & implications
Goldman Sachs believes that the executive order's additional constraints on front-of-the-meter energy storage equipment supply, combined with its exclusion of behind-the-meter facilities, will make behind-the-meter energy storage a more important means of addressing data center electricity demand and interconnection bottlenecks. Benefits across the value chain will be uneven: an increasing contribution from energy storage and recovering utilization give LGES and LG Chem more favorable long-term risk-reward, while the high valuations of some cathode material companies already price in relatively optimistic energy storage growth outcomes.
What to watch
- Monitor the implementing rules for Executive Order 14420 that the US Department of Energy is due to issue within 120 days, by late December.
- Monitor whether cumulative US behind-the-meter energy storage capacity can rise from approximately 30 GW in the base case toward more than 40 GW in the bull case.
- Monitor the increasing contribution from energy storage and the path to recovering capacity utilization at LGES and LG Chem.
- Monitor whether long-term energy storage shipments, market share, and margins can reach the bull-case assumptions.
- Monitor whether the valuations of Ecopro BM and Posco Future M continue to remain significantly above the typical range for Japanese specialty chemical companies.