Expected U.S. data center interconnection reform drives rally in Korean battery supply chain; 2030 U.S. ESS demand forecast raised by 52%

Overview

This report focuses on the impact on the Korean battery supply chain from faster grid access for large loads such as AI data centers driven by FERC in the United States. The report argues that if data center ESS deployment can reduce interconnection complexity through peak shaving, interruptible transmission service, and simplified studies, data center operators will be more willing to incorporate ESS into project design, even if power is not sourced entirely from solar or wind. Based on this assumption, J.P. Morgan significantly raised its U.S. ESS demand forecast and believes Korean battery cell makers and some cathode material companies will benefit.

Core views

The core views are: first, FERC's show cause orders may prompt U.S. RTOs to accelerate the large-load interconnection process, with the SPP framework's expedited interconnection study for on-site generation or ESS supporting data centers completed within 90 days and viewed as a demonstration case; second, ESS deployment for data centers shifts from an option to an economic incentive to speed up power connection, driving the 2030 U.S. ESS demand forecast up from 200GWh to 303GWh; third, Korean battery makers already have more than 200GWh of capacity in North America, which could exceed 400GWh by 2030, and ESS demand could offset weakness in the EV battery market; fourth, LGES and Samsung SDI have strong order visibility, while SK Innovation has fewer ESS orders but potential leverage from U.S. battery capacity and the SMR data center theme; fifth, within the cathode materials chain, L&F benefits from clearer LFP ESS order visibility, LG Chem has a potential opportunity to enter the LGES ESS supply chain, while POSCO Future M faces LFP development and mass production ramp risks, and Ecopro BM is impacted more neutrally.

Analysis framework

The report uses a framework combining policy catalysts, interconnection mechanisms, data center loads, ESS deployment ratios, U.S. battery supply-demand balance, and company order/capacity exposure. It first explains the change in demand from FERC's reform requirements for RTOs, then estimates 2030 U.S. ESS demand using assumptions for data center ESS penetration, deployment intensity, and duration, and finally maps this to orders, capacity utilization, margins, and relative investment preference for Korean battery cell manufacturers and cathode material companies.

Methodology notes

• Policy and regulatory catalystFERC large-load interconnection reform framework

  Drive faster grid access for large loads such as data centers through RTO reform

  FERC requires RTOs to submit reports and explain or reform existing tariffs and processes, focusing on simplifying studies for large-load interconnection, clarifying who bears network upgrade costs, accelerating interconnection studies for co-located generation or ESS, and providing more flexible transmission services for large loads equipped with generation/ESS.

• Demand forecastingData center ESS penetration model

  Estimate ESS demand using data center load, ESS deployment ratio, and duration

  The report assumes that 35% of U.S. data centers will deploy ESS by 2030. Existing projects have ESS deployment ratios of about 10%-30% of data center load, with a typical duration of 2-4 hours, leading to an upward revision of the 2030 U.S. ESS demand forecast to 303GWh.

• Supply-demand balanceU.S. battery supply-demand table

  Compare U.S. EV and ESS battery demand, domestic battery capacity, and the capacity utilization pressure faced by Korean/Japanese manufacturers

  The report compares annual EV and ESS battery shipments with U.S. battery capacity to assess the potential support from higher ESS demand for capacity utilization, gross margins, and market share.

• Company mappingOrder visibility and technology route exposure

  Assess the degree of benefit to companies based on ESS orders, North American capacity, LFP cathode capability, and the data center energy theme

  LGES, Samsung SDI, and SK Innovation mainly benefit from ESS cell demand; L&F benefits from LFP cathode contracts and potential follow-on orders; LG Chem has a potential opportunity to enter the ESS supply chain; POSCO Future M and Ecopro BM have weaker short-term benefit visibility.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LG Energy Solution (373220.KS)

  Core beneficiary among cell makers from the upward revision in U.S. ESS demand, rated OW.

  Strengths

  U.S. ESS order backlog target rises from 140GWh in 4Q25 to 230GWh in 4Q26; high North American capacity scale and ESS revenue exposure.

  Weaknesses

  Still affected by EV battery demand fluctuations, customer project timing, and North American capacity utilization.

  Comparison

  Compared with Samsung SDI and SK Innovation, the report believes LGES is best positioned to gain ESS market share.

  Risks

  FERC reform falls short of expectations, data center ESS deployment rate is below assumptions, or order conversion to shipments is slower than expected.

• Samsung SDI (006400.KS)

  Beneficiary of the U.S. ESS opportunity, rated OW.

  Strengths

  ESS order book covers 2-3 years of U.S. capacity, which the report estimates at about 60GWh; ESS accounts for a relatively high share of JPM's forecast 2027 revenue.

  Weaknesses

  Capacity scale and market share expansion may lag LGES.

  Comparison

  Compared with LGES, order coverage is clear but elasticity in scale and market share may be smaller; better positioned than SK Innovation, which has a weaker ESS order base.

  Risks

  Delays in U.S. ESS projects, customer concentration, capacity ramp-up, and margin pressure.

• SK Innovation (096770.KS)

  Potential beneficiary of U.S. ESS demand, rated OW.

  Strengths

  Has significant U.S. battery capacity and investment exposure to the fourth-generation nuclear SMR data center theme.

  Weaknesses

  Current U.S. ESS order backlog is relatively limited, with ESS accounting for only about 3% of 2027 revenue mix.

  Comparison

  Short-term ESS order visibility is weaker than LGES and Samsung SDI, but the valuation gives limited credit to its U.S. battery capacity, creating potential upside.

  Risks

  Insufficient ESS order wins, uncertain SMR commercialization progress, and weak EV markets dragging on capacity utilization.

• L&F (066970.KQ)

  Major beneficiary of rising LFP ESS cathode demand, rated OW.

  Strengths

  Has secured Samsung SDI's W1.6tn LFP cathode contract, which JPM estimates at about 130kt covering 2026-2029; likely to receive follow-on orders from existing and new customers.

  Weaknesses

  Dependent on realization of ESS LFP demand and continuity of customer orders.

  Comparison

  The report prefers L&F among Korean cathode material names, ahead of Ecopro BM and POSCO Future M.

  Risks

  Slower customer order timing, LFP price competition, and non-China supply chain substitution progressing below expectations.

• LG Chem Ltd (051910.KS)

  Potential beneficiary in the ESS cathode supply chain, rated OW.

  Strengths

  Although it does not currently produce LFP cathodes, it plans to launch differentiated products and may have an opportunity to enter the LGES ESS supply chain over the next two years.

  Weaknesses

  LFP products have not yet contributed to current revenue, and entry into the supply chain remains a potential scenario.

  Comparison

  Compared with L&F, short-term order visibility is lower; but compared with POSCO Future M, the report believes its supply chain entry opportunity is worth watching.

  Risks

  LFP product development, customer qualification, and mass production progress fall short of expectations.

• POSCO Future M (003670.KS)

  Related to the LFP ESS theme but with weaker short-term visibility, rated UW.

  Strengths

  Developing LFP cathodes to address LFP ESS demand.

  Weaknesses

  The report notes execution risk and potential delays in development and mass production ramp-up, limiting short-term visibility.

  Comparison

  Compared with L&F and LG Chem, the report is more cautious on POSCO Future M.

  Risks

  Product development delays, mass production yield and cost issues, and slower order wins than peers.

• Ecopro BM (247540.KQ)

  Impact from higher ESS demand is relatively neutral, rated N.

  Strengths

  Has an established business base in NCM EV battery cathodes.

  Weaknesses

  The report expects the company to remain more focused on NCM materials for EV batteries, with lower direct exposure to LFP ESS demand.

  Comparison

  Benefits less than L&F and LG Chem; compared with POSCO Future M, the report's view on its impact is more neutral.

  Risks

  Weak EV battery demand, lower-than-expected NCM penetration in ESS versus LFP, and limited valuation support from the ESS theme.

Key data

• Korean battery chain share price performance+10%-26%June 29 gain, while the KOSPI was broadly flat.
• 2030 U.S. ESS demand forecast303GWhRaised 52% from the previous 200GWh forecast.
• Data centers' share of 2030 U.S. ESS demand45%The report forecasts data centers will become an important source of U.S. ESS demand.
• SPP expedited interconnection study period90 daysIf a data center includes on-site generation or ESS, it can use an accelerated, load-limited interconnection study framework.
• ESS deployment ratio in existing projects10%-30% of data center loadTypical duration is 2-4 hours.
• Assumed 2030 U.S. data center ESS deployment rate35%The report model assumes 35% of U.S. data centers will deploy ESS.
• North American capacity of Korean battery makers>200GWh currently, potentially >400GWh by 2030By 2030, North American capacity could account for 74% of total capacity.
• ESS as a share of JPM forecast 2027 revenue mixLGES 38%; Samsung SDI 34%; SK Innovation 3%Shows that LGES and Samsung SDI have higher revenue sensitivity to the ESS opportunity.
• LGES U.S. ESS order target140GWh to 230GWhThe company aims to increase U.S. ESS order backlog from 140GWh in 4Q25 to 230GWh in 4Q26.
• Samsung SDI U.S. ESS order coverage2-3 years, about 60GWh of U.S. capacityThe report estimates its ESS order book covers 2-3 years of U.S. capacity.
• L&F LFP cathode contractW1.6tn, about 130kt, covering 2026-2029LFP cathode contract from Samsung SDI, improving ESS demand visibility.
• 2030 U.S. battery supply-demand tableEV 146GWh; ESS 303GWh; total 449GWhThe table shows 2030 U.S. battery capacity at 607GWh, with total demand at 74% of capacity.

Impact & implications

If FERC reform is implemented and adopted by more RTOs, data centers will have stronger motivation to deploy ESS in order to shorten power connection timelines, and U.S. ESS demand could be meaningfully higher than previously expected. For Korean battery makers, this could cushion capacity utilization pressure caused by weak EV demand and enhance the strategic value of North American capacity. At the company level, LGES and Samsung SDI benefit more clearly due to their more direct exposure through orders, capacity, and ESS revenue; SK Innovation has a weaker ESS order base, but its U.S. battery capacity and SMR data center theme provide option value. On the materials side, L&F has high visibility thanks to its LFP cathode contract and non-China supply chain substitution demand, LG Chem has a possibility of entering the LGES ESS chain, and the short-term benefit for POSCO Future M and Ecopro BM is less certain than for the former two.

Risks

• FERC reform still requires RTOs to submit reports by mid-July and explain or revise tariffs and processes by mid-August, leaving uncertainty over final implementation intensity and timing.
• ESS deployment by data centers is not a mandatory requirement in traditional designs, and actual adoption rates may fall below the model assumption of 35% by 2030.
• Even if interconnection studies accelerate, network upgrades, transmission capacity, cost allocation, and acceptance of interruptible service may still constrain project progress.
• Weakness in the U.S. EV battery market may continue to pressure cell makers' capacity utilization and margins, and higher ESS demand may not fully offset this.
• There are execution risks in LFP cathode development, customer qualification, and mass production ramp-up, especially affecting POSCO Future M and potential entrants.
• Competition in the U.S. ESS market, tariffs, supply chain localization, and changes in Chinese companies' exports could alter Korean manufacturers' market share.
• The report discloses that J.P. Morgan has market-making, client, investment banking, or potential investment banking relationships with multiple covered companies, and investors should apply independent judgment.

What to watch

• RTO reports due in mid-July on large-load power supply capability and interconnection processes.
• RTO explanations of existing tariffs, reform proposals, or special provisions for large loads due in mid-August.
• Whether SPP's 90-day expedited interconnection study and interruptible transmission service are adopted by other regional power markets.
• Whether U.S. AI data center projects adopt ESS as a standard configuration to shorten power connection timelines.
• Whether LGES's U.S. ESS order backlog can increase from 140GWh to 230GWh as targeted.
• Whether Samsung SDI's U.S. ESS orders continue to cover 2-3 years of capacity and convert into actual shipments.
• Substantive progress by SK Innovation in U.S. ESS orders and the SMR data center energy theme.
• L&F's LFP cathode contract deliveries, follow-on orders, and demand for non-China cathode supply chain substitution.
• Relative changes in U.S. EV sales, BEV penetration, and ESS shipments, and whether the 2030 ESS demand assumption of 303GWh remains valid.