Jumpstarting Europe’s Battery Industry
A Strategy for Energy Security
01 July 2026
Author: Giovanni Cisco, EIES
Europe is wiring its grids, military bases and data centres with battery systems it does not control, built and operated by a strategic rival. And it is spending public money to do so: funding the very Chinese dependence Brussels regulators seek to mitigate, putting Europe's battery industry at risk.
EIES’ report, ‘Jumpstarting Europe's Battery Industry – A Strategy for Energy Security,’ draws on over 30 industry expert interviews to set out how Europe can strengthen its battery industry: build demand for European-made batteries, secure it against foreign pressure, and anchor it to its energy and defence.
Executive Summary
Batteries are increasingly the backbone of Europe's energy, economy and defence. They stabilise grids, power industry, transportation and defence systems, and back the data centres at the heart of the modern economy. No longer seen as a transport-only technology, batteries are now a gateway technology whose supply chains, processing capacity and manufacturing know-how feed into critical sectors and technologies across Europe’s industrial base.
A strong domestic battery industry is a precondition for Europe’s industrial resilience. Yet today, Europe is spending public funds to induct predominantly Chinese-made components, materials, cells and software into the continent’s critical infrastructure. This exposes Europe’s energy infrastructure, industrial base, defence systems and broader economic security to external disruption, coercion, manipulation and attacks. These are risks Europe cannot accept – as energy and supply chain shocks from COVID and Russia’s war on Ukraine to the Persian Gulf make clear.
Europe faces a chain of structural barriers to scaling its battery industry – and unfortunately, every link reinforces dependence on China with its decisive cost advantage. This is built on Beijing’s control of over 70% of global critical mineral refining and over 90% of cathode and anode production and reflects decades of targeted industrial policy. These are the very segments Europe must build out as its storage market grows, with installed capacity projected to reach up to 600 GWh by 2030, up from roughly 77 GWh today, an almost eightfold increase.
Cost is only part of the gap; Europe is also behind in efficiency and industry maturity. European cell plants production scrap rates are still high, which shows a process know-how deficit that only closes with sustained production at scale. The midstream, including precursors, electrode active materials and electrolytes, is Europe’s critical missing link. Without it, cell manufacturing will remain structurally reliant on inputs that others control. And without a midstream, there can be no recycling loop to process recovered materials back into battery-grade inputs and into the supply chain. Today, perversely, recovered battery black mass goes to China for refining and returns to Europe as finished material at a premium price.
Three risks compound these vulnerabilities.
The first is geopolitical coercion. Since 2021, China has steadily escalated its use of export controls for geoeconomic leverage. Most recently, in October 2025, Beijing extended controls to third-generation Lithium Iron Phosphate (LFP), artificial graphite anodes, precursors and the production equipment needed to manufacture them. Those restrictions added more than two months to delivery timelines for many affected European firms before being suspended. Beijing’s constant tightening of export controls and supply chains security frameworks exemplify how the geopolitical and geoeconomic risk can manifest.
The second is cybersecurity exposure. A remote compromise of battery systems can translate into physical disruption. Chinese firms may build battery factories in Europe, but the technology, IP and operational control stay in China. Chinese grid-connected, software-run systems installed across Europe can give the supplier ongoing access to European infrastructure. Every new installation can become a backdoor into Europe’s grid, industrial and defence infrastructure.
The third is the systemic market risk, including supply chain disruptions, price volatility and demand uncertainty. Cheaper, state-backed imports and unmanaged inbound investment crowd out emerging European producers. Whether battery assets are used for civilian purposes, to power dual-use applications such as drones, or in defence electronics, advanced munitions, armoured vehicles and military microgrids, they share the same underlying supply chains for cells, raw materials, manufacturing equipment and know-how. Europe needs to build its domestic battery market and support emerging producers in an unfair and volatile market environment, otherwise it will forfeit the capacity to manufacture a strategic technology, develop new skills and industrial synergies - and with them, Europe's ability to meet its own strategic needs, civilian and military.
If these risks are not addressed, Europe’s economy, security, infrastructure and population will be left vulnerable and dependent on the good will of an economic competitor and systemic rival that in addition to its economic challenge to Europe and domestic repression, remains Russia’s prime supporter in Putin’s brutal and illegal war against Ukraine.
Key Recommendations
Europe cannot afford to lose its battery industry. It must act now on two fronts to boost its industrial base from within and protect it from external pressure. The following overview lists the most urgent and critical tasks. A complete set of recommendations are set out in detail at the end of the report.
Boost the industrial base
The first task is internal. Europe must address the vulnerabilities that hold its battery industry back: insufficient demand, a missing midstream and a technology gap.
Build European, Buy European — Jump-start demand for European-made batteries through simple localisation criteria to access public procurement and public funding under the EU Industrial Accelerator Act (IAA). Without demand for their products, European producers can never scale, while the proposed IAA published by the European Commission in March is too weak: cost-exemption loopholes and lax origin rules weaken the demand signal for ex-China supply chains, leaving a headline policy that does not support European production and partner supply chains. The immediate priority is to build the LFP capability and sustain Europe’s position in Nickel Manganese Cobalt (NMC) batteries. Policymakers must tighten and simplify the IAA. This must be complemented with a step-change in predictable funding for European battery supply chains in the next EU budget. Introducing production support - tying funding to verified production and covering operating costs - will reward higher yields, process efficiency and actual production.
Fill the Gaps: Invest in the Midstream, Integrate the Chain — Concentrate industrial support on the midstream - the processing layer between raw minerals and finished battery cells where Europe is weakest and most dependent on one external party. Projects often fail because investors do not fund without committed buyers and European buyers do not commit, when the European market is uncertain and cheaper alternatives exist. Europe must break that deadlock by tying public funding and de-risking tools to downstream offtake, creating bankable projects that lenders currently see as too risky. This will also ensure that public money does not support underperforming projects detached from the battery ecosystem. Get this wrong and every cell Europe makes in the future will still depend on inputs China fully controls.
Invent More, Import Less — Invest in scaling up LFP manufacturing to create much needed incremental innovation, fund next-generation chemistries to cut Europe's dependence on imported materials and target the synergies a battery ecosystem needs. Technologies have the best shot at reaching production when researchers, equipment makers and cell producers work together, so funding must also foster cooperation. Carry this support into the next EU budget from 2028 and tie it to industrial partners with a real path to manufacturing. The aim is to industrialise these technologies in Europe, not invent them here and watch them be completely built elsewhere.
Defend and control the industrial base
The second task is external. Europe must protect its capacity against outside risks by securing its systems from high-risk suppliers, shielding the market from unfair subsidised competition and anchoring battery supply to Europe’s energy and defence needs.
Secure the Stack, Control the Grid — Treat infrastructure-connected storage as critical infrastructure and set the rules early. Software-run and remotely managed, battery systems are open to their suppliers through firmware, data and remote access. Condition market access and public funding on binding, harmonised European control over the software and remote-access layer, keep operational data under EU jurisdiction and align EU and NATO security standards across civilian and defence procurement. Otherwise, every installation will be another door into Europe's infrastructure that is hard and expensive to close later. Pay for resilience now or pay a far higher price later.
Raise the Shield, Protect the Market — Activate trade-defence tools to stop subsidised imports undercutting European producers before they reach scale. Apply calibrated, phased tariffs to Chinese batteries and key components and upgrade the EU Foreign Subsidies Regulation (FSR) to screen supply chains proactively rather than on individual case basis. Europe already has these instruments, it just needs to use them. Financially supporting the industry is wasted without parallel protection from cheaper, subsidised imports.
Leverage Defence, Strengthen Resilience — Write Allied-origin and security criteria into NATO/EU defence battery contracts and exclude high-risk suppliers of battery components and raw materials from defence and security-relevant systems. Use NATO/EU defence procurement and investment to anchor European-controlled battery supply chains inside Allied critical energy and defence systems. Defence volumes are small, but less price sensitive and more patient than commercial demand, able to tolerate longer timelines and uncertainty of early production. That patience can help anchor the industrial base before the wider market does. The cells and software are largely the same for civilian and military systems.