Holland approves infrastructure plan for $2.5B LG Energy Solution expansion

EDITOR’S NOTE: This story has been updated with comments from LG Energy Solution Michigan.

The city of Holland has signed off on an updated agreement with LG Energy Solution Michigan that includes $53 million in local electric grid upgrades to meet the company’s power needs anticipated with a multibillion-dollar expansion.

The Holland City Council on Wednesday night approved a new amendment to a development agreement between the battery manufacturer, the city and the Holland Board of Public Works (HBPW) that highlights obligations with utility services and related infrastructure improvements needed for LG Energy Solution’s latest $2.5 billion expansion. 

The agreement also includes a conditional land transfer with neighboring Fillmore Township, where LGES would be building a portion of its new facility.

“LG Energy Solution appreciates the City of Holland’s support as we take another step toward potential expansion of a third plant,” the company said in an emailed statement. “As a leading global manufacturer of batteries for electric vehicles, we look forward to a greener future through the continued transformation of the automotive industry. Our company remains dedicated to being a good neighbor and community partner, while investing and growing in the Holland community.”

The latest agreement states HBPW will build a new electric substation to support LGES’s service request for 60 megawatts (MW) of electric power for the new facility. LGES would pay for the $53 million substation, while the utility would make a “contribution in aid of construction” to LGES after five years in service, according to the agreement.

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The company also has committed to powering at least a portion of the facility with renewable energy, and would help HBPW comply with the state’s 2023 energy law that requires power providers to meet a 50% renewable energy standard by 2030 and 60% by 2035.

“We want to make sure that we have a relationship with LG where we’re going to be able to make those commitments that are Holland BPW commitments through the provisions that are allowed in that law,” Dave Koster, general manager at HBPW, said during Wednesday’s meeting. 

Koster also said the utility will likely seek new electric transmission service in the future to support LGES’s development and avoid a burden on HBPW and its other ratepayers.

Land transfer, infrastructure costs

The amended agreement comes as LGES invests $2.5 billion and adds a new facility and support buildings spanning 1.7 million square feet to accommodate a contract secured in 2023 to supply Toyota Motor North America Inc. with lithium-ion battery modules for electric vehicles. 

The expansion, known as Phase III, comes in addition to LGES’s $1.7 billion expansion, or Phase II, currently underway off East 48th Street in Holland. 

The new amendment also is conditioned upon a conditional land transfer, known as an Act 425 agreement, with neighboring Fillmore Township. This will allow the transfer of a portion of Phase III’s property that is currently within Fillmore Township to the city of Holland, which will then become the main taxing entity through a 50-year tax sharing agreement with the township. 

“A portion of that plant will have to be built on what is currently township property,” Mark Meyers, Holland’s community and neighborhood services director, said during the city council meeting. “LG has purchased three properties, including about 26 acres, and we’ve come to an agreement with Fillmore Township, which they actually approved last week, to bring those properties into the city and then in return to share some tax revenue.” 

The new amendment also outlines various zoning, water system, sanitary sewer system, construction power facilities, public road and other related upgrades along with the company’s cost reimbursement obligations. The total cost of these upgrades would be on top of the electric substation, though the exact cost is not yet known. 

LGES will reimburse the city of Holland for any of its costs related to the development of the Phase III plant, according to the agreement. 

The HBPW board previously approved the amended development agreement on April 8. 

“We want to make sure, number one, that we are designing and building the system to utility standards that we do in all of our other applications,” Koster said. “We’re going to follow those good utility practices. We’re going to make it very operable with the rest of our system.” 

The update follows a previous amendment between the parties that was executed in 2022 when LGES announced its $1.7 billion Phase II expansion project and plans to add 1,200 new jobs. 

A development agreement has existed between LGES, the city and the HBPW since the company started developing its original facility, which began production in 2010. 

With the city council’s approval, LG’s site plan for the Phase III expansion now enters a 30-day referendum period, according to Meyers. The company will then be able to apply for necessary rezoning for the Fillmore Township property, which is currently zoned residential.

Meanwhile, the Holland Sentinel reported this week that the Michigan Occupational Safety and Health Administration fined LG Energy Solution Michigan more than $150,000 for various workplace safety violations in Holland, including two alleged “willful” infractions involving the operation of machinery. The company reportedly said it is appealing the citations.

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