The worsening crisis in global supply chains and commodity sourcing
The Covid-19 pandemic has been carrying several changes for companies, including a shift away from global supply chains. After all, if these do not function properly, because, for example, capacities are restricted by Covid-19 incidents or fall completely short for weeks, a quick adjustment of supply chains is usually not possible.
Since the outbreak of the Russia-Ukraine war in February 2022, another phenomenon has now exacerbated an already existing problem: the concerns about critical raw materials used to manufacture lithium-ion batteries, a crucial element in the transition towards e-mobility. Lithium-ion batteries contain amongst others the materials lithium, cobalt, and nickel. However, the known raw material reserves are limited and regionally very unevenly distributed. Russia, for example, is the world’s third-largest nickel producer. Triggered by the Western countries’ sanctions against Russia, at times, the price of nickel has increased fivefold.
The European Commission, as part of the European Raw Materials Alliance (ERMA), is already working on establishing an EU battery value chain which aims to reduce dependency on third countries and tackle related environmental, ethical, and social issues1. In fact, several raw materials used in the battery value chain, such as cobalt, are tainted by ethical and humanitarian issues. The protest to procure these raw materials from non-democratic governments is becoming ever louder, which raises the question of how to secure these limited resources in the long term and in a stable manner2.
The new dominance of automotive manufacturers in lithium-ion battery demand
In the meantime, e-mobility had gained global acceptance amongst others due to two important effects. On the one hand, since 2010 prices for lithium-ion batteries have fallen by 80-85% and battery technologies have become more and more efficient. On the other hand, the awareness of the dangers of climate change has led to a rethinking of mobility. As a result, all car manufacturers are now focusing on electric vehicles, and many have even announced the end of certain series of internal combustion vehicles in the coming years. Consequently, if we look at the forecast of future demand for lithium-ion batteries, even in conservative scenarios, electric mobility becomes the first demand sector from 2025 onwards, overtaking others such as energy storage (i.e. electric utilities). Even conservative scenarios show that the demand for battery raw materials will exceed the supply. Thus, a raw material crisis is expected to occur from 2025, but no later than 2028-20303. This will be reflected in rising prices for all market participants4.
A first indication of the reversal of the trend of steadily falling prices for lithium-ion batteries was already seen in the winter of 2021, i.e. even before the start of the war in Ukraine, when the industry recorded rising battery prices for the first time in over 10 years5. Overall, initial estimates suggest that the price of electric vehicle batteries could increase by €1,000 – €2,000 per vehicle due to raw material price developments6. The market dominance of automotive manufacturers in the battery market will also make it very difficult for some other industries and smaller players to get affordable new lithium-ion batteries for their applications and products.
The opportunity for 2nd life batteries in the electric mobility sector
With the severe shortage of raw materials, the battery recycling industry will experience a boom. However, the current processes only have an efficiency of about 50% – what limits the re-introduction of the recovered materials in the battery value chain – and are very energy-intensive, i.e. they emit further CO2 during the recycling process. There is already a lot of investment in this area to make these processes more efficient and sustainable. However, it is expected that at the earliest by 2030, the industry will be able to implement these new recycling processes at industrial scale.
And here lies the double opportunity for 2nd life batteries from electric vehicles. For e-mobility to become truly sustainable, the lithium-ion battery must be given a second life. This is because the second largest source of CO2 emissions during the life cycle of the battery is the energy-intensive production, which accounts for up to 40% of the total production emissions7. Batteries are replaced in the electric vehicles after approx. 8 years, when they still have 70-80% of its original storage capacity. So, at this point in its life cycle, the battery is still far too valuable to not continue using it.
The other chance of 2nd life batteries is that the raw material is already available in Europe, for example, and does not have to be imported from distant countries. Thus, 2nd life batteries with guaranteed recycling at the end of the second battery’s life can make a valuable contribution to the raw material crisis. If these already existing batteries are remained in the economic cycle, Europe can become less dependent on raw material importers and meet the rapidly increasing demand for batteries in industrial applications.
How betteries is seizing this market opportunity
betteries aims to replace carbon intensive power generation solutions such as diesel generators with sustainable alternatives. Here, betteries is fully committed to use 2nd life batteries from electric vehicles in the spirit of the circular economy through upcycling at module level. Through the industrial partnership with Renault Mobilize, thousands of mobile, modular, and multi-purpose battery packs can already be built on an industrial scale in 2022. In addition, betteries acts as an integration partner supporting its customers in the decarbonization of their activities. Customers particularly value the know-how built up by betteries over the years regarding the correct selection of suitable use cases and the optimized use of 2nd life batteries. In addition, by connecting the power storage systems to the betteries cloud, customers have the opportunity to obtain valuable data on battery use and performance, calculation of avoided CO2 emissions and predictive maintenance.
3 https://www.nature.com/articles/s43246-020-00095-x , Future material demand for automotive lithium-based batteries
7 https://theicct.org/sites/default/files/publications/EV-life-cycle-GHG_ICCT-Briefing_09022018_vF.pdf (page 5, figure 1).
Annika Hönig, Tel. +49 152 057 35 306