Batteries have tremendous potential. They are a key technology to create significant economic value, increase energy access, and drive a responsible and just value chain. Batteries are the most important short-term driver for decarbonizing road transportation and supporting the transition to a renewable energy system, which will help keep global emissions in check.
Batteries are a systemic enabler of a fundamental transition to bring transportation and power to greenhouse gas neutrality by linking both sectors for the first time in history and transforming renewable energy from an alternate source to a stable basis when the proper conditions are in place.
Batteries have the potential to reduce carbon emissions by 30% in the transportation and power sectors, provide electricity to 600 million people who currently do not have it, and create 10 million safe and sustainable jobs globally.
Batteries directly avoid 0.4 GtCO2 emissions in transport and enable renewables as a reliable source of energy to displace carbon-based energy production, which will avoid 2.2 GtCO2 emissions.
The battery value chain halves its GHG intensity by 2030 at a net economic gain, reducing 0.1 Gt emissions within the battery value chain itself and putting it on track to achieving net-zero emissions in 2050. The massive expansion of the battery value chain has brought a slew of risks and challenges across the board.
Raw material mining
Over the next decade, raw material production for batteries will scale up unprecedentedly. This growth has the greatest impact on four battery metals: lithium, cobalt, nickel, and manganese. It necessitates, first and foremost, a significant increase in infrastructure in specific areas. The battery value chain faces a significant challenge in managing the increase in raw material supply responsibly across different geographies and stakeholders.
Almost half of today’s lithium is mined for battery-related purposes. Lithium is well distributed in the Earth’s crust, and the major deposits with high grades are in Australia, Chile, and Argentina. Owing to the relatively low capital-intensive operations, when lithium prices were high, many new entrants announced projects and started their production, resulting in a currently oversupplied market.
Nickel reserves are dispersed worldwide, with seven countries accounting for 7-20% of the total (Australia, Brazil, Canada, Indonesia, New Caledonia, the Philippines, and Russia). Today, most of the nickel’s major applications are not related to batteries (e.g., stainless-steel fabrication). However, as the demand for electric vehicles (EVs) grows, the demand for high-purity nickels will put the market under pressure in the coming years.
Cobalt is almost exclusively a byproduct commodity, obtained mostly from copper and nickel mines. While overall demand is increasing, the share of cobalt in future cell chemistries is continuously decreasing, causing less optimistic demand growth for this mineral. Most of the refining operations for cobalt are situated in China, accounting for 60% of the refined cobalt supply in 2018.
The increase in raw material supply has a lot of economic potentials. Scaling up mineral sourcing poses significant challenges, as it may have negative social, environmental, and integrity consequences across different geographies. Hazardous working conditions, deaths from poorly secured tunnels, various forms of forced labor, the worst forms of child labor, exposure to fine dust and particulates, and DNA-damaging toxicity are all serious social risks. Over 250,000 people are estimated to be working in hazardous conditions, approximately 35,000 of them being children. Some estimates suggest that as many as one million children are affected by the mining industry.
Today, an estimated 350 GWh of cell production capacity is in operation. Another 510 GWh of capacity is expected through 2025, totaling 860 GWh of cell production capacity, of which 60% will be located in China. To meet the demand of 2,600 GWh, another 1,700 GWh of capacity is required. Based on current investment levels, an additional investment volume of $140 billion would be needed to meet the base case demand over the next decade.
Recycling processes are currently costly. The need for high safety precautions due to the fire hazard of large lithium-ion batteries and the toxic properties of some materials creates substantial hurdles to economic recycling practices. The recovery of materials other than the most valuable ones like cobalt, copper, or nickel is limited in most current processes, lowering the benefits of recycling. Not all current recycling processes are environmentally advantageous, potentially emitting substantial GHG and pollutants into water and air.
In 2030, it is expected that 54 percent of end-of-life batteries will be recycled, contributing 7% to the overall demand for raw materials for battery production. It will necessitate a 25-fold increase in recycling capacity by 2030 compared to today. This expansion can create annual revenues of $300 billion along the value chain in 2030 – a factor of 8 more than today.
Significant GHG footprint
The production of batteries requires significant amounts of energy and causes CO2 emissions. However, batteries’ full life cycle emissions are lower than traditional vehicles, including their use phase. By 2030, the battery value chain will emit 182 Mt CO2e, more than the annual emissions of the Netherlands today. The most GHG-intensive steps in the battery value chain are the production of active materials and other components and the production of cells. Reducing the production footprint is a significant challenge and a major obligation to address. Improvements in the CO2 footprint can help make arguments for switching to battery applications even more compelling.