What a run it has been. Since displacing the horse 100 years ago, the combustion engine has become the go-to technology for transportation the world over. But its reign has been a filthy one. Fossil fuel burned in combustion-engine vehicles is responsible for 14% of all anthropogenic greenhouse gas emissions. Pollution from vehicle exhaust gases contributes to the death of about 5 million people annually.
Europe has only a 3% share of the global lithium-ion battery market, but regional leaders have aspirations to compete with Tesla and the dominant Asian producers as electric vehicles slowly become our main mode of transportation. European makers of batteries and battery materials want to reduce costs and risks by recycling and by sourcing raw materials within Europe. European efforts to establish a native battery industry are impressive but could be too little, too late.
The combustion engine’s successor-in-waiting—an electric motor powered by a lithium-ion battery—generates substantially less pollution and is being ushered into cities the world over. Improving battery technology means driving range is improving, and electric vehicles are becoming cheaper than combustion-engine cars to buy and run.
Chinese manufacturers—along with Tesla, the world’s most successful electric-vehicle manufacturer, and Panasonic, its Japanese battery partner—command an 85% share of the global lithium-ion battery market, which could be worth $300 billion annually by 2030, according to the World Economic Forum.
Today, Europe’s share of that market is a mere 3%. But with the battery making up about 40% of the value of an electric vehicle, Europe is waking up to the notion that whoever controls a region’s lithium-ion battery supply chain also wields much control over its lucrative car industry and the hundreds of thousands of jobs that go with it.
Iconic European auto brands such as BMW, Mercedes-Benz, Jaguar, and Volkswagen have been caught short by the success of Tesla and Asian electric-car firms. They are investing tens of billions of dollars in an effort to catch up.
Several major battery plants—known as gigafactories—are planned for Europe in the next few years to meet an anticipated surge in demand for electric vehicles in the region. Most are being built by Tesla and Asian firms. But the European Commission and European countries also want to establish a home-grown battery industry to ensure that thousands of R&D jobs stay in Europe along with the related manufacturing supply chains and profits.
European strategists argue that battery performance and cost still have plenty of room for improvement. In a bid to compete, the European Commission is pulling together a major cross-border program to develop and manufacture the next generation of lithium-ion batteries.
The EC also wants to minimize costs and risks along the supply chain by embracing battery recycling and opening mines for key battery metals. Chemical companies such as BASF and Johnson Matthey are in the mix, developing new materials, including highly dense materials for lithium-ion battery cathodes.
Despite the huge sums of money Europe is throwing at its battery sector, experts warn it could be too little, too late. “Though European players are starting to make some noise, production still looks set to be dominated by Asian players,” says Alex Holland, a technology analyst with the market research firm IDTechEx.
One challenge for Europe is that critical battery raw materials such as lithium, cobalt, and nickel are mostly extracted outside Europe. Several countries around the world extract lithium, but more than half of the world’s lithium refining capacity is in China. Chinese companies also own more than half of the cobalt coming out of the Democratic Republic of Congo, the source of more than 60% of the world’s supply of the metal.
Though European players are starting to make some noise, production still looks set to be dominated by Asian players.
Alex Holland, technology analyst, IDTechEx
And while European firms are mostly still seeking funding for production, Asian firms are putting steel in the ground in Europe. In the next few years, Contemporary Amperex Technology Co. Ltd. (CATL), LG Chem, Samsung, SK Innovation, and Svolt, along with Tesla, are set to massively hike European battery and battery cell production.
For example, CATL, the world’s largest battery producer, plans to invest $2 billion in research and battery production in Europe over the next few years. The Chinese firm says it will produce at a scale that will rival Tesla’s Gigafactory 1 in Nevada, which can make enough batteries for about 200,000 electric vehicles per year.
“There aren’t any European companies who, today, have significant volumes of cell production capability,” Holland says. Of those only Saft and Groupe PSA, Northvolt, Freyr, and TerraE have announced plans to reach large-scale battery production.
To help local firms catch up, the European Commission recently approved almost $3.5 billion in funding for the electric-vehicle battery supply chain. Belgium, Finland, France, Germany, Italy, and Sweden are participating in the program. It is a boost for the European Battery Alliance, Europe’s key battery initiative, which brings together more than 400 industrial and innovation actors from mining to recycling. The EC hopes the funding will draw in a further $5.5 billion in private investment.
While European car and battery manufacturers work out the transition from hydrocarbons to electrons, sales of electric cars have taken off. European auto-emission regulations, combined with generous consumer incentives in countries such as Norway, led to a 44% increase in electric-car sales in 2019, more than in any other region in the world. Europe may be only 3% of the battery market, but it now accounts for 26% of the electric-car market.
Germany plays catch-up
Germany is in an especially tough position. While German car makers have an 18% share of the country’s fast-growing electric-vehicle market, in 2019 almost every one of those cars was built with imported batteries.
The German government was already planning to spend $1.1 billion on commercializing battery technology through 2023. Now, as part of Germany’s post-COVID-19 stimulus package, it will spend an additional $1.7 billion supporting battery cell production in the country.
The German government sees Asian firms as the key threat. “Our competitors are not based in Ulm or Münster. They are based in South Korea and China,” said Wolf-Dieter Lukas, state secretary in the German Federal Ministry of Education and Research, at a conference earlier this year hosted by the German Battery Forum, the national development program. “The clear message is: we have to be at the forefront when the battery technology of the future is developed.”
German private investment in electric-vehicle production is ramping up. Collectively, German automakers plan to invest at least $140 billion in electric vehicles and batteries in the next few years, according to a 2019 study by Reuters.
While German car manufacturers are hatching plans, Tesla has already cleared woodland near Berlin for a factory to manufacture electric vehicles and batteries in association with Panasonic. Scheduled to start up in 2021, the $4.4 billion plant will have capacity to make 10,000 vehicles per week.
Tesla will source metals for batteries made in the Berlin facility, as well as another in Shanghai, from Glencore, a Swiss firm with cobalt mining operations in the Democratic Republic of Congo.
When it comes to materials for cathodes—the most valuable battery component—Europe is at least bolstered by the presence of BASF. The German firm has spent more than $100 million in the past few years developing next-generation battery materials, including energy-dense cathodes featuring high nickel loading.
It takes about 5 years from specification to going live with manufacturing, so we do need to move urgently.
Stephen Gifford, chief economist, Faraday Institution
Although BASF aims to supply its cathode material in all regions, the firm is “committed to a competitive European value chain for electric-vehicle batteries,” says Daniel Schönfelder, vice president for battery materials Europe at BASF.
The company is building a cathode materials precursor plant in Harjavalta, Finland, and a cathode materials plant in Schwarzheide, Germany; both are due to start up in 2022. Initial capacities from the plants will be sufficient to supply about 400,000 electric vehicles per year.
In 2018, BASF secured a supply agreement for nickel and cobalt from Nornickel, which runs a metal refinery in Harjavalta. “This proximity provides unique access to locally sourced nickel and cobalt,” Schönfelder says. Moreover, by tapping into Europe’s relatively modest reserves of cobalt, BASF can avoid human rights violations associated in recent years with cobalt from the Democratic Republic of the Congo.
While BASF is not claiming it will be the cheapest battery materials producer, it does plan to be one of the most sustainable—a potential selling point for a consumer product marketed for its relatively low environmental impact.
“Through regional production in combination with renewable energy sources as well as use of energy-efficient and proprietary process technologies in our new plants in Europe, we are able to reduce CO2 footprint significantly—by around 30% compared with conventional industry standard on the market,” said Peter Schuhmacher, president of BASF’s global catalysts division, in a recent progress report on the firm’s European battery plans.
Elsewhere in Europe . . .
To minimize its environmental impact, the Swedish battery start-up Northvolt is opting to use only renewable energy to run its planned gigafactory in Skellefteå, Sweden, due to open in 2021. Headed by former Tesla executives, Northvolt will produce batteries using components made in-house, including electrolyte and electrodes.
Along with Sweden and other Scandinavian countries, Poland is fast becoming a hub for battery manufacture in Europe. Johnson Matthey, which is developing energy-dense enhanced lithium nickel oxide cathodes, plans to open a cathode materials plant in Konin, Poland, in 2022. “It is particularly critical to increase battery cell manufacturing expertise in Europe to close the gap between Europe and Asia,” says Andy Walker, technical marketing director for Johnson Matthey. “Asia is probably a couple of years ahead at present.”
Lithium-ion batteries by the numbers
▸ 2.1 million: Number of electric cars purchased in 2019, representing 2.6% of global car sales
▸ 7.2 million: Number of electric cars on the road, representing 1% of total car stock
▸ 900 million: Annual electric-car sales predicted in 2040
▸ 3%: Europe’s share of the global lithium-ion battery market
▸ 85%: The share of the US and China of the lithium-ion battery market
▸ >$300 billion: The value of the global battery market by 2030
Sources: International Energy Agency, European Commission, Oxis Energy, McKinsey & Co.
Umicore is also setting up in Poland. Recently, the Belgium firm secured a $138 million loan for about half the cost of building a cathode materials plant in Nysa, Poland, that will create about 350 full-time jobs.
And in France, Saft, the battery subsidiary of Total, has ambitions to build a gigafactory. Saft hopes to clear a path to the electric-vehicle market by partnering with the French car company PSA, though Saft recently said they were still negotiating over the terms of the deal.
Meanwhile, interest in building the UK’s first gigafactory is heating up. “Long-term, the UK could support about seven gigafactories,” says Stephen Gifford, chief economist for the Faraday Institution, an independent organization promoting the Faraday Battery Challenge, a $340 million government initiative to commercialize lithium-ion battery technology in the UK.
“We need the first gigafactory in about 2025, and it takes about 5 years from specification to going live with manufacturing, so we do need to move urgently,” Gifford says.
By 2030 the UK lithium-ion battery market could be worth $6 billion per year, says the Faraday Institution in a recent report. And by 2040 the UK’s battery manufacturing capacity could be 140 GW h, about 12% of projected European battery capacity of 1,200 GW h. If this capacity is not built, Faraday predicts, car production in the UK will relocate elsewhere.
One UK company, Britishvolt, wants to capture a piece of this market. The start-up secured seed funding in December 2019 and is now trying to raise the $5 billion or so required to build a 30 GW h gigafactory in the UK, creating 4,000 jobs. The firm aims to license lithium-ion battery technology featuring a cathode rich in nickel, manganese, and cobalt. To reduce risk it plans to build the factory with fellow British battery start-up AMTE Power.
AMTE CEO Kevin Brundish is optimistic that the UK government will follow through on a pledge to invest public money into UK battery factories and that “onshoring” production is more important than ever. “COVID-19 has taught us that supply chains for compounds need to be incredibly robust,” Brundish says.
Producing batteries close to the European electric-car market has its advantages, says Britishvolt’s chief strategy officer, Isobel Sheldon. The next generation of batteries featuring high levels of nickel are moisture sensitive, and shipping them from China is becoming more expensive, Sheldon says. “Locating production to the European continent is an absolute no-brainer.”
The challenge for the UK, as with other European countries, is that it has to put together a battery supply chain that Asian producers already have in place.
“We rely on supplies of some of the critical cell components and precursors from the Far East,” says Jerry Barker, chief technology officer for the UK sodium-ion battery firm Faradion. “It would be far better if we had a reliable, local, UK-based supply chain for cathode, anode, and electrolyte as well as the cell hardware such as separator and current collectors.”
Huw W. Hampson-Jones, CEO of Oxis Energy, a UK start-up developing lithium-sulfur batteries, is also frustrated with the UK—in his case because the government is choosing not to help fund the firm’s planned commercial plant.
“Rather than looking to compete in the manufacture of lithium-ion batteries—a 30-year-old technology dominated by Asian firms—the UK should be looking to next-generation lithium-sulfur batteries, which are lighter, more energy dense, nontoxic, and safer,” Hampson-Jones says.
Betting on battery recycling
While Oxis focuses on lithium-ion’s possible successor, much of the present emphasis in Europe is on improving the performance of lithium-ion batteries and on reducing their supply-chain risk, environmental impact, and cost of production. Europeans intend to tackle such factors in part by promoting battery recycling.
Northvolt plans to be among the early entrants in lithium-ion battery recycling with its Revolt brand process for recovering lithium hydroxide, nickel sulfate, cobalt sulfate, manganese sulfate, copper, and aluminum. After dismantling batteries, Northvolt crushes cells into a mix of metals and recovers the electrolyte via an evaporation and condensation technique.
Northvolt has the advantage that Scandinavia—where it is setting up operations—has one of the world’s highest electric-vehicle adoption rates, making it a good location for battery recycling. “We’re confident that, by 2030, 50% of materials used in Northvolt cell production will be sourced from materials recycled in-house,” says Emma Nehrenheim, the firm’s chief environmental officer.
Rather than adding cost to the supply chain, recycling should be cheaper than sourcing virgin materials, according to Nehrenheim. “Securing these materials from end-of-life batteries and circulating them into manufacturing flows will reduce new cell costs substantially,” she says, adding that the benefit to supply security is an even bigger draw. “Efficient recycling of batteries represents the single most effective solution to reducing various supply-chain risks.”
Northvolt plans to install a pilot recycling plant this summer in Västerås, Sweden, adjacent to its cell manufacturing plant. “Further to this, a full-scale recycling plant will be established at Northvolt Gigafactory in Skellefteå, Sweden. This will be the first industrial-scale recycling plant to recycle lithium in Europe,” Nehrenheim says.
Northvolt, along with BMW and Umicore, have created Europe’s first electric-vehicle battery recycling consortium. Other recycling partnerships, including one featuring BASF, are also popping up across Europe.
Meanwhile, the German recycling start-up Duesenfeld is already recycling batteries from electric cars at a small scale at a plant not far from Volkswagen’s battery facility in Braunschweig, Germany.
Duesenfeld crushes and then shreds the cells in an inert nitrogen atmosphere to stop any chemical reactions. The liquid electrolyte is evaporated under low pressure and then recovered through condensation, while metals are recovered and separated using hydrometallurgical processes. Duesenfeld says its process boasts a battery cell material recycling rate of 91%, compared with just 32% for standard pyrometallurgical processes involving smelting.
Recycling could provide 7% of all raw materials for batteries in 2030, according to the World Economic Forum. But Europe could once again be left trailing its Asian competitors. According to the online news hub Electrive.com, in the summer of 2018 China selected 17 cities to begin a pilot program for recycling EV batteries.
Backward integration to mining
Even if Europe recycles a high percentage of its old batteries, the region will still need virgin materials such as cobalt and lithium in high volumes. To avoid the costs—and risks—associated with shipping materials long distances around the world, some firms are trying to create at least some indigenous supply.
Already among the European countries seeking to take a lead on battery recycling, Finland also plans to open Europe’s first lithium mine. In central Finland, the mining firm Keliber plans to start producing up to 15,000 metric tons per year of high-purity lithium hydroxide from lithium-rich spodumene ore by the end of 2024. The firm estimates it has reserves of more than 11 million metric tons—enough for millions of electric vehicles.
“It is about avoiding dependency on single or few supply chains,” says Keliber CEO Hannu Hautala. “Due to COVID-19 we have seen how important it is to have alternative supply chains. The market looks promising.”
Keliber will extract lithium hydroxide—the form of lithium most used in batteries—from the spodumene using a sulfate-free leeching process. Keliber claims the process is less environmentally damaging than the extraction of lithium carbonate from brine followed by conversion to lithium hydroxide. Used extensively in Argentina and Bolivia, the brine method involves pumping underground brines into shallow ponds where the lithium is concentrated by solar evaporation. While the method consumes substantial volumes of water, it is less energy intensive than spodumene mining.
Among the hills of northern Portugal, a second lithium mine—and potentially Europe’s largest with estimated deposits of more than 20 million metric tons of spodumene—could also soon open.
Mining company Savannah Resources aims to extract at least 175,000 metric tons of spodumene per year and refine it on site into enough battery-grade lithium hydroxide for about 500,000 vehicles. Savannah says it is making “excellent progress” in securing long-term sales contracts.
“The company is intent not only on building a sustainable, low-carbon-footprint project but also in forging strong European partnerships,” said Savannah Chairman Matthew King, speaking at the firm’s general meeting in May.
Mines and other European initiatives could enable the region to reduce supply-chain risks and costs, giving it a chance of competing against better-established firms in Asia and the US. Europe’s best option will be to play its sustainability card.
“Europe could gain an advantage by incorporating technology or process innovations,” IDTechEx’s Holland says, “or by focusing on sustainability, lower emissions, and visibility of supply chains as electric-vehicle purchases are still—at least to some extent in Europe—environmentally driven purchases.”
It’s still a long shot, but Europe’s aspirations to create a home-grown battery industry by making it the most sustainable could yet win out.