Global Battery Demand Is Soaring, But Supply Is Lagging Behind

There is an undeniable need for more electric batteries to be produced in line with the growing global demand for electric vehicles (EVs) and electronic devices. But companies are repeatedly falling behind on their production aims due to a multitude of challenges, from supply chain constraints caused by the Covid pandemic to lithium shortages in the face of rising demand. Costs have soared in recent years, in response to these challenges, and many once-promising startups have failed in their attempt to weather the storm and come out the other side triumphant. Now, the U.S. believes that battery shortage is a threat to its national security, as its green transition could be endangered if not enough batteries are delivered. So, just how dire is the situation?

Battery demand is expected to rise by approximately 30 percent, to 4,500 gigawatt-hours (GWh) globally, by 2030. The battery value chain could achieve annual revenues of $410 billion, based on this demand increase. And 40 percent of this demand will come from China alone. To meet the global lithium-ion battery needs, automakers and energy companies must work together now to boost production. However, they can expect a range of challenges to scaling production, including labour and material shortages, the timescale required to develop gigafactories for battery production, competition for resources, and resource and product shortages – such as currently being seen with lithium and semiconductor chips. Companies will also be expected to ensure they are meeting international environmental, social, and governance (ESG) standards, as enforcement becomes stricter.
Related: No, The World Isn’t Running Out Of Lithium

As well as new demand, many of the batteries from the first generation of EVs will need to be replaced. According to 2021 estimated, around 12 million tonnes of lithium-ion batteries will need to be retired and replaced between now and 2030. This not only presents the threat of major electrical waste – which required large amounts of raw materials, including lithium, nickel, and cobalt, to produce – but also demonstrates the never-ending demand for electric batteries.

Despite a strong push from international organisations and governments worldwide to begin the shift to electric, some experts believe we are nowhere near ready to transition to widescale EV adoption. Bob Galyen, a battery producer who engineered the battery for the General Motors EV1, believes the U.S. is not ready for the switchover. He explained, “We have neither the raw materials nor the manufacturing capacity,” adding “If the wrong country goes to war with us, we don’t have enough batteries to support our military.”

This may seem an extreme view, but the U.S. purchases around 90 percent of its lithium from Argentina and Chile at present, producing just 1 percent of the world’s nickel and cobalt. Meanwhile, China refines around 60 percent of the world’s lithium and 80 percent of its cobalt. It also produces around 70 percent of the world’s lithium-ion batteries, meaning many countries around the globe are relying on China for their EV production. In the wake of the Russian invasion of Ukraine, this is precisely the kind of dependence that several countries are trying to avoid.

Much of this seems strange considering how much there has been publicised about breakthroughs in battery production, increased metals and minerals production, and innovative startups breaking onto the scene. Yet, many startups have been accused of exaggerating their “breakthroughs” to gain attention and funding. Media outlets worldwide have been far too quick to draw attention to companies boasting about their ground-breaking battery technologies, with little understanding of the scale. It is perhaps not surprising, therefore, that several promising EV and battery startups have gone under in the face of several major challenges.

Britishvolt, a startup that promised to transform the U.K.’s car production, with a valuation of over $1 billion – giving it “unicorn” status, recently collapsed. The firm was founded in 2019, expected to be the first company to develop a domestically owned battery factory for the EV industry. The factory was expected to produce 30 GWh of batteries a year for thousands of EVs. Despite great publicity, and support from then Prime Minister Boris Johnson, Britishvolt failed to get the funding it required to make its dreams a reality, sending the company into administration earlier this month. This meant a loss of 200 jobs and the sale of its plant site.

While other more-established companies are seeing greater success, no company can avoid the sectoral challenges completely. Rising material prices over the last few years have sent EV manufacturing costs soaring, in an already expensive and highly competitive industry. Lithium, nickel, and cobalt prices have all increased in recent years, as shortages have been seen, and core battery components have also been hard to source due to supply chain constraints. Mounting pressures from governments, looking to reduce their dependence on major mining powers, such as China, are further complicating the situation by making automakers look for domestic suppliers or at least diversify their imports.

The future of the electric battery remains uncertain. As governments encourage a rapid transition away from fossil fuel-powered vehicles to EVs, no one is quite sure whether the battery manufacturing industry can keep up with the demand. A range of challenges continues to threaten output, with huge investments required to develop the mining operations and gigafactories needed to support battery production around the globe. Yet, progress remains slow considering the ambitious targets set out for EV production by governments worldwide.

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