Lithium-ion batteries, a difficult reality?

All - Sep 06 2018

It is stunning to see just how many companies have been raising funds, announcing new ventures, merging and competing to position themselves as big players of the booming energy storage business. Energy storage can take multiple forms, it can be central and stationary (pumped hydro, NaS batteries…) or decentral and mobile with three main existing technologies: hydrogen with mobile hydrogen tanks, electrical with the Superconducting Magnetic Energy Storage (SMES) and chemical with Li-Ion batteries. The latter is widely considered to be the most usable and efficient technology for our daily appliances and vehicles.

From lithium, cobalt and nickel extraction to cell production and battery assembly, manufacturers are in a race to make a profit by producing as many batteries as possible. This will supposedly limit the automotive industry’s impact on the environment. This insight will provide an overview of the current state of the market and the possible outlooks for the Li-Ion battery market considering the economic and ecological challenges it is facing.

 Energy storage has more than one application and the demand for batteries is very diverse. Of course, we need batteries for our phones and everyday devices, but energy storage brings also profit opportunities. Some advanced countries like Switzerland are already using energy storage (primarily through their hydro pumps) to make profits on exports upon the difference between the peak and off-peak electricity tariff. If well integrated, energy storage could help balance and optimize the grid. This is true at large scale but also at small scale. In private houses, for example, batteries can be integrated with solar panels to provide a continuous power flow. This is one of the drivers of battery demand with companies like Tesla that have already commercialized home batteries that can be installed to work with solar panels to improve energy recovery. Government incentives such as feed-in tariffs should only speed up the installation of home batteries.

Second, but not least, electric vehicles are expected to be the main driver of the global demand for batteries. A study by France Stratégie found that 1.2 million EV had been sold in 2017, half of them in China, the rest mainly in western and northern Europe or in California. Sales have increased by 60% compared with year 2016 and by 2030 this emerging supply chain is expected to produce a total of 340 million new electric vehicles (from passenger cars to trucks and buses) between now and 2030. These skyrocketing figures can be explained by a spectacular drop in battery price at 209 $/KWh in 2017 vs 1000$/KWh in 2010 (BNEF). Sales have also been boosted by government incentives and the fact that car manufacturers must face the spectre of government bans: 4 Europeans powers and India pledged to ban new thermic vehicles: the Netherlands and India in 2030, Scotland in 2032 and France and the UK in 2040.

This rising demand calls for a massive supply of batteries and more fundamentally of the raw materials that can be found in them. A typical electric car contains 50kg of Lithium and 20kg of cobalt. Both resources come from countries that don’t manufacture EVs. Lithium is extracted in Argentina, Chile, Bolivia (75% of production) while Cobalt originates primarily from the DRC (60%). The following graph displays the projected lithium demand (in Lithium Carbonate equivalent) for each application until 2030. The forecast is that global demand will nearly triple by 2025 mostly driven by EV growth.

Global demand per applications type, kt LCE



This increase in demand is reflected in the lithium prices that have gone up drastically but with an inflection point just recently due to industrial overcapacities. As a result of investment from these companies in new factories and production lines, production annual capacity should reach 400 GWh by 2021 vs 131GWh today (BNEF). This increase in production puts the stress on raw materials supply.  Cobalt is the other strategic raw material needed and is considered harder to obtain. Cobalt mining companies and intermediaries such as Huayou Cobalt in Congo aggregate productions from “artisanal” miners or “creseurs” as Congolese diggers call themselves. They then ship the production through Dar er Salaam or Durban and supply the companies we know: Tesla (Nevada and plans a new factory in Shanghai), LG Chem (Korea, US…), Daimler (Germany) or CATL China’s biggest producer… To stay aligned with battery productions, cobalt production has to double. Yet, a large share of cobalt originates from the DRC where reserves are limited and where work conditions, child labor, and environmental issues still exist as pointed out by Amnesty International and the Washington Post. The cost of corruption, political instability and the new mining code that should increase taxes are as many factors that drive the prices up. This gives a strong bargaining power to mining companies that can dictate supply. Forecasts estimate that cobalt supply will not meet the demand by 2025 and there are concerns that a cobalt cliff could be detrimental to EV’s sales.

Companies are exploring new options to address these challenges including less cobalt intensive and cobalt-free batteries as well as cobalt recycling that currently accounts for only 5% of the global supply. This resource limitation and technological competition make the energy storage market a very strategic one. This is not to forget that raw materials are also put under stress in producing of decarbonized electricity: quartz for solar, rare-earth elements for wind energy… Currently, China holds the economic lead (73% of the global Li-On batteries capacity) while European countries have taken a political lead by implementing strong regulation. Yet, Europe is still struggling to secure a regional supply even though the European Commission has called for an Airbus-style consortium to develop European production. But it may already be too late to catch up with the Asian train.

Nathan Breen, Climate Analysis Team  –  Sources: Beyond Ratings, BNEF, Washington Post

 

 

 

 

Our latest
publications

Title
Category
Tag
Country
Date
Analyst insight
#ESG
Global
2019-10-19
Analyst insight
#Carbon #ESG
Global
2019-10-19
Analyst insight
#ESG
Global
2019-10-19
Research note
#ESG
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#ESG
France
2019-10-19
Analyst insight
#Credit Risk #ESG
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change #Environment
Global
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#ESG
France
2019-10-19
Analyst insight
#Carbon
Europe
2019-10-19
Weekly food for thought
#Carbon
Global
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#Credit Risk
United States
2019-10-19
Analyst insight
#Environment
Northern Area
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Europe
2019-10-19
Weekly food for thought
#ESG
France
2019-10-19
Weekly food for thought
#Credit Risk
Peru
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change
World
2019-10-19
Weekly food for thought
#ESG
France
2019-10-19
Weekly food for thought
#Credit Risk #GDP
Europe
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#Credit Risk
France
2019-10-19
Analyst insight
#Credit Risk #France
Europe
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#ESG
Global
2019-10-19
Weekly food for thought
#GDP
Europe
2019-10-19
Analyst insight
#ESG
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#Carbon #ESG
France
2019-10-19
Weekly food for thought
#Credit Risk
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#ESG
Europe, USA
2019-10-19
Weekly food for thought
#GDP
France
2019-10-19
Analyst insight
#Environment
France
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change #ESG
Global
2019-10-19
Weekly food for thought
#Credit Risk #GDP
China
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#ESG
USA
2019-10-19
Weekly food for thought
#GDP
Global
2019-10-19
Analyst insight
#Credit Risk #Sovereign Debt
Global
2019-10-19
Weekly food for thought
#Carbon #Climate #IPCC #WMO
Global
2019-10-19
Weekly food for thought
#Carbon #Inequality #Paris Agreement
France
2019-10-19
Weekly food for thought
#GDP #Sovereign Debt
Italy
2019-10-19
Analyst insight
#Credit Risk #GDP #Geopolitics #Sovereign Debt
Global
2019-10-19
Weekly food for thought
#Environment
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #GDP
Global
2019-10-19
Weekly food for thought
#GDP
France
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Environment
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Environment
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Environment
Global
2019-10-19
Analyst insight
#GDP
Brasil
2019-10-19
Weekly food for thought
#Environment
Venezuela
2019-10-19
Weekly food for thought
#Environment #Natural Capital
Norway
2019-10-19
Analyst insight
#Carbon #Carbon/Climate Change #Climate
United Kingdom
2019-10-19
Weekly food for thought
#Agriculture #Biodiversity #Climate #GHG #Greenhouse gases
Global
2019-10-19
Weekly food for thought
#Biodiversity #Climate #Environment #ESG #IPCC #Oceans #SIDS
Global
2019-10-19
Weekly food for thought
#Credit Risk #GDP
France
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Europe
2019-10-19
Weekly food for thought
#Carbon/Climate Change
France, Canada
2019-10-19
Weekly food for thought
#Credit Risk #GDP
Argentina
2019-10-19
Analyst insight
France, Egypt
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate
France
2019-10-19
Weekly food for thought
#GDP #Sovereign Debt
Germany
2019-10-19
Weekly food for thought
#Environment #ESG
Global
2019-10-19
Analyst insight
#GDP #Natural Capital #Sovereign Debt
South Africa, France
2019-10-19
Weekly food for thought
#Credit Risk #Sovereign Debt
United States
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change #Environment #ESG
Global
2019-10-19
Weekly food for thought
#Carbon/Climate Change #Climate
Global
2019-10-19
Weekly food for thought
#ESG
India
2019-10-19
Weekly food for thought
#Credit Risk #GDP
USA, Japan, European Union
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #GDP #Paris Agreement #Sovereign Debt
Global
2019-10-19
Weekly food for thought
#Climate #Environment #Paris Agreement
Small Island Developing States, Global, Barbados, Fiji
2019-10-19
Weekly food for thought
#Credit Risk #GDP #Sovereign Debt
Venezuela
2019-10-19
Analyst insight
#Carbon #Carbon/Climate Change #Climate #Credit Risk
Global
2019-10-19
Analyst insight
Global
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate
Global
2019-10-19
Weekly food for thought
#Credit Risk #GDP
Global
2019-10-19
Analyst insight
#Biodiversity #Environment #Natural Capital
Brazil
2019-10-19
Weekly food for thought
#Credit Risk #Sovereign Debt
United States
2019-10-19
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-19
Analyst insight
#Credit Risk #Sovereign Debt
United States
2019-10-19
Analyst insight
#Carbon/Climate Change #Credit Risk #ESG #Natural Capital
Global
2019-10-19
Analyst insight
#Carbon #Carbon/Climate Change
Europe
2019-10-19
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Paris Agreement
France
2019-10-19
Weekly food for thought
#Credit Risk #Sovereign Debt
Europe
2019-10-19
Weekly food for thought
Global
2019-10-19
Analyst insight
Global
2019-10-19
Weekly food for thought
France
2019-10-19
Weekly food for thought
#Carbon/Climate Change #ESG
Global
2019-10-19
Weekly food for thought
Global
2019-10-19
Weekly food for thought
Global
2019-10-19
Weekly food for thought
Global
2019-10-19
Analyst insight
#Biodiversity #Climate #Environment #Natural Capital #Paris Agreement
Global
2019-10-19
Weekly food for thought
United States
2019-10-19
Weekly food for thought
Italy
2019-10-19
Weekly food for thought
Global
2019-10-19
Analyst insight
Middle East & North Africa
2019-10-19
Weekly food for thought
Global
2019-10-19
Weekly food for thought
Global
2019-10-19
Research note
#Carbon #Carbon/Climate Change #Climate #Paris Agreement
Global
2019-10-19
Weekly food for thought
Global
2019-10-19
Analyst insight
All
2019-10-19
Weekly food for thought
United States
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
#Carbon/Climate Change #Climate #Credit Risk
England
2019-10-19
Weekly food for thought
Global
2019-10-19
Weekly food for thought
Germany
2019-10-19
Analyst insight
Brazil
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Italia
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Canada
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Analyst insight
Sweden
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Italia
2019-10-19
Analyst insight
All
2019-10-19
Weekly food for thought
USA
2019-10-19
Analyst insight
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
United Kingdom
2019-10-19
Weekly food for thought
United Kingdom
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Research note
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Russia
2019-10-19
Analyst insight
Argentina
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
European Union
2019-10-19
Analyst insight
European Union
2019-10-19
Analyst insight
Greece
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
European Union
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Cuba
2019-10-19
Weekly food for thought
All
2019-10-19
Analyst insight
Greece
2019-10-19
Weekly food for thought
European Union
2019-10-19
Weekly food for thought
French Guyana
2019-10-19
Weekly food for thought
#Sovereign Debt
Russia
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
Venezuela
2019-10-19
Analyst insight
All
2019-10-19
Weekly food for thought
United Kingdom
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
France
2019-10-19
Weekly food for thought
European Union
2019-10-19
Weekly food for thought
All
2019-10-19
Weekly food for thought
France
2019-10-19

Let's keep in touch!

This field is required
Invalid email

Register to our newsletter to be the first to hear about ...

By submitting this form, you consent to receiving email communications from Beyond Ratings. Beyond Ratings will update your email preferences and hold your details in its contact database. For more information on how Beyond Ratings uses your data, see our Privacy Policy.

Get started

More investors are choosing Beyond Ratings' proprietary ESG-augmented financial metrics to gain a 360° view of company and country ESG performance.