Uncertainty in EU strategic layout in battery industry



On December 9, the European Parliament and the Council of the European Union agreed on an interim new rule for the battery regulation, which sets a higher target for the collection of waste batteries and the proportion of materials recycled. At the same time, companies are required to implement due diligence measures to review and report social and environmental risks in all links of the supply chain.


European MPs who participated in the legislation said that for the first time, the EU has covered the entire life cycle of a product in circular economy legislation, with the goal of building a strong European recycling industry, especially on lithium. The new rules could become the benchmark for the entire battery market globally.

1. Green batteries - survival with differentiation

In the face of rivals such as East Asian countries and the United States, Europe, which has fallen behind, needs to find its own position in the battery field. Take the field of electric mobility as an example. Globally, Europe manufactures 30% of electric vehicles, but only 10% of batteries. Production of key raw materials including lithium, nickel and graphite accounted for less than 1%, and processing of these key raw materials accounted for about 1%. The global demand for batteries will grow from 0.5 TWh today to 3.6 TWh in 2030, about 25% of which will come from Europe.

The EU is trying to open up new markets in the field of circular economy, which can not only alleviate the pressure on natural resources, but also solve the problem of waste battery recycling technology. The EU's legislation on batteries is also closely related to the European Green Agreement, circular economy action plan and new industrial strategy. In December 2020, the European Commission published a draft battery and waste battery to replace the 2006 battery directive.

Green Batteries - survival with Differentiation


The draft covers all batteries in the EU market including portable batteries, electric vehicle batteries, industrial batteries, etc., and also covers the entire industrial value chain from raw material mining, to battery production, to battery recycling, with particular emphasis on establishing sustainability standards. How green a battery is depends largely on how "green" the electricity is. According to a research report, in terms of battery production alone, Germany has more advantages than China in terms of sustainability.

Compared with Germany's power generation structure, China's greenhouse gas emissions in power generation are about 40% higher. As a result, in the manufacture of battery cells, Germany can reduce emissions by 9 to 12 kg/kWh compared to China. However, in 2022, under the energy crisis in the Russo-Ukraine War, coal power in Europe will be ordered to go against the general trend of climate protection, and the proportion of power generation will increase. Even if it is temporary from a strategic point of view, this temporary period will definitely not be short in terms of time span.

2. Battery raw materials - striving for the upstream

Recycling alone will not solve Europe's raw material problem. The span of the battery life cycle determines that Europe cannot wait to turn batteries from East Asia into waste, and then save the demand for batteries by turning waste into treasure. Mining is a must. European demand for lithium and cobalt will increase 18-fold and 5-fold, respectively, by 2030 due to electric vehicle batteries and energy storage, according to EU documents. Increased 60-fold and 15-fold by 2050, the EU will face supply problems if no action is taken now. The EU will naturally lay out upstream materials for batteries, especially lithium ore, the key raw material for power batteries.

Battery raw materials - striving for the upstream


In 2020, lithium will be added to the EU's list of 30 key raw materials. The European Battery Alliance and the European Raw Materials Alliance established by the EU have a common goal of ensuring the security of battery raw material supply within the EU. The available lithium ore resources in the EU have increased from 2.2 million tons in 2020 to 5.5 million tons today. Together with projects in Spain and Portugal, European local resources have the potential to cover 80% of Europe's lithium demand. Of course, the data given by the European Commission only refers to the possibility, in view of the fact that the mining of local minerals in Europe encounters various resistances in reality.

Especially from the opposition of local residents and environmental protection organizations, the potential of resources can only be realized at a discount, and Europe has to rely on raw material imports. In terms of alternative battery technologies, the EU's research focuses on how to get rid of dependence on rare or key raw materials, such as sodium-ion batteries or magnesium-ion batteries. But before the technology matures, the supply of raw materials for lithium-ion batteries is still the focus. In the foreseeable future, the upstream raw materials of EU batteries cannot get rid of the fate of relying on imports.

3. Europe is entering battery production

Before 2021, the batteries needed for electric vehicles in Europe are almost completely monopolized by other countries. Now, lithium battery companies in the world are beginning to pour into Europe, and Europe is entering a key link in the battery industry value chain: battery production. Some 40 battery makers want to build factories in Europe, the data show. The study pointed out that from the data point of view, Europe will not face a fundamental battery shortage by 2030, and more super factories will emerge in Europe in the coming time. The upcoming subsidy program in the United States covers subsidies for electric vehicle battery production and battery raw materials.

Europe is entering battery production


Compared with the US subsidy for local production of electric vehicles, the US subsidy for batteries may be more challenging for Europe. Before making investment decisions, battery manufacturers who consider costs need the certainty brought by subsidy policies. Late last year, many businesses expressed concern that battery legislation would be delayed due to the introduction of carbon footprint and supply chain scrutiny rules. Building the European battery value chain must be done now, not three or four years later, in such a rapidly changing key area. In the face of more powerful competitors, any delay in determining the rules will cause Europe, a latecomer, to miss its last good opportunity.

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