Batteries dominate the EV value chain

As German car makers ramp up their battery manufacturing capacity, the UK is making the right noises but still lagging behind in hard action.

This week, Mercedes commenced production of battery systems at its Hedelfingen plant for its new EQS, which launches in a couple of weeks. Last week, Volkswagen hosted its “Power Day” unveiling far-reaching plans to make battery production central to its business, including the establishment of six gigafactories in Europe.

Meanwhile, in the UK, only one company has announced firm plans to build a gigafactory. In December last year, Britishvolt announced its selection of a site in Blyth, Northumberland, which it says will be operational by the end of 2023. Jaguar Land Rover is currently constructing a battery assembly facility at its Hams Hall site.

These development are set against a long-standing awareness within industry and among policymakers that batteries are the most critical part of the EV supply chain.

“We will make batteries a core business of Volkswagen.”

Thomas Schmall, Volkswagen Group Board Member for Technology

Volkswagen’s plans to build six gigafactories will give it a total capacity of 240 GWh by 2030. At its Power Day, the world’s second-largest vehicle maker also described its “closed-loop” approach to EV batteries. “That means we will develop the cell, we will produce the cell, we will secure the supply chain, we will have a second life after the car, and we will have the recycling business inside the core business of Volkswagen,” said Schmall.

Its plans for a so-called “unified cell”, i.e. one cell design for 80% of its product portfolio aims to halve the cost of the battery from current levels by 2030.

Daimler, on the other hand, sources its cells on the international market and only assembles the battery units at its own plants, including those of its battery subsidiary Accumotive and joint ventures in Asia. However, the company is pursuing a vertical integration strategy on batteries and plans to commence small-scale production of cells in 2023. Although this facility is part of its development function, rather mainstream production, it nevertheless offers a springboard for taking in-house control over cell supply as EV uptake accelerates.

The UK perspective for 2030

When, in late February, the UK government published the results of its public consultation on banning the sale of petrol- and diesel-powered cars and vans in 2035 (pulled forward from 2040) nearly seven months after the consultation period ended on 31 July 2020, it felt somewhat overtaken by events, given that prime minister Boris Johnson had already announced in November 2020 that the ban would be pulled even further forward to 2030.

Nevertheless, the report on the responses received from 1,305 individuals and 173 organisations is a reflection of thinking and concerns surrounding alternatives to the ICE that persist in the UK and are strongly felt within businesses and across the general public as a whole.

Battery supply was one of the four main issues listed by respondents as barriers to bringing forward the ban. As well as arguments relating to a lack of manufacturing capacity in the UK, many objections surround the availability and extraction of raw materials (including environmental and ethical concerns) and the upfront carbon emissions associated with producing batteries.

These respondents argued for a technology neutral approach focused on promoting vehicles based on their lifetime emissions, as opposed to just tailpipe emissions. Respondents argued that ICE vehicles could be cleaner than BEVs once the emissions impact of battery and electricity production is taken into account.

Consultation Outcome – Ending the sale of new petrol, diesel and hybrid cars and vans: government response

In its response, the government took the side of other voices who argued that carbon savings over the lifecycle of a BEV already more than offset the upfront carbon emissions required to produce the vehicle. It pointed to modelling by the Department for Transport (DfT) and subsequent analysis by the Climate Change Committee (CCC) that found that BEVs in the UK repay the carbon debt from the production of the battery in just over a year. The government goes on to state: “Unlike petrol or diesel vehicles, BEVs will become cleaner over the course of their lifetime, as the UK’s electricity mix becomes cleaner.”

Complex issues surrounding raw materials

Addressing concerns raised about the raw materials for EV batteries, the UK government pointed to research by independent body the Faraday Institution which found “more than enough raw materials to meet demand for the UK and global markets to at least 2050”, based on a forecast annual requirement of 6,530 GWh. The response went on to say that by 2050 “battery recycling will be able to deliver significant volumes of key battery raw materials for future production requirements”.

However, the succinctness of the response belies the complexity of the situation. A closer look at the Faraday Insight referenced above, and another on Building a Responsible Cobalt Supply Chain, reveal some interesting and concerning considerations:

While outlining developments in battery chemistry that may alleviate some of the pressures, particularly in relation to cobalt, the latter report says “growth in global production will not be easy”, and points to potential shortages, bottlenecks and market volatility. And according to its modelling, global cobalt reserves will be entirely used up by 2039 unless resources are turned into reserves by then.

The Faraday report also identifies the geo-political and social issues associated with cobalt mining as a significant risk, and concludes by saying: “Tackling resource pressure and social issues with cobalt will require innovations in battery cell technology and the successful development of alternatives such as solid-state batteries.”

Volkswagen’s move to its unified cell seems to reflect this. The company claims its “new prismatic unified cell also offers the best conditions for the transition to the solid state cell – the next quantum leap in battery technology, which Volkswagen anticipates for the middle of the decade”.

Mercedes likewise is seeking to cut cobalt out of the equation. “In the future, we want to use post-lithium-ion technologies with new material compositions to completely dispense with materials such as cobalt,” said Mercedes COO Markus Schäfer

Meanwhile, Volkswagen and Daimler have both adopted ethical procurement policies for battery cells and their raw materials. Last year, Mercedes-Benz AG announced that it will source cobalt and lithium exclusively from certified mines in a move to address human rights worries.

Human rights focus on DRC

Many of the geo-political and social concerns surrounding current lithium-ion batteries centre on the position of the Democratic Republic of Congo (DRC) as the principle source of cobalt (currently around 65% of global production) and the predominance of Chinese companies in the process supply chain – accounting for 62% of global production of refined cobalt.

There have been powerful stories in the media of Chinese businesses working unethically with artisanal and small-scale mining (ASM) operations that use child labour and modern slavery. This has sparked a flurry of activity among industrialised nations and NGOs to find ways of addressing this.

One initiative is the Global Battery Alliance (GBA), part of the World Economic Forum. Established in 2017, the GBA is a public-private collaboration platform of 70 organisations focused on establishing a sustainable value chain. By Boris Johnson’s target year of 2030, the GBA envisages “batteries could enable 30% of the required reduction in carbon emissions in the transport and power sectors and provide 600 million people with access to electricity”. However, it also points out that the battery value chain will have to expand by 19 times over the next decade.

While initiatives such as the GBA represent a positive attempt to address humanitarian issues associated with cobalt sourcing, some of the language surrounding this work has been criticised for paternalistic undertones. For instance, the DRC has established a state-owned company to purchase all ASM cobalt for the market – blocking the role currently played by foreign actors (mainly Chinese). This has been met with a mixed response, raising concerns about the transparency and accountability of the process and about the company using its market power to manipulate prices.

Given the historic political instability of the DRC and endemic corruption, these concerns are understandable from the perspective of industrialised nations keen to protect their own interests. Nevertheless, it is notable that the great majority of the DRC’s cobalt is mined by large industrial corporations such as Glencore, which itself has a problematic record when it comes to environmental pollution and tax avoidance on its mining activities in Africa, as investigated in this compelling 2012 documentary by Christoffer Guldbrandsen.

The conundrum therefore remains, inasmuch as “certified mines” of the type that would presumably meet the requirements of companies such as Daimler in the context of child labour nevertheless come with their own specific types of ethical baggage. The main options as they currently stand are to do business with multi-national corporations that channel internal transactions through tax havens or with an unstable sovereign state struggling with crippling poverty, political mismanagement and entrenched corruption.

In effect, as long as cobalt remains critical to the EV supply chain, there is every chance that the Global North will alleviate the geo-political issues associated with oil dependency by trading them in for a different set of problems associated with battery technology.

Is battery recycling the answer?

Although it certainly seems to be one of them, it is not without its own tribulations. In its response to the consultation, the UK government identifies a number of options it is progressing in parallel. One is ongoing research into sustainable alternatives to critical raw materials such as cobalt, while another is second-life applications such as home energy storage. It classifies battery recycling as a potentially valuable “secondary resource”, but does not expect batteries to be recycled en masse until the 2030s due to the anticipated lifecycle for the batteries being produced today (including second-life use).

Volkswagen has established its own in-house battery recycling facility with the aim of industrialising the recovery of lithium, nickel, manganese and cobalt in a closed loop. However, it too points out that larger volumes of battery returns are not expected until the late 2020s at the earliest. For the pilot phase, the plant has been designed to recycle up to 3,600 battery systems per year – equating to roughly 1,500 tonnes. As this video from Volkswagen shows, recycling EV batteries is a complicated process – and complicated also means expensive …

In December 2020, the European Commission published proposals for modernising EU legislation on the sustainability of all types of batteries. The proposals, drawn up within the scope of the European Green Deal, include requirements for all batteries (not just for EVs) mandating the use of responsibly sourced materials, minimum content of recycled materials, carbon footprint declarations, performance, durability and labelling, as well as collection and recycling targets. In addition to wanting significant improvements in the collection figures for batteries used at home (phones, laptops etc.), the proposals expect automotive and EV batteries to be collected in full, adding: “All collected batteries have to be recycled and high levels of recovery have to be achieved, in particular of valuable materials such as cobalt, lithium, nickel and lead.”

Executive Vice-President for the European Green Deal Frans Timmermans said: “Our increasing reliance on batteries in, for example, transport should not harm the environment. The new batteries regulation will help reduce the environmental and social impact of all batteries throughout their life cycle.”

Major vehicle-producing nations such as the UK will not only have to comply with such requirements, but also secure localised recycling of EV batteries. With funding from the UK government, the Faraday Institution is running the Faraday Battery Challenge, which includes a target to increase the recyclability of battery packs from 10-50% today to 95% by 2035. Its ReLiB project “aims to devise and develop alternative recycling routes that could provide UK businesses with a competitive advantage”. It wants to “propel the UK to the forefront in lithium-ion battery recycling rather than just play catch-up with already emerging technology”.

Germany is already home to several battery recycling plants. As well as Volkswagen’s pilot facility, companies like Accurec Recycling, Duesenfeld and Redux Recycling are up and running, with others such as Primobius and Roth Recycling at the planning stages.

EV battery recycling is complex, with wide variations in battery chemistries and design making it difficult to devise a one-size-fits-all system for recycling them cost-effectively. As EV uptake expands through the coming decade, the hope within the industry is for standardisation and consolidation to improve the currently shaky economics of battery recycling.

Rapid ramp-up of battery manufacturing in Europe

In the meantime, the race is on for battery manufacturing capacity in Europe. Tesla has been pressing ahead with its gigafactory near Berlin. And despite ongoing issues with building permits, has recently stated it expects to commence production in late July or August of this year. It is one of 15 large-scale battery cell factories currently under construction in Europe.

Overall, the German government is investing an additional EUR 2.5 billion in “accelerating R&D for e-mobility and battery cell production”. This compares with a UK fund of GBP 1 billion to develop UK supply chains for the large-scale production of BEVs. Earlier this month, the UK government announced a GBP 20 million competition to encourage innovative ideas for zero-emissions vehicles, asserting its would “help ensure the UK remains a world leader in EV design and manufacture”. However, the assertion of world leadership feels hopeful at best, and potentially delusional, when set against the strides being made elsewhere with the backing of highly motivated indigenous vehicle makers.

Photo credits: Feature photo provided by Mercedes-Benz AG. Photo of Thomas Schmall provided by Volkswagen AG

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