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January 11, 2022
Brigita Darminto & Gabriela Herculano
Forecasting Demand for Batteries until 2030 and Considerations on Supply - Different Applications, Technologies, Minerals, and Costs
Batteries Have Evolved But Are Still Fundamentally The Same As Volta’s Design
Over the last decade lithium-ion batteries (LIBs) have become an integral part of our daily lives, powering the mobile phones and laptops that have revolutionised modern society. A surge in their production has resulted in an 85% decline in prices, making Electric Vehicles (EVs) and Stationary Energy Storage (SES) economically viable for the first time in history. Batteries are the key for the transition away from fossil fuel dependence and are set to play an even greater role in reaching Net Zero by 2050. So, what is a battery? It seems a simple question, until you start thinking hard about it.
In essence, a battery is a device that stores chemical energy and converts it to electrical energy. First invented by Italian Alessandro Volta in 1799, the three basic components of a battery are still the same - an anode, a cathode, and an electrolyte. A separator is often used to prevent the anode and cathode from touching. When the battery is charging, an external source of electricity is connected to the battery. This source causes electrons to move from the anode to the cathode while lithium ions move in the opposite direction, from cathode to anode. The process is reversed when a battery is in use (in other words, when it is ‘discharging’), as seen in the schematic below. Let’s go a bit deeper.
We hear the term voltage a lot, but what does it actually mean? The battery cell voltage is a measure of potential energy, and is determined by the difference between the redox energies of the anode and the cathode. Redox potential is the tendency of a chemical compound to acquire electrons from, or lose electrons to an electrode. The higher the difference, the greater the potential energy of the circuit and the greater the voltage. Hence, the cathode energy should lie as low as possible, and the anode energy should lie as high as possible. With this in mind, Professor John Goodenough’s group began to explore oxide cathodes in the 1980s and invented Lithium Cobalt Oxide (LCO), the first and the most commercially successful form of layered transition metal oxide cathode. Its existence transformed the battery industry. It was originally commercialized by SONY, and this material is still used in commercial Li-ion batteries (Manthiram).
Since then, two more classes of oxide cathodes have been discovered. The three classes are: layered (e.g. LCO, Nickel Manganese Cobalt Oxide (NMC)), spinel (e.g. Lithium Manganese Oxide (LMO)), and polyanion (e.g. Lithium Iron Phosphate (LFP)). Of the three, layered oxides have been the favoured option because of their high energy per unit mass and energy per unit volume. However, cost and sustainability are becoming critical as we move forward with large-scale deployment of LIBs for EVs and SES and moving away from cobalt is now an industry target. Also, there is a big appetite to increase the energy density beyond the current level to keep up with the advances in portable electronic devices and enhance the driving range of electric vehicles. As a result, concerted efforts are made to increase the cathode capacity and lower the cost (Manthiram).
Battery Trends – Predominantly NMC and Potentially Shifting to LFP
In May 2021, the output of LFP (polyanion) batteries in China surpassed that of NMC (layered). LFP batteries were among the earliest well-developed EV batteries in China and are known for their stable and safe performance, despite their overall low energy density when compared to NMC batteries, as seen above. In the second half of the last decade, most Original Equipment Manufacturers (OEMs) in China shifted to NMC batteries in an attempt to achieve a higher energy density. This change was encouraged by the incentives provided by the government at that time (Metal Buletin). Recently, however, there was a cut in the EV subsidies in the country. In order to minimize their exposure to volatile cobalt and nickel prices, the OEMs have shifted back towards LFP batteries since 2020.
In addition to safe performance (as it is less vulnerable to thermal runaway) LFP’s lower cost is its best-selling point. As demand for batteries due to EVs and SES ramps up in the next 10 years (more on that below), the scarcity of battery minerals, especially cobalt, is a crucial factor for the supply chain. Nickel alone would give the most energy-dense batteries, but it is unstable and reactive. Cobalt is the key for boosting energy density and battery life because it keeps the layered structure stable (C&EN). However, it is the most expensive battery mineral and mainly sourced from mines in the Democratic Republic of Congo, where unethical mining practices are prominent. The dependency on one country for cobalt supply also possesses risks and creates uncertainties in the value chain. Given these issues, some carmakers want to significantly reduce the cobalt content in their favourite cobalt rich NMC batteries, like NMC 523 and NMC 622, or eliminate it completely ifs possible. An example of the innovations intended to cut the cobalt content is NMC 811 batteries. These batteries have significantly higher energy densities than LFP batteries while having lower cobalt content than NMC 523 and NMC 622, hence they are it is likely to hinder the momentum of LFP batteryies adoption as long as energy densityies/ range is the main concern for the carmakers. Traditional NMC 523 and NMC 622 batteries usually contain 10 to 12% of cobalt. Some cathode material producers have succeeded in reducing the cobalt content to about 7 to 8% while improving energy density by raising the voltage. A raise in the voltage could lead to an increase in battery capacityies. Cathode materials producers hope to further reduce the cobalt content, however, there will still be a minimum amount of cobalt, around 5%, required to maintain the safe operation of NMC batteries (Metal Buletin). Once EVs dominate the market, cobalt and nickel are likely to be recycled. Hence, the dependency on newly mined minerals would fall.
Earlier this year, Tesla announced that they will be changing the battery chemistry of their standard-range EVs from NCA to LFP (CNBC). This move is likely to benefit Tesla in two ways: increase in profit margin without having to raise vehicle prices, and more robust supply due to cathode material diversification and less dependency on cobalt. Tesla is already making vehicles with LFP chemistry at its factory in Shanghai. It sells these cars in China, the Asia-Pacific region, and Europe. In September, Tesla asked Model 3 reservation holders in the US if they would accept cars with LFP batteries with earlier delivery dates (CNBC). According to Roskill, 95% of LFP cathode is currently being manufactured in China. Shifting the low-range EVs and SES to LFP is a great move by Tesla, considering battery cell supply is one of Tesla’s biggest bottlenecks. It will help Tesla to achieve significant growth in the next few years. As pointed out by Sawyer Merritt of ARK Invest, Tesla is uniquely positioned for LFP chemistry because of its industry-leading drivetrain efficiency. This would allow Tesla to offer acceptable range at lower prices with LFP batteries, compared to its competitors. On top of the low-range EVs, Tesla has also announced that it will switch some of their SES products to LFP, as announced on its Battery Day this year. For the SES market, high cycle life, low cost, and high safety will take precedence over energy density. LFP batteries are known to have 2 – 3 times longer cycle lives than NMC batteries. Hence, Tesla’s decision to switch some of their SES batteries to LFP makes sense.
Batteries in V2G
The increasing adoption of EVs offers great potential for Vehicle to Grid (V2G) to play a significant role as a grid service. However, the economic viability of V2G operations has been the subject of debate, primarily due to a lack of proper accounting for battery degradation in the development of business models. Attempts have been made by the academic community to simulate the possibility of V2G as a tool to adjust EV’s rest conditions and improve their its longevity. In their study, Uddin et al. develop and validate a model that predicts battery capacity and power fade over time based on ageing data collected over two years. This model was then integrated with a smart grid system which interacts with a vehicle battery management system (BMS) to calculate the energy and power available from the car and operational condition of the battery which minimizes degradation. The control algorithm only allows access to the stored energy if there are no adverse effects on battery longevity. Therefore, the worst case is that the battery would degrade as if there was no V2G. They reported that their system can reduce the battery pack capacity fade by up to 9.1% and power fade by up to 12.1% on the condition that the EV is charged to 100% daily. These numbers demonstrate that V2G can be beneficial for battery life if the battery prognostic models are accurate and the causes, mechanisms, and impacts of battery degradation are fully understood. At the moment, the academic community is still doing further research to satisfy both conditions.
Forecasting Demand for Batteries Until 2030
Most Batteries are Inside BEVs - Why Does That Matter?
As we electrify transportation and heat and move towards green electricity generation, the demand for batteries is expected to increase significantly. Forecasting the order of magnitude of future demand for batteries is paramount, as increased production feeds into a virtuous cycle of price reductions, which feeds into additional demand as lower prices will spike additional adoption of EVs and stationary batteries for energy needs. Lower battery pack prices translate into BEVs being more price competitive (and much higher UX) than ICEs on the transportation side, while on the energy storage side reduced battery prices translate into a lower Levelized Cost of Storage (LCOS), which is key to solving renewable energy intermittence. Batteries converge transportation and grid decarbonization. They are a key technology and the amount we can produce of the different chemistries, and the price at different volumes, are key figures. The purpose of this article is to summarise the research we have done on the topic, centred around our own forecast of EV figures by 2030 as well as the need for stationary clean energy battery-based storage. With economies of volume, we applied Wright’s Law to forecast future battery pack prices.
According to IRENA, in 2019 the total GWh of energy storage within EVs amounted to 200 GWh, while stationary storage came to 30 GWh. The fact that ca. 87% of all clean battery storage capacity is, and will continue to be, mobile, inside EVs, is one of the main reasons why we believe V2G and Vehicles to Everything (V2X) are solutions to benefit from massive adoption in the next years.
EV battery producers need to keep increasing energy density, as the goal to increase EV range is predicated on the ability to cover longer distances with smaller battery sizes, weights and lower costs. Luckily, for stationary applications size and weight are not as relevant, while price (therefore LCOS) is fundamental. In this paper we also explore possible anode & cathode combinations and likely future applications.
Our own forecast is for 50 million BEVs to be sold in 2030 (of which 20 million will be sold by Tesla). We also forecast 1,857 GWh of stationary batteries installed in 2030 (note that again Tesla is the company with the most robust sales forecast, having announced 1,500 GWh of energy storage deployment in 2030). Will battery manufacturers be able to produce enough, and do we have sufficient minerals to produce all the 5,747GWh we forecast the world will demand in 2030? We believe the answer to both questions is yes.
Starting from that 2019 total global battery capacity of 230 GWh, our forecast translates into a CAGR above 35% until 2030. Empirical evidence coined as Wright’s Law suggests that LiB pack prices drop by 20% at every doubling of capacity. Our forecast is therefore for pack prices to reach $50.4 per kWh in 2030.
BNEF and Wood Mackenzie Forecasts
Before we get into more detail on our key numbers, let’s summarize the numbers of two very relevant research powerhouses. Wood Mackenzie released their Global Energy Storage Outlook in October 2021. In it, they state that demand for global energy storage will reach 952 GWh in 2030, a 17x growth on the 2021 figure (that they forecast will be 56 GWh). Of that 952 GWh, Front of the Meter (FTM) storage is to represent almost 75% of all demand drive. Further, Wood Mac expects the US and China to dominate the market with a combined 73% of all stationary battery needs (the US leading with 40%). The driver of this increase in FTM demand is much more ambitious renewable energy targets.
In November, right before COP26, BNEF published their forecast, which estimates a similar figure. BNEF forecasts that the Global Energy Storage market will hit 1,000 GWh by 2030. Furthermore, BNEF forecasts that 55% of all energy storage installed by 2030 will focus on storing solar or wind energy to be released at a later point (energy shifting). Interestingly, BNEF expects that energy storage located Behind the Meter (BTM), at homes and businesses, will represent about 25% of all global storage installations by 2030. BNEF’s current forecast is for an $58/kWh expected average battery pack price in 2030. By the end of 2020 the average lithium-ion battery pack reached $137/kWh and cells had fallen to around $100/kWh.
iClima’s Key Forecasting Parameters
Our forecasting exercise started with the US market. We used the Solar Futures Study report from the US Department of Energy (DoE) as the basis for our US BTM & FTM clean energy storage forecast. Our base case is their “Decarbonization with Electrification” scenario, that forecasts a 374 GW capacity by 2035, a growth of over 100x given the 3 GW of battery energy storage capacity in 2020. The DoE forecasts the total storage capacity per duration (assuming up to 8 hours by 2045), with 50% of all storage capacity being 4-hour storage. We assumed the US market would represent half of the total demand for clean energy storage, with China leading the demand for the rest of the world.
On the BEV side, we forecast 9.1 million units being sold in 2022, with a ramp up to ca. 19.5 million units in 2025 and finally 50 million units by 2030. We assumed that the average BEV battery capacity by 2030 is 78 kWh. We did forecast demand for batteries for plug-in hybrid vehicles (PHEVs) as well, but we see PHEVs simply as a transition solution given their inefficient batteries and worse ICE engines. We estimate zero PHEVs being sold in 2030 and a pick of sales of this hybrid solution in 2025, with 5.8 million units sold globally. All these figures are for passenger vehicles only.
The graph below shows the forecast for the 2025 mid-point: 1,621 GWh of battery needs from EV application, around 790 GWh for clean energy storage, and pack prices reaching ca. $71/kWh.
With detailed volume projected for batteries for both EV and stationary clean energy we could apply Wright’s law, using a 20% reduction in price for every doubling of production of LiBs. By 2030 we forecast a total of ca. 5,747 GWh of battery demand, with the breakdown between the two main global needs as in the chart below. We forecast battery pack prices to reach ca. $50.4/kWh by 2030. That is a figure below the $58/kWh of BNEF but not as aggressive as the $25/kWh that RethinkX seems to be forecasting.
Forecasting Battery Mineral Requirements Until 2030
Predicting the increase in battery demand up to 2030 is crucial. One of the reasons is that it allows us to understand the magnitude of future demand for EV battery raw materials. It is also essential to guide strategic decision-making in policy and industry and to assess potential supply risks as well as social and environmental impacts. We attempted to answer the pressing question on the supply side: do we have enough raw materials to meet the demand? We specifically assessed four main minerals in all battery chemistries, namely lithium, cobalt, nickel, and manganese. The material requirements depend on the choice of battery chemistries used. For the SES, we followed Wood Mackenzie’s chemistry mix prediction, as seen below. While for the EVs, we have 3 different scenarios: (1) NCX scenario where the current trend of a widespread use of NCA and NMC batteries continues until 2030, (2) LFP scenario where LFP batteries would be increasingly used in the future, (3) Tesla’s scenario where the industry wide battery mix follows Tesla’s. Scenarios 1 and 2 are based on an academic paper by Xu et al.
Combining the above scenarios with the information we have on the amount of mineral required per battery composition, and our battery demand predictions for 2030, the amount of minerals required to meet the demand predictions are much less than the amount of reserves reported by Holon Global Investment and BNEF, assuming zero recycling.
Percentage of Minerals Inside Different Battery Chemistries
Amount of Minerals Required to Meet 2030 Batteries Demand (Figures in Million Metric Tons)
Comparing the reported reserve numbers with our minerals demand prediction, we do have enough reserves to power all the EVs and SES up to 2030. However, the question that we haven’t been able to answer is will the mineral production ramp up at the same rate as the demand? We will attempt to have the answer for this in 2022. In academia, there are unprecedented efforts into researching new battery chemistries and improvements in manufacturing and efficiencies in the supply chain that will drive battery technology and generate cost reductions over the next decade. There are things like advanced-LiBs, which use little cobalt, such as NMC 955, which could be here in the market in a few years. However, we are already at the physiochemical limit of what these materials can do. The next generation batteries could be lithium-air, solid-state batteries with pure metal anodes, or sodium-ion batteries. Most of them are still at lab-scale phase and from there to mass production, we’re looking at 10 years or more. There are a few companies who are currently trying to scale up solid-state batteries, like Solid Power and QuantumScape.
We will have more articles next year talking about these new technologies and the risks behind them, so stay tuned!