How Europe aims to achieve battery independence from China
Among the things we must thank Elon Musk for is the word ‘gigafactory’ – the term he coined for the site in Nevada manufacturing the batteries for his Tesla cars. Today, it’s become a generic name; and most gigafactories are in China. But Europe wants to become battery-independent. How’s that going?
Electric mobility is surging ahead in Europe. In 2020, the EU edged past China to become the world’s largest EV market. Today, there are about 1.8 million BEVs and PHEVs on the road in Europe. By 2030, that number is predicted to shoot up to 30 million – and the ultimate goal is total electrification. All those EVs need lithium-ion batteries. At present, about 80% of the world’s batteries for EVs are made in China.
Countries outside China – especially those with rapidly electrifying fleets – are wary of Chinese dominance in battery production. They remember how back in the 1970s, when OPEC had a near-monopoly on the oil that made cars run and factories hum, the organisation was able to turn off the tap to make a political point. The ensuing crises sent oil prices skyrocketing and economies crashing.
To avoid a 21st-century replay of that scenario, the EU in 2018 launched a Battery Action Plan, to increase Europe’s battery production capacity. Realizing they couldn't beat China on price, the Europeans resolved that their batteries would be more sustainable and more efficient.
Such a plan was overdue, because setting up lithium-ion battery production is costly, complex, and above all: slow. In early 2020, just four facilities were up and running across Europe: Samsung’s at Göd (Hungary), LG’s plant in Wroclaw (Poland), Leclanché’s site in Willstätt (Germany), and Envision AESC’s facility in Sunderland (UK, now ex EU).
By the end of 2021, the global annual production capacity of lithium-ion cells will reach around 740 gigawatt-hours (GWh). The good news: that is an almost threefold increase from 2017. The bad news, at least from a European perspective: Europe will account for only 62 GWh or just 8% of that total.
The EU’s strategy to catch up includes funding R&D, creating a ‘battery passport’ to favour EU-made battery cells, and pumping billions of euros into a fund that supports key member states in adjacent activities, from mining raw materials to recycling used batteries.
Thanks to focused efforts like these, lithium-ion cell production capacity in Europe is expected to increase tenfold by 2025. And not just in the EU: Nissan recently announced the setup of a gigafactory in Sunderland, in partnership with Envision AESC, which currently already supplies EV batteries to Nissan.
In general, it is the OEMs that are cornering the bulk of the expanding market by securing long-term supply of battery cells, via three strategies:
- Establishing gigafactories of their own, producing exclusively for their own needs.
- Financing gigafactories via a partner, who will produce exclusively for them.
- Signing a long-term contract with a Gigafactory to deliver an agreed volume in GWh.
At present, there are still only half a dozen gigafactories in operation in Europe. By 2025, an additional 25 should have come online, helping to raise production capacity to around 590 GWh. Another five gigafactories are planned by 2030, taking total capacity up to around 665 GWh. Adding in predicted capacities of projects without exact commissioning dates, Europe could have an annual production capacity of lithium-ion cells in 2030 of around 785 GWh – in other words, more than the current global capacity.
In terms of that global capacity, BloombergNEF predicts Europe's share could increase from 7% now to 31% in 2030. And according to Eurobat, the trade association of the battery industry in Europe, the value of the battery industry will increase from €15 billion in Europe and €75 billion worldwide in 2019 to €35 billion in Europe and €130 billion worldwide by 2030.
All are but rough estimates, since the combined capacity of all the plants listed on the map above exceeds 1 TWh (1,000 GWh). Produced by the German trade publication Battery News, it shows the state of play of projects present and future by the middle of this year – just before Nissan’s Sunderland announcement.
As the overview below shows, if all projects on the map receive funding, get built, and are up to capacity, Germany will be the hotspot for battery production in Europe, with more than 500 GWh in annual battery production capacity. Next in line, in the 50-100 GWh bracket, are Hungary, Italy, the UK, Norway, and Poland. Smaller players (10-40 GWh) will be Sweden, France, and Slovakia, with Russia, Czechia, and Spain having GWh production capacity in the single digits.
Of course, further projects may and probably will be announced – Tesla has indicated an interest in establishing a second Gigafactory in Europe, for example. So, the landscape is likely to shift significantly. The graph mentions a few major projects already announced but still looking for a location.
If current predictions hold, then by 2030, Europe’s lithium-ion battery production industry will be dominated by three players: Tesla, Northvolt, and LG Chem, which will have a combined market share of around 33%. Together or apart, they may hope to compete against CATL, the Chinese giant of the industry (currently, 9 out of the world’s top 10 companies in battery production are at least partly Chinese).
If by 2030 there will effectively be 30 million EVs on the road in Europe, and with the average eV battery pack currently at 60.7 kWh, that would translate into a total required battery production capacity of 1,700 GWh. Even if all projects on the map are up and running by 2030, that still leaves a significant capacity gap, of anywhere between 20% and 40%. So it is likely that the EU will pour even more money into battery production, via the European Green Deal and as part of Europe’s post-Covid recovery plan.
Also, it should be noted that not all the batteries produced will go to EVs. Also booming is the stationary energy storage industry, which could claim up to 10% of overall battery production from 2030.
Battery production is not just strategically sound; it also boosts employment. A study by Fraunhofer ISI says that for each GWh added in battery production capacity, you may count on 40 jobs added directly and 200 in upstream industries. The study forecasts battery manufacturing could generate up to 155,000 jobs across Europe by 2033 (although it doesn't mention how many would be lost due to reduced production of fossil-fuel cars).
With automotive as a driver of capacity expansion, it is expected that cell and battery costs will continue to drop, with cells down 27% in cost by 2030 from the 2023 estimate.
What about the United States, which gave the world the word ‘gigafactory’ in the first place? The Biden administration is keen to make up for past inaction, but it has its work cut out.
Right now, there are just three gigafactories in the U.S. (Tesla’s original one included). If current trends continue, China will have around 140 gigafactories by 2030, Europe around 30, and the United States no more than 10. It sounds like the U.S. needs its own version of Europe’s Battery Action Plan.
Images: Shutterstock, Battery News, Ruland Kolen