Electric vehicle battery demand's jump-start from lithium-ion

Lithium-ion is a stalwart in rechargeable battery technology. Future demand from global EV sales is expected to grow nearly 40 times by 2040, with EV sales expected to increase to about 300 million vehicles. With this in mind, any discussion of the emerging EV sector requires that we consider lithium and the critical role it will play in influencing the electric vision down the road.

As lithium demand grows around the world, a corporate strategy to understand policy and deployment drivers within the EV space will be paramount. The coming sea change in the automotive sector will depend on EVs achieving price parity with internal combustion engine vehicles.

Lithium market changes around the globe

The lithium market itself shows plenty of room for improvement. Prices for Chinese domestic lithium carbonate recently strengthened for the first time since late 2017, but we are not expecting a dramatic price rally on the immediate horizon. Lithium supply continues to expand, with contract prices for South American producers feeling the pinch as they compete with China’s native reserves.

And although battery manufacturing is on the rise in Europe, lithium production on the continent is scarce. In Africa, lithium has gained a measure of acceptance, with Prospect Resources' Arcadia project approved for a 10-year Special Economic Zone (SEZ) status, and will provide Arcadia with a corporate tax exemption.

Energy storage deployments on the rise

Our analysis shows that energy storage deployments are expected to grow by more than 5x (38% annually) over the next five years, reaching 44 GWh of annual deployments globally by 2024, the majority of which will be lithium-ion based systems. The U.S. will continue to dominate global storage deployments over the next five years, partly due to its head start in policy frameworks and business models.

Key drivers for the global storage market include:

• Improved regulatory policies
• Storage mandates and incentives
• Greater need for renewable integration
• Improved economics resulting from declining prices and competitive markets

Battery pack prices have declined by more than 75% in the last decade. Prices are expected to dip by more than 80% by 2040, as more than 85 megafactories and gigafactories are planned to expand or come online. In addition to progressive carbon policies, incentives, and charging infrastructure investments on the rise, battery manufacturers are ramping up battery production. As manufacturers make improvements to energy density, they will develop recycling technology that will enable economies of scale and close the supply loop.

Beyond investments in alternate battery technologies, the recycling of lithium-ion batteries is being explored by a number of industry vendors. Disposing of EV batteries is costly, while the decommissioning of lithium-ion battery storage systems is essentially nonexistent, considering the viable recycling technology and infrastructure available at this time. However, due to the increasing number of EVs on the road, China implemented regulations that make it mandatory for EV manufacturers to both collect and recycle spent lithium-ion batteries.

In addition to recycling, several automotive vendors are also trying to find second-life applications for spent EV batteries. These lithium-ion batteries still have about 60%-70% of useful life left after they are removed from EVs, and can be repurposed for a variety of energy storage applications.

Supply responses are under way, but it pays to be patient as new capacities compete to produce lithium and other battery-grade chemicals that will satisfy the EV onslaught.