As electric vehicle (EV) sales continue to gather momentum, concerns are being raised about possible shortages of critical raw materials required to produce lithium-ion batteries (LiBs).
According to Wan Gang, vice chairman of China's national advisory body for policymaking, the global market for EV batteries will exceed 3.5 TWh by 2030. To put this growth into context: firms Rho Motion and Wood Mackenzie estimate 2021 battery storage capacity to have been less than 60 GWh.
Simultaneously, as power utilities turn to sustainable energy, LiBs, with their excellent cyclability and long life, are increasingly being used for grid storage. The added demand for scarce raw materials has the potential to create bottlenecks in the supply chain and push up prices.
Fortunately, while both sectors require more LiBs, each sector’s functional requirements are quite different. For automotive traction batteries, energy density, capacity and rapid charging are key performance metrics, whereas grid storage applications require efficient storage and discharging of energy for many years.
Thus, whereas a LiB is deemed to have reached its end-of-life once the capacity drops to about 70% of that originally specified, these batteries are perfectly fit to be repurposed as second-life devices for grid storage.
McKinsey and Company's research predicts that 200 GWh of batteries will be retired from EVs by 2030. And, as more EVs enter the market and batteries reach their end-of-life, this is set to increase exponentially.
What is more, once the second-life LiB reaches the end of its useful lifespan – which would typically be after 10 years in its second-life role – it can be recycled and many of the scarce materials recovered for reuse in the manufacture of new EV batteries.
By applying these circular economic practices manufacturers can shore up the resilience and sustainability of automotive supply chains and reduce primary resource requirements, at the same time cutting costs and battery-manufacturing emissions. All of which are critical to EV production and sustainability.
Giving the EV LiB a second lease on life
Second-life batteries (2LBs) can either be refurbished or directly repurposed. Refurbishing batteries entails replacing damaged or aged battery parts, with the goal of re-selling the refurbished batteries back into the market as “semi-new.” This process requires considerable labor, resources, and time.
On the other hand, repurposing used EV batteries for life in a less-demanding application - such as stationary energy storage – is far more cost-effective.
According to a report by Gartner, the cost of refurbishing an EV battery is around $160/kWh, while the cost of repurposing comes in at about $120/kWh. This compared to about $190/kWh for a new LiB. What is more, with the cost of raw materials, such as lithium, nickel and cobalt on the rise, the price difference is likely to increase even further.
Based on McKinsey and U.S. National Renewable Energy Laboratory research, by 2030 the costs of refurbishing and repurposing will both decline, with the cost difference widening significantly. Estimates put the cost of repurposed 2LBs at $53/kWh, and $77/kWh for refurbished units – a 31% cost advantage for repurposing over refurbishing.
Of course, the state of health of the battery being repurposed is critical to its performance during its second life.
To make sure used EV LiBs are indeed fit for second-life, 2LB specialist company, ReJoule, has developed a fast grading system that uses electrochemical impedance spectroscopy (EIS) to measure the battery’s impedance - a battery health metric that accurately shows the battery’s true health and remaining useful life.
The EIS test dramatically reduces the time it takes to determine the battery’s capacity. Based on tests conducted with lithium iron phosphate (LFP) battery modules, ReJoule can achieve ±2% accuracy in a 5-minute test (about 70x faster than the norm) and ±4% accuracy in a 30-second test.
By conducting this evaluation at the outset, it is possible to find and disqualify unsuitable batteries earlier in the evaluation process thereby speeding up the overall cycle time.
For batteries that do not qualify for a second-life the next step in the circular economy ensures that scarce materials are recovered for use in the manufacture of new batteries for EVs, or other applications.
The economics behind the LiB circular economy
Recycling is not only environmentally important - it is as much about sustainable raw material supply and cost. Recovering materials from end-of-life LiBs is much more efficient than mining and processing scarce virgin resources. What is more, the lack of critical raw materials in several important markets makes the recovery of critical materials strategically important to the sustainability of EV manufacture.
Philipp Siedel, a principal at Arthur D. Little (ADL), points out that European battery makers are only likely to be self-sufficient in materials after 2035, based on the consultancy’s estimates that demand for nickel will be five times higher than at present; lithium, six times higher; manganese, 10 times higher; graphite, five times higher; and cobalt, two times higher.
To satisfy this increase in demand it will be critical to implement recycling, even though end-of-life batteries will only make up a tiny portion of the battery feedstock in 2025 and 2030 - in 2025, 3 GWh, and in 2030, 13 GWh.
Scrap from battery production will account for a much larger share. ADL estimates the total will grow from 7 GWh in 2021 to 74 GWh in 2025, 120 GWh in 2030, and 199 GWh in 2035.
In China, recycling is well established, with recyclers already making money on the back of the sizeable EV market. More than 9 million battery EVs and plug-in hybrids have been sold since BYD launched its first “plug-in” car.
Nomura Research Institute America estimates recyclers in China are currently making $10/kWh for each $80/kWh battery, with earnings slightly more or less depending on battery size. According to Akihito Fujita, a senior manager at the company, recycling costs $32/kWh, after which recycled materials – primarily nickel, lithium and cobalt – are sold for an estimated $42.
In Europe, the second-largest EV market, Nomura doesn’t expect recycling to be profitable until 2025 – and then only marginally at $2/kWh – as recyclers cut costs from the $63/kWh today to $40/kWh.
In the U.S. where EV sales are beginning to take off, the recycling of LiB batteries is largely being driven by the country’s current reliance on imported materials. According to the U.S. Geological Survey, the country had a net import reliance of 100% for graphite and manganese in 2021, followed by 75% for cobalt, almost 50% for nickel and more than 25% for lithium.
As the local demand for LiBs increases, material shortages are beginning to impact EV production, but scaling up mining to satisfy the market in the short term is difficult: on average, as it takes 16.5 years to bring a new mine from planning to production. Additionally, most minerals needed for EVs are produced in a handful of countries, making the supply chain vulnerable to price volatility and disruptions.
That is why the Biden administration set aside $335 million in funding for LiB recycling in the 2021 infrastructure bill. By reusing materials from end-of-life batteries, a secondary domestic supply chain independent of mining can be created.
In the short term, the greatest obstacles to the continued growth of EV sales are soaring prices and the availability of critical materials essential for battery production. And while there are no shortages of the materials in the earth’s crust, it is questionable whether mining operations can scale up quickly enough to meet demands – notwithstanding rising geopolitical trade tensions. While the circular economy might not, in itself, solve the supply chain challenges, it is a vital link in the sustainable manufacture of electric vehicles.
About the author
Peter Els is a South Africa-based former automotive engineer. This includes time with Nissan South Africa’s Product Development Division, Daimler Chrysler, Toyota, Fiat/Alfa Romeo, Beijing Automotive Works (BAW), as well as tier-one suppliers Robert Bosch and Pi Shurlok. After consulting to the local industry for 15 years, Els has ventured into technical writing and journalism about the latest trends, technologies, opportunities and threats facing the new world of mobility.