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EU’s €12 billion project puts EV battery materials in crosshairs

05 February 2021 Cristina Brooks

The EU is seeking to spur development of the bloc's electric vehicle (EV) industry by approving member state investments in a €11.9 billion ($14.25 billion) battery research project.

Batteries make up a third of electric car prices and contain precious materials, but this type of innovation will lead to the bloc's EV success, according to a statement on the decision by the European Commission (EC) Executive Vice President overseeing digitization, Margrethe Vestager.

By 2030, all EV batteries must be recycled and traceable, enabling manufacturers to reuse high levels of valuable materials like cobalt, lithium, nickel, and lead, the EC said in a December proposal to update its battery regulation. Battery demand could increase by a factor of 14 over the coming decade due to the rise in production and use of EVs.

Furthering the EC's legislative goals, the research project will forge a sustainable, traceable, and domestic "battery value chain" covering raw materials, design, and manufacturing of battery cells and packs as well as their recycling. To extend the lifespan for batteries by upcycling them as energy storage, the project also will study real-time control and measurement systems that could be used, for example, to test the health of 10-year-old electric car batteries.

The project aims to make battery production processes more environmentally friendly by removing carbon, energy demand, and solvents. It will also monitor material supplies with data analytics and improve both lithium-ion batteries and post-lithium-ion batteries, for which certain materials are costly.

This project was put forward by Austria, Belgium, Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain, and Sweden, and follows a similar project involving many of the same states two years ago.

Both ventures are EU-backed Important Projects of Common European Interest (IPCEI), international public-private research projects that have gained a free pass on EU state aid rules preventing subsidies that might warp industrial competition. Of the financing, €2.9 billion will come from public coffers and €9 billion from private investment.

IPCEIs are intended to de-risk private investment in sectors like autonomous vehicles, hydrogen, low-carbon industry, internet-of-things, and cybersecurity.

In the latest IPCEI, about half of the companies involved are based in the EU's automotive manufacturing heartland of Germany, where the government also coordinated the project. BMW and Tesla, which both have factories in Germany, could receive funding as they are named as participants. Italo-American Fiat Chrysler Automobiles also claimed a spot.

Companies headquartered in Europe that may now receive state aid include chemical companies Arkema, Borealis, and Solvay as well as battery company Sunlight Systems and demand response provider Enel X.

Cobalt supply

In a statement, EC Commissioner for Internal Market Thierry Breton said the project could reduce "unwanted dependencies on third countries" in vehicle and energy storage battery production.

Cobalt is found in the lithium-ion batteries in most EVs and mainly produced in Democratic Republic of the Congo (DRC) and China, with around 55% of the world's supply mined in the DRC, according to a report by the EC's Joint Research Centre in 2018. The competition for supply of cobalt from 2020 onwards and the human rights implications of mining it were cited as roadblocks for future EV markets.

Cobalt mining in the DRC was at the heart of a 2019 federal class-action lawsuit filed against Tesla and other tech companies using cobalt on behalf of the parents of children who were killed or maimed while mining cobalt for Glencore and Huayou.

Raw material and battery chemistry is a long way off removing cobalt from the battery supply chain, Isobel Sheldon, chief strategy officer UK at battery manufacturing startup Britishvolt told IHS Markit. Britishvolt is aiming to build the UK's first battery-making gigaplant by 2023.

As the ramping up of EV markets accelerates demand for batteries, manufacturers have sought to use less cobalt in the most common lithium-ion batteries, the nickel manganese cobalt (NMC) and nickel-cobalt-aluminum (NCA) alternatives, said IHS Markit Senior Analyst Youmin Rong in the January edition of its Battery Cell Manufacturer Database.

Concerns over the safety of lower cobalt batteries have encouraged the industry to research other cathode technologies, such as nickel, cobalt, manganese, and aluminum (NMCA), and lithium-manganese-nickel oxide (LNMO), he said.

EV and transport batteries make up the vast majority of the global market and cobalt-containing NMC batteries make up around 90% of the top three battery manufacturers' combined manufacturing capacity, a recent IHS Markit report shows.

NMC batteries also make up a large part of the energy storage battery market, although cheaper lithium iron phosphate (LFP) batteries are growing in popularity.

International competition

Europe saw record-breaking quarterly additions of battery manufacturing capacity at the end of 2020 after Tesla announced the construction of its fourth gigafactory in Berlin, Germany, according to Rong.

But fast-growing European battery markets are playing catch-up with China, which produces the vast majority of the world's lithium-ion batteries. "With capacity expansions in mainland China slowing down on a year-upon-year basis, Europe will become the fastest-growing market for battery manufacturing, averaging 80% year on year, in the coming three years. It benefits from a rising number of European countries committing to cease sales of gasoline-powered vehicles in the coming decade," writes Rong.

EC officials put the continent's recent battery sector growth down to EU policy. "Some three years ago, the EU battery industry was hardly on the map. Today, Europe is a global battery hotspot. And by 2025, our actions under the European Battery Alliance will result in an industry robust (enough) to power at least 6 million electric cars each year," said Maroš Šefčovič, a vice president of the EC's interinstitutional relations and also runs the EU-funded public and private grouping called the European Battery Alliance, launched in 2017.

The UK government must also develop local and European supplies for its EV industry. This is thanks to Rules of Origin within the Brexit trade deal requiring 50% of EV battery content originates from the UK or Europe by 2024.

The UK's battery sector, which was historically constrained by the EU's state aid rules, now may be overshadowed by the bloc. "There is a threat that Europe races ahead of the UK in terms of EV development and deployment, owing to state aid. However, I feel confident that Number 10 will step up and give the UK economy the assistance it rightly deserves. We have so much battery R&D talent on our doorsteps that we must utilize and create a commercial success of," Britishvolt CEO Orral Nadjari told IHS Markit.

Posted 05 February 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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