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The battery technologies market has the potential to enter an exciting period of growth. According to a recent report from McKinsey and the Global Battery Alliance, the annual demand for lithium-ion (or Li-ion) battery cell is predicted to grow by around 27% to reach around 4,700 GWh by 2030.
According to the IEA, Li nickel manganese cobalt oxide (NMC) commanded a 60% market share in 2022, followed by Li iron phosphate (LFP) at 30%, and nickel cobalt Al oxide (NCA) at 8%.
Unsurprisingly, batteries for the transport sector (e.g., electric vehicles or EVs), will drive much of the demand. A separate analysis from Statista found that EV sales are expected to reach 17.1m vehicles in 2028 (broken down to 13.5m for EVs and 3.6m for plug-in hybrid EVs). That’s a 61% increase from 2023, where expected EV sales are set to hit 10.6m (broken down to 7.7 for EVs and 2.9m for plug-in hybrid EVs).
The value chain is expected to increase by as much as ten times between 2020 and 2030, reaching annual revenue as high as $410 billion. Notably, 13 out of the top 15 original equipment manufacturers (OEMs) have announced plans to ban internal combustion engine (ICE) vehicles and achieve new emission-reduction targets.
But meeting the market demand isn’t without its challenges – some of them significant, such as potential supply chain shortages. In this article, we explore the factors behind what’s driving the market, the blockers hurting progress, and where the current opportunities lie for innovative R&D breakthroughs that can help overcome these challenges and power an electric future.
Recent international tensions and conflicts, most obviously the Russo-Ukranian War, have emphasised the importance of building and securing the UK’s supply chain and intellectual property around battery technologies.
This has led to efforts to attract foreign direct investment, particularly in “gigafactories”, which are large-scale manufacturing facilities that specialise in producing Li-ion batteries.
Environmental targets, many of which are legally binding, are also propelling the market. The UK Government’s Net Zero Strategy has led to an ongoing electrification process and the phase-out of traditional ICE vehicles. As such, congestion charges, company car benefit-in-kind tax rates, and capital allowances are all being designed to encourage the transition to EVs in the hope of creating a greener world.
These factors tie in with the treasury’s plan to grow the economy by making the UK the “next Silicon Valley” through new technologies (specifically including green industries) that will drive enterprise and tackle poor productivity, as well as creating opportunities for job creation and upskilling. In fact, the Government considers clean energy and decarbonisation to be so important to the UK’s future that they have gone as far as to open the first Lithium mine in Britain.
Of course, it’s not just the government driving this change. Despite some near-hysterical tabloid articles about EVs, there is evidence that points to an increasing climate consciousness among consumers.
Despite its promising prospects, the battery technology market faces several significant hurdles that threaten to slow its progress. These obstacles span across the whole supply chain, from mining to manufacturing. Two of the biggest challenges include the potential environmental impact of mining and refining as well as supply shortages and price volatility- both of which we explore in more detail below.
A long-standing challenge facing the battery technology industry lies in the mining and refining of raw materials. Lithium, cobalt, nickel, manganese and graphite (key components of most batteries) are extracted from the earth through intensive mining operations. This process can lead to environmental degradation, biodiversity loss, hazardous waste creation, and contamination of water, air, and soil. For instance, lithium is a toxic metal: through the process of brine mining (where lithium is extracted from underground saltwater reserves) there is the risk that contaminated water could threaten humans and animal biodiversity.
Moreover, mining operations are often perceived to have detrimental effects on the quality of life in local communities (especially when it comes to accidents or health hazards caused by pollution). According to a report from the European Parliament, communities often worry about the local economy and a potential loss of income. They also fear that the damage caused by mining could be irreversible, impacting not just the environment and rural landscapes, but also private property and infrastructure.
This is even though new mines can create new infrastructure and services, including roads, high-speed internet cables, shops, restaurants and social services, which both the new mining workforce and existing residents can use.
The battery technology industry is also plagued by supply constraints, leading to price volatility that hinders market growth.
The limited availability of raw materials, such as lithium and cobalt, poses a difficult challenge. These materials are not evenly distributed worldwide and ,in many cases, are available in politically unstable regions, leading to supply disruptions.
The specialised machinery required for battery manufacturing is often expensive, and the supply is limited, particularly in regions without a strong manufacturing base. It also takes approximately one and a half years from the time of ordering to the commissioning for some equipment specific to batteries. Future equipment shortages might therefore pose problems as battery cell manufacturing capacity is currently running at over 95%, leaving very little room to boost production for when demand inevitably increases.
Furthermore, the industry’s growth is constrained by a need for more skilled labour. As the sector expands and evolves, there’s a growing need for workers with expertise in areas like mining, electrochemistry, materials science, and engineering. However, there’s a shortage of such skills, slowing down recruitment and expansion.
Additionally, certain companies or countries might engage in anti-competitive practices, such as dumping or monopolistic control over resources, further complicating an already tricky situation.
Research and development will be crucial not just for improving the technology, but also for helping to drive consumption habits, societal acceptance and adoption of EVs. As such, key areas of R&D focus on improving battery performance, manufacturing process efficiency as well as tackling environmental and safety concerns.
For improving performance, engineers and scientists are looking at how to increase battery range and decrease charging time while addressing safety concerns. This involves looking into new active material chemistries, such as solid-state batteries as a solution for delivering superior performance, which is being actively pursued by major automotive OEMs such Toyota. These are key improvements that will all help to achieve a more sustainable long-term solution.
Developing new, lightweight, low-cost, and sustainable materials, like Li metal anode to replace graphite, is also in progress.
As well as this, researchers are exploring new alternatives to conventional lithium-ion batteries such as Sodium-ion batteries (Na-ion).
Enhancing manufacturing productivity is also a major focus, aiming to streamline production and reduce costs. This includes research into improving the productivity of OEMs’ production lines and increasing the agility and adaptability of production lines.
Recycling is another critical area of focus, with initiatives aimed at extending battery lifespans through repairing and reusing used batteries in other second-life applications (such as grid storage).
Beyond the batteries themselves, R&D breakthroughs can lead the way in helping the mining industry reduce its environmental footprint and promote more sustainable practices. For example, developing more efficient extraction and processing techniques that use less water and energy, thereby reducing greenhouse gas emissions. Examples of such techniques include direct lithium extraction (DLE), direct lithium to product (DLP) and even producing lithium from waste material from the Kaolin industry.
At Leyton, our R&D experts are helping to push the boundaries of what’s possible in the battery technology market. We’re working within key battery tech sectors including design, modelling, manufacturing (cell production to packaging) and battery recycling to help identify research and development activities that qualify for valuable R&D Tax Credits. This tax relief can then be reinvested in hiring and training new staff, expanding facilities and buying new equipment – all of which drives more R&D.
Are you working on innovations in the battery technology industry? Speak to one of our experts to find out more about how we can support your R&D efforts.
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