Battery Production: A Global Arms Race
The race is on, and all the superpowers are moving into position towards a net zero future. The core to that future begins and ends with batteries. This is one of the drivers for the upcoming Volterra Energy Marketplace.
Government policies in major auto markets like the U.S., China, and Europe are further accelerating the adoption of EVs, but the battery arms race is not just limited to these nations. Suppliers are investing around the world in expanding battery production facilities in major markets. Panasonic is looking at building a lithium-ion battery business in Norway in a bid to supply European carmakers. In China, leading battery manufacturer CATL recently announced its plans to invest $4.5 billion to increase its lithium-ion battery capacity.
To meet growing EV demand, battery production must expand substantially, causing this global arms-race among major governments, battery producers, and automobile manufacturers. While lithium markets were previously oversupplied, lagging investment in additional production capacity could result in shortages of the key raw material for batteries as EV demand surges. More and more countries are creating policies that will lock raw materials such as lithium and other rare earths to be used for their own country’s benefit.
In relation to the batteries, the ability to efficiently, reliably, and inexpensively mass-produce lithium-ion cells is essential for growing the EV market. Yet limited battery manufacturing capacity, particularly in major developed markets, presents supply chain risks, the reason being why President Biden plans to electrify the federal vehicle fleet, which requires 69 GWh of battery capacity. Yet total battery production in the U.S. was only about 40 GWh in 2020.Factoring in fast-growing demand for EV passenger vehicles, buses, and trucks, U.S. automakers will likely have to depend on overseas battery supply chains for the foreseeable future.
Given the strategic importance of EVs as an advanced technology, impacting climate change, and a potential major employer in manufacturing, governments, OEMs, and suppliers do not want to outsource major components of this industry. At present, there are 211 announced lithium-ion battery factories capable of producing over 1 GWh of battery cells per year. 156 are in China, followed by 22 in Europe and only 12 in the U.S.18 Today, battery capacity in the U.S. largely comes from Tesla-Panasonic’s Gigafactory 1 in California, LG Chem’s Michigan plant supplying GM, and AESC Envision’s factory in Tennessee.
A few battery producers are ramping up production capabilities in the U.S. LG Energy Solution plans to invest $4.5 billion to expand its EV battery manufacturing footprint in the U.S. with an additional 70 GWh of capacity starting in 2025.19 Panasonic also plans to add a new production line at the Nevada factory it co-owns with Tesla.
For perspective, in 2020, global battery capacity totaled 755 GWh. Yet, total battery capacity in the global pipeline for 2030 is 3,792 GWh (or 3.8 TWh), a robust 500% increase from 2020. With all this new power on the grids, we will need the online infrastructure to authenticate and manage this power so that the providers and users gain the maximum benefit from this energy revolution. The Volterra Energy Marketplace is that solution.
Mark Goorwah
