Towards a Sustainable European Battery Value Chain

Updated: Nov 9, 2021

Legislations and regulations enabling the clean energy transition for Europe create business opportunities for a strong, competitive and sustainable European battery industry


 

European legislation and regulations for a clean energy transition are often blamed as a valuable cost factor and an obstacle for keeping business profitable. The truth is: They are a booster for the European industry to build up a solid and competitive European battery industry.


EU Regulations forcing the sustainable use of batteries

On 10 December 2020, the European Commission presented their proposal for a new Batteries Regulation. The aim: to modernise the EU’s Batteries Directive to fully deliver its objectives, particularly with regards to the battery life-extension, collection of waste batteries or the efficiency in the recovering of materials. Additionally, the initiative focuses on reducing the use of hazardous substances in batteries, responsible sourcing and efficient use of raw materials. This legislative update plays a key role in the transition to a less carbon-intensive economy and with it may affect players active in the battery value chain for the European market in terms of business opportunities.



(Image source: Okai Vehicles, Unsplash)


Responsible for roughly a quarter of greenhouse-gas (GHG) emissions in the EU, transport is pointed out to be the main cause of air pollution. CO2 emission standards for vehicle manufacturers and EU member state minimum targets for public procurement of clean vehicles, set by EU legislation, are expected to accelerate the electrification of road transport such as cars, vans and buses.


Massive growth of the European Electric Vehicle market expected

The global EV outlook for 2021 produced by the International Energy Agency (IEA) reports an expected increase in electric vehicle (EV) sales in Europe as well as globally, between 2020 and 2030. In a scenario reflecting all existing or announced policies, policy ambitions and targets, the global EV stock (excluding two/three-wheelers) will expand from 11 million to 145 million vehicles. Whereas in a scenario in line with reaching net-zero emissions by 2070 — the Sustainable Development Scenario — a total of 230 million vehicles will be reached. In the Stated Policies Scenario a net savings of 120 million tonnes (Mt) CO2 equivalent is predicted for 2030. The global EV fleet would emit 230 Mt, rather than 350 Mt CO2 equivalent if the fleet were to rely on internal combustion engines.

In the context of the clean energy transition the development and the production of batteries is essential. The modernisation of the EU legislative batteries framework reinforces commitments and reports adopted by the European Commission, such as the new Circular Economy Action Plan and the Sustainable and Smart Mobility Strategy. The latter aiming at achieving a reduction of 90% in GHG emissions from transport by 2050. This will also create new business opportunities for manufacturing and recycling industries.




Aiming for a sustainable, strong and safe battery value chain

The main objectives for the Battery regulation are to:

  1. Ensure minimum sustainability requirements to strengthen the functioning of the EU internal market,

  2. Close the loop for battery materials to increase the resilience of the EU battery supply chain, and

  3. Reduce the environmental and social impacts throughout all stages of the battery life cycle.

Measures are listed around five topics including Traceability amongst others. For example, within a year of the regulation entering into force, economic operators placing rechargeable industrial batteries and EV batteries with an internal storage and capacity of >2 kWh on the EU market, will have to comply with the supply chain due diligence obligations including third-party verification.

Uniting industrial actors along the value chain

The need for efficient batteries is growing fast and at an increasing pace. In October 2017 the European Battery Alliance (EBA) was launched for the creation of a competitive and sustainable European battery cell manufacturing value chain with the final purpose to ensure that all Europeans benefit from safer traffic, cleaner vehicles and more sustainable technological solutions. The EBA recognises that the whole value chain — from raw material supplies to battery recycling — is of strategic interest for the EU. It set a target of 200 GWh/year manufacturing capacity to be available in the EU as of 2025.

EBA250, the EBA’s industrial development program unites over 600 members distributed across Europe, as a project-driven community to build a strong and competitive European battery industry. The members all take part in the value chain of batteries, from mining and resource extraction to transformation, applications with OEMs and finally into recycling and second life. EBA250 is led by EIT InnoEnergy who provides background data, defines key questions, recommendations and actions and supports the establishment of a European battery ecosystem through workshops with key stakeholders.

China in leading position for the transition to electric mobility

From 2016 to 2020, the number of EVs — specifically cars — had increased to about 5 times, from 2 to 10 million, respectively. When comparing the global vehicle stock by region, at the end of 2020, China was at the forefront, followed by Europe and the US.

According to the Electric Vehicle Index 2021, China and Germany are at the forefront on the transition to electric mobility. Three key indicators (technology, industry, and market) are used for the e-mobility index to compare the competitive positions of some of the leading automotive markets worldwide. China was the leading country in terms of the status of technological improvements implemented by domestic OEMs. Looking at the current customer demand, Germany achieved the highest score.



Leading countries in the field of electromobility, according to the Electric Vehicle Index 2021 (Image source: Statista)


Filling the gaps in the European EV battery value chain

Christophe de Charentenay is the founder of the recently formed joint venture between the Renault-Nissan Alliance and Dongfeng Motor Group Co., Ltd. and an investor in Urban Tech for Low-Carbon mobility on Europe’s position in the field of electromobility. Christophe commented:

“Europe is facing tough competition from China: The Chinese Electric Vehicle industry is strong, fast and clearly oriented towards a goal. Europe is strong as well, but we need to define a clear direction and increase speed.”

The increase in EV registrations is reflected by a 33 per cent increase in automotive lithium-ion battery production in 2020 relative to 2019. Where China accounts for the largest share of battery demand (80 GWh), Europe saw the largest increase in percentage (110 per cent reaching 52 GWh) in 2020. The European demand for batteries in 2020 exceeded its production capacity.


(Image source: EBA)


“What is more critical than the production of the battery cells now is rather the supply of raw materials, recycling and training of the workforce that will work in the value chain of this industry”,

says Thore. “The production of cells and applications is estimated to be able to match the demand, but Europe will likely not have the ability for self-sufficiency in the production of raw materials, cathodes, anodes and in its capacity for end-of-life management. Therefore, we need to focus on sourcing raw and active materials, recycling and to train and scale up our workforce. When it comes to raw materials we also need to increase the public acceptance on for example mining in Europe. Additionally, the new Battery Regulation should set a level playing field for actors in Europe and define a threshold to meet for environmental criteria.”



The battery value chain capacities and demand, and the gaps that require continued efforts (image source: EBA)

The rise in EV market demand and technological developments is fuelled by governmental policies and incentives and goes hand in hand with the increasing demand for EV batteries. Electrification of transport and the mobility sector could significantly contribute to global sustainability goals by cutting emissions. Addressing this topic, Europe is on its way to build a strong and sustainable internal value chain. Legislative frameworks such as the proposal for a new battery regulations as well as last month’s adoption of the fit for 55 package by the European Commission can accelerate the transition towards greater sustainability as well as provide new business opportunities with high growth potentials. To build a strong and sustainable European battery value chain, it will not suffice to focus only on the raw materials aspect, but the whole product life cycle should be considered.


Contributors:
Thore SEKKENES | EIT InnoEnergy & EBA250 Program Director Christophe DE CHARENTENAY | investor in Urban Tech — Low-carbon Mobility for cities Henri CUIN | eolos co-founder & environment policy expert Aurianne MEGDOUD | eolos, Innovation expert
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