EV sales are exploding and that has people thinking about the future. From Q2 2021 to Q2 2022, the fully electric (battery) vehicle sales increased 66%. And the same lithium-ion batteries that power electric cars are also found in laptops, smartphones, and more handheld devices. As momentum picks up, attention has shifted to the sustainability and availability of materials required to make these batteries. For instance, Russia is a major supplier of high grade, low price nickel - a mineral that batteries need. Russia’s invasion of Ukraine led to a supply contraction in global nickel markets, threatening to raise EV prices by up to $1000. In response to such concerns and the effect they may have on EV and other clean technology adoption, efforts are being made to ensure that the U.S. has a domestic supply of these materials and manufacturing capability. Policies within the recent Inflation Reduction Act (IRA) are addressing this.
But first, what does it take to create an Li-ion battery?
What is in a lithium-ion battery?
A lithium-ion (aka Li-ion) battery consists of two nodes: an anode (negative) and cathode (positive), separated by materials that help electrons flow between the nodes. The anode is typically graphite, but the cathode can be various lithiated metal oxides. Because the active material in the cathode is the distinguishing factor between different types of batteries, the different chemistries are used to name the battery types. Common chemistries in electric vehicles include NMC (nickel-manganese-cobalt) and LFP (lithium-iron-phosphate). In 2021, NMC, NCA (nickel-cobalt-aluminum) and other nickel-based cathodes made up 80% of battery capacity in the new vehicle market.
Where do these materials come from?
The lithium-ion battery supply chain begins with mining the minerals and ores that make up the battery materials. The figure below shows the average mineral composition of a Li-ion battery manufactured in 2020, combining data for both NMC and LFP chemistries.
Of the minerals listed, six of them (graphite, aluminum, nickel, manganese, cobalt, and lithium) are listed on the USGS Critical Minerals list, which was updated in 2022 to inform recent climate and energy legislation. A critical mineral is one that is deemed essential “to the U.S. economy and national security.“ Today, it takes a global effort to supply battery materials, but some current practices and suppliers come with geopolitical, humanitarian, and environmental consequences in the countries where minerals are sourced and refined.
There is a focus on developing a domestic supply of such minerals to reduce reliance on countries which may be uncooperative or hostile to the US. A domestic supply will also be less affected by logistics and supply disruptions due to climate change or international conflicts.
In terms of critical mineral mining, China dominates, with 80% of the mining capacity of battery raw materials in 2021. The Democratic Republic of the Congo (DRC) mined 68% of the world’s cobalt supply in 2020. More than half the world’s lithium comes from the Lithium Triangle (Chile, Argentina, and Bolivia), nickel production happens in Indonesia and Australia, and manganese is found predominantly in South Africa. A topic that has gotten a lot of attention is the human rights allegations against cobalt mines in the DRC, which point to employee exploitation and unsafe working conditions. Such conflicts around cobalt, in particular, are motivating some battery manufacturers to find other sources for the mineral or move away from cobalt-rich chemistries altogether.
How is lithium mined?
The sourcing, and thus pricing of lithium has been a big question mark in 2022 as researchers worry about the future supply in an increasingly battery-powered world. There are two prominent techniques for mining lithium: metallic brine mining and hard rock mining. For brine mining, water that contains dissolved lithium is pumped from underground reservoirs. The brine is stored in above-ground ponds where evaporation further concentrates the lithium, producing lithium carbonate. Lithium carbonate is then commonly converted to lithium hydroxide, which is used to make cathodes and electrolytes. This method is common in arid locations, such as in the Lithium Triangle and the Silver Peak Mine in Nevada. However, it faces scrutiny due to its reliance on large quantities of water, since water itself can be quite supply restricted in these locations. Furthermore, in April of this year, we saw lithium carbonate prices increase by twelve times those the year before.
Alternatively, in hard rock mining, a mineral called spodumene (see image below) is collected. A concentrate is created from this lithium-rich mineral that is further processed to create lithium hydroxide directly. This method is becoming more popular in North America, due to the abundance of spodumene ore. Piedmont Lithium is starting to take advantage of the supply in North Carolina.
As mentioned above, after mining the raw minerals, they must be refined and processed. China continues to dominate here, too, having the highest refining capacity for nickel, cobalt, and lithium. The purified metals are then sent to manufacturers who make the cathodes, anodes and electrolytes, then assemble them into cells. The most prevalent battery manufacturing companies are in China (CATL, BYD & CALB), South Korea (LG Energy Solution, Samsung, and SK Innovation), and Japan (Panasonic).
The Inflation Reduction Act
In the 2022 Inflation Reduction Act (IRA), the 2010 electric vehicle tax credits have been updated and expanded. One of the most contested updates is criteria that are motivated by increasing domestic manufacturing of Li-ion batteries and minimizing the U.S. supply chain’s current reliance on China. The criteria focus on critical mineral content, which includes the six minerals listed above. The law states that any vehicle placed in service before January 1, 2024 must have 40% of its critical minerals sourced or processed in a free-trade agreement country, or recycled in North America. This percentage goes up to 50% in 2024, 60% in 2025, 70% in 2026, and 80% in 2027. Similar requirements are made on the percentage of “components contained” in the battery that were “manufactured or assembled in North America.” This quota starts at 50% as of January 1, 2024 and ramps up to 100% by 2028.
The auto manufacturing industry has pushed back against this new requirement, arguing that it will take time to develop North American sources, production, and refineries for these minerals, and that the pace of EV adoption may suffer in the short term due to the stringency of the critical minerals requirements. A big fear is that “while it might only take two years to build a battery gigafactory, it takes at least eight years, and sometimes much more, to bring a new lithium mine into production,” creating lithium bottlenecks. However, as Zachary Shahan points out in Clean Technica, there are substantial credits and cost savings available to manufacturers who can figure out the domestic supply: a manufacturer can “get a tax credit for one component of a battery (raw lithium, for example)...can also go and get a tax credit for another component or even later stage of the same component (the refined lithium, for example).” The hope is that this will really push battery and car manufacturers to onshore the industry.
On the other hand, the critical minerals requirement includes provisions for materials recycled in the United States, which should help stimulate the domestic recycling industry. Of course, since EV batteries are lasting much longer than expected, there are supply bottlenecks for recycling, too. However, as new battery factories come online in the US, production scrap will help recycling facilities ramp up.
What to expect in the future in the US
In 2021, the Federal Consortium for Advanced Batteries within the Department of Energy outlined a National Blueprint for Lithium Batteries through 2030. The plan’s vision can be summarized by four main goals:
- Secure access to raw and refined materials and discover alternatives for critical minerals for commercial and defense applications
- Support the growth of a US materials-processing base able to meet domestic battery manufacturing demand
- Stimulate the US electrode, cell, and pack manufacturing sectors
- Enable US end-of-life reuse and critical materials recycling at scale and a full competitive value chain the US
One way we are seeing the first goal addressed is through the adoption of battery chemistries that minimize critical mineral use. For example, Tesla and others had announced the use of LFP batteries in some vehicle models. These batteries are much cheaper and reduce the need for critical and conflict minerals, such as nickel and cobalt. They are less energy dense, which means each cell can hold less energy than cobalt-based batteries, but they are much more stable and do not degrade as easily, allowing drivers to use much more of the available capacity. Most drivers should have their needs met easily by LFP batteries.
As mentioned before, most raw materials are currently processed overseas. For example, lithium mined at the La Corne mine in Quebec is still mainly sent to China for further refining and purification. Companies such as Lithium Americas, Piedmont Lithium, and Albermale are working to develop lithium refineries in the US. This transition will require more expertise and training within the US to operate these facilities.
We are also seeing more battery manufacturers opening sites in the US. One of the first large joint ventures we saw was the Tesla and Panasonic partnership that led to the Tesla gigafactory in Nevada, but Panasonic recently announced a new factory in Kansas, which will supply batteries to various EV manufacturers. Other collaborations include Ford and SK Innovations in Kentucky and Tennessee, General Motors and LG Energy Solution in Michigan, Hyundai in Georgia, and most recently Honda and LG Energy Solution.
Finally, we can expect to see more investment in researching and scaling up Li-ion battery reuse and recycling. For example, when a battery pack in an electric vehicle reaches its end of life, it is because degradation lowered the capacity below 70% or 80% of the original. While having near-full capacity is important for electric vehicles, it is not as important for stationary energy storage and microgrid use cases. Even though these reused batteries do not go back into the EV supply chain, they reduce the demand for critical minerals in other energy storage markets, leaving more available for EVs. A 2020 study of the Li-ion battery supply chain conducted by scientists in Finland and Germany showed that reuse (aka secondary life) will be critical to meet electrification demands, especially as the recycling stream is developed. They also highlight the need for Vehicle-to-Grid technology (V2G), which allows an electric vehicle to connect to the power grid as an electricity source.
With respect to recycling, North American companies Redwood Materials and Li-Cycle are working to create a circular battery supply chain. The Department of Energy also launched ReCell, a battery recycling research and development (R&D) center that brings together national labs and universities in the country to innovate new recycling methods at scale. The biggest obstacle in the space currently is the lack of standardization in recycling collection, making it difficult to process a lot of batteries of various chemistries. As recycling becomes the norm, manufacturers will standardize cells and chemistries to make it easier to recycle them.
