The United States has already lost the solar power manufacturing race to China. Now the Biden administration wants to make sure that it doesn’t lose the lithium-ion battery race.
That’s the focus of a new set of policies announced by the Department of Energy on Tuesday, aimed at regaining market share from China, Japan and South Korea in making the key components of the advanced lithium-ion batteries that will power electric vehicles and store renewable energy for a decarbonized grid. The move is also intended to secure U.S. supplies of the raw materials that go into the batteries.
DOE's new policies mandate that projects receiving federal support — including $200 million in the agency's 2022 budget to support battery technology research and development — must manufacture a significant portion of their products within the U.S. It will also expand the guidelines for the $17 billion in lending authority under DOE's Advanced Technology Vehicles Manufacturing Loan Program, part of the agency's Loan Programs Office, to include advanced battery cells and packs for use in EVs.
Alongside these new policies, DOE is also asking Congress to pass legislation that aligns with the Biden administration’s $2.2 trillion infrastructure plan that would boost domestic battery manufacturing. Those proposed provisions include incentives to boost EV adoption and domestic manufacturing, grants and support for electrifying school and transit buses, and cost-sharing and grant programs to bring more domestic advanced battery cell manufacturers to commercial scale.
“We’re going to need a significant increase in battery production to supercharge America’s clean energy future, which means we urgently need to build up our capacity to research, develop, manufacture and market batteries right here at home,” Energy Secretary Jennifer Granholm said in a prepared statement.
If the U.S. battery industry is to avoid the fate that befell the domestic solar manufacturing sector over the past two decades, it will need a major shift in current market trends. Chinese solar manufacturers, backed by comprehensive government industrial policy, have captured the majority of the global market for solar PV and an even greater share of the precursor materials such as polysilicon that go into making them.
A similar situation is starting to play out with lithium-ion battery manufacturing today. The United States only manufactures about 10 percent of lithium-ion anodes produced today, and it makes even smaller portions of the other components used in lithium-ion batteries.
China, by contrast, produces approximately two-thirds of the global supply of lithium-ion anodes and electrolyte solution and about 40 percent of the cathodes and separation materials used in most of the world’s advanced batteries. Japan and Korea rank second and third, respectively, in global market share of these components, according to 2019 data from BloombergNEF.
This data appears in the National Blueprint for Lithium Batteries 2021-2030, a report prepared by a federal consortium that includes the Departments of Defense, Commerce and State, part of a 100-day supply chain review ordered by the Biden administration in February.
The blueprint recommends five goals for securing the country’s lithium-ion battery supply chain. These include securing access to key raw materials including lithium, cobalt and nickel; supporting growth of domestic capacity for processing those materials; boosting manufacturing capacity to build battery electrodes, cells and packs; and enabling their reuse and recycling at large scale.
It also calls for maintaining and advancing technology leadership in next-generation batteries with improved energy density, safety, reliability and cost. Another key goal is to reduce batteries' reliance on cobalt, an ingredient whose production is linked to human rights abuses and toxic exposure.
The gaps in U.S. lithium-ion battery chains
A host of next-generation battery technologies that claim to have these characteristics are being developed by U.S. companies, including Ionic Materials, QuantumScape, Sila Nanotechnologies, Sion Power and Sionic Energy. But they face significant competition from overseas manufacturers that have attained market dominance over the past decade.
U.S. companies do assemble lithium-ion batteries, but the individual battery cells going into them are almost entirely built by Asian manufacturers, including Japan’s Panasonic, South Korea’s LG Chem and Samsung, and China’s BYD, Guoxuan, Lishen and Contemporary Amperex Technology (CATL). Tesla’s Gigafactory sources its battery cells from Panasonic, for example, and Portland, Oregon-based grid storage provider Powin assembles its storage systems using cells from Chinese suppliers.
If this imbalance continues, the U.S. could be left behind in reaping the economic rewards of a global market for lithium-ion batteries that’s expected to grow fivefold to tenfold over the next decade to meet the demands for EVs and grid energy storage, according to the DOE report.
“If you want any type of independent energy, you have to look at downstream, upstream and midstream” supply, said Lindsay Gorrill, CEO of Kore Power. The U.S.-based manufacturer of lithium-ion battery cells built its first full-scale factory in China, but in the next few months it will announce a site for a U.S. factory capable of producing up to 12 gigawatt-hours of battery cells per year.
Kore Power’s facility would be the only large-scale battery cell manufacturer in the U.S., he said, in addition to cell production joint ventures between General Motors and LG Chem, and Ford and SK Innovation, another South Korean company.
The Biden administration has set goals of bringing tens of millions of EVs onto U.S. roads by decade’s end, and U.S. automakers General Motors and Ford have pledged to shift almost all new vehicle production to battery-powered or zero-emissions models by 2035.
Transitioning the electric grid to zero-carbon energy by 2035 as the Biden administration has proposed will also require hundreds of gigawatts' worth of energy storage systems to shift solar and wind power from when it’s produced to when it’s needed.
“Strengthening our domestic supply chain will accelerate our efforts to decarbonize the economy, helping to power electric vehicles and boost grid storage and resiliency,” Granholm said.
National security and environmental impacts
Building up U.S. manufacturing capacity could also protect the country from disruptions to industries critical to national security. The battery supply chain report was accompanied by similar 100-day reviews ordered by the Biden administration for pharmaceuticals, computer chips and rare minerals.
The U.S. Defense Department, part of the federal battery consortium behind this week’s recommendations, has a strong interest in ensuring domestic supplies of a critical technology. A123, a U.S.-based lithium-ion battery manufacturer that went bankrupt and was sold to China’s Wanxiang in 2012, was ordered to sell its defense and government business to U.S.-based Navitas Systems due to concerns about the national security implications of turning over those contracts to a Chinese-based company.
Supply of minerals also plays an important role in securing U.S. lithium-ion competitiveness. Extraction and processing of the lithium that goes into these batteries is controlled by a handful of international mining giants, including China’s Ganfeng Lithium and Tianqi Lithium, U.S.-based Albemarle and Chile-based SQM.
Australia leads in global production of lithium, followed by Chile, China, Argentina and Zimbabwe. But according to Megan O’Connor, CEO of Nth Cycle, “North America can meet its supply gap with its own resources."
The startup, which counts the DOE as its first investor, is commercializing technology developed at Harvard University to extract metals including nickel, cobalt and manganese from sources ranging from mine tailings to depleted EV batteries. It plans to open its first pilot production line at a battery recycling facility next year.
Recycling can provide about one-tenth of the projected U.S. demand for critical minerals, O’Connor said. As-yet-untapped resources could provide the remainder, including lithium deposits ranging from ancient volcanic clays in Nevada being targeted as a source for Tesla batteries to the brine of California’s Salton Sea.
But these extraction processes can impose significant environmental damage and grave health impacts. Environmental groups, local landowners and nearby Native American tribe members oppose the Nevada project being planned by Lithium Americas.
The DOE’s guidance for expanding domestic supplies of lithium, cobalt and nickel call for all new extraction to be “held to modern environmental standards” and carried out in consultation with communities and tribal nations. Its reuse and recycling guidelines also emphasize the need for safe and cost-effective methods to recapture materials that could otherwise turn into hazardous waste.
Nth Cycle’s electro-extraction process uses electric currents to extract different metals from water running through specially designed filters. According to O'Connor, this approach will drastically cut energy consumption and the cost of heat-based extraction methods, as well as avoiding the chemical impacts of using acids to leach metals from raw materials.
“A lot of these technologies don’t meet the environmental regulations we have in many states,” she said, citing one key reason why mining and recycling operations have been moved overseas. By incorporating “technologies that can significantly reduce the use of chemicals, we can do them in the United States.”
(Article image courtesy of Yo-Co-Man)
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