By Cary Springfield, International Banker
Whether powering our laptops, phones and cars or being used extensively across power-storage solutions, it is clear that batteries are essential to our everyday lives. And with electric vehicles (EVs), electricity storage and renewable power all set to play increasingly significant roles across the world over the next decade, our global dependence on batteries will continue climbing expeditiously. Indeed, the global battery market size is expected to reach $310.8 billion by 2027, expanding at a CAGR (compound annual growth rate) of 14.1 percent from 2020 to 2027, according to a July 2020 report by Grand View Research.
Lead-acid, lithium-ion and nickel-based batteries are currently the battery types most commonly used worldwide, with some estimates calculating their total share of the global battery market at around 95 percent. Of the three, lithium-ion (Li-ion) batteries will likely generate the bulk of the growth over the next few years. Thanks to the specific qualities of lithium that make charging and discharging much safer than other materials, Li-ion batteries are already used across a broad spectrum of applications, including portable devices such as mobile phones, laptops and tablets, as well as efficiently supplying energy for electric vehicles (EV), medical equipment and power tools.
A March 2021 report from the MarketsandMarkets research company forecasted that the global Li-ion battery market will grow at a CAGR of 16.4 percent between 2020 and 2025, from $44.2 billion to $94.4 billion. Growth is likely to be driven by the preferable, often unique qualities possessed by such batteries, which will boost adoption of consumer electronics as well as expand the number of research and development initiatives by different organizations and battery manufacturers, the report noted. What’s more, an increase in demand for plug-in vehicles; a growing need for automation and battery-operated material-handling equipment in industries propelling the demand for smart devices; and an expanding need for Li-ion batteries across a broad range of industrial applications are key factors that will drive Li-ion-battery-consumption growth over the next few years.
The Li-ion-battery market for the automotive industry, meanwhile, is widely expected to represent the biggest market share during the forecast period. “Increasing adoption and awareness of EVs, government initiatives, and regulations supporting the adoption of EVs around the world are the factors that are driving the growth of the lithium-ion battery market,” according to MarketsandMarkets. “The market for these vehicles is expected to grow in the near future, partly driven by the adoption of various environmental norms and emission regulations. This has increased the demand for Li-ion batteries.”
A July 2021 report from Research and Markets, moreover, saw the global Li-ion battery market growing from $41.1 billion in 2021 to $116.6 billion by 2030 at a CAGR of 12.3 percent, with the need to fulfil peak electricity-demand requirements being the major contributory factor. “The flexibility offered by these batteries to the grid in terms of energy storage helps to deal with fluctuations associated with renewable energy sources, such as solar and wind energy, is catalysing the adoption of lithium-ion battery energy storage systems,” the report noted. “Lithium-ion battery energy storage systems enable grid operators to save electricity when there is a surplus of renewable energy.”
The prevailing COVID-19 situation, however, means that the expected growth of the Li-ion battery market is likely to be curbed by the pandemic restricting the supply of batteries and other components due to severe disruptions in businesses and the global economy, the report acknowledged. Indeed, as is the case for many industries at present, supply-chain disruptions are greatly affecting output levels—in this case, it is mainly due to key components for batteries being manufactured in the Asia-Pacific region.
“The COVID-19 situation has exposed the overdependency on the region for key raw materials, especially China. Battery manufacturers in the US, Germany, and Australia are highly impacted by the shutdown of operations in China and other Asia Pacific countries,” according to Research and Markets. “It has also resulted in limited production leading to a serious decline in business inputs. The recovery depends on government assistance, as well as the level of corporate debt and how the companies and markets cope with the trimmed demand.”
And what about the environmental impact of this anticipated surge in battery demand? After all, the heavy power consumption that is expected, along with the growth of the global battery market, has enormous implications for clean-energy usage and sustainable development as a whole. Indeed, with the right conditions in place, batteries could well crucially facilitate a comprehensive global transition towards greenhouse-gas neutrality, particularly for the transport and power sectors, by positioning renewable energy as a reliable power base rather than simply an alternative-energy source. That said, one also mustn’t discount the impact that the rapid growth in battery usage will have on the global capacity for waste and disposal, especially when batteries reach their end-of-life point.
According to a 2019 report from the Global Battery Alliance (GBA), a public-private partnership initiated by the World Economic Forum (WEF) in 2017 with 70 member organizations to help establish a sustainable battery value chain that can power sustainable development and climate-change mitigation, batteries could enable 30 percent of the required reductions in carbon emissions in the transport and power sectors, provide access to electricity to 600 million people who currently have no access and create 10 million safe and sustainable jobs around the world, more than 50 percent of which will be in emerging economies.
In order for such a vision to be achieved by 2030, however, the battery value chain must develop along an accelerated trajectory from current levels. “The time to pivot is now as the remaining ‘carbon budget’ is running out—without batteries, this budget will be used up by 2035. If the deployment of batteries is not accelerated, decarbonization will come too late,” the report warned. “Acting now is also a chance to shape an emerging value chain, while acting later requires costly reconfiguration and leads to the exacerbation of social and environmental impacts.”
But how can we specifically act now? The report identified five levers as being the most impactful in driving a pivot in the trajectory of the value chain:
- Electric shared mobility: A concerted acceleration by vehicle manufacturers in developing and commercialising purpose-built EVs for sharing, alongside greater incentivisation of electric shared mobility by regulators.
- Smart charging: V1G (vehicle-to-grid) allows the charge rate and charge time to be modified to potentially reduce the cost of charging an EV, and V2G enables energy to be returned to the power grid from the battery of an EV. Battery manufacturers, vehicle manufacturers and utilities should collaborate to ensure these charging technologies are possible on a large scale.
- Refurbishment and repair: This can extend the lifetime of EV and energy storage system (ESS) batteries, thus lowering the demand for new capacity and associated costs.
- The repurposing of EV batteries after use: Some EV batteries can be repurposed for ESSs to extend their use after their initial end-of-life marks. This can recover significant residual battery value and thus improve the economics of batteries, as well as reduce the need for new batteries in the power sector.
- Recycling: Recovering materials from end-of-life batteries and manufacturing scraps during production minimises the need to use virgin resources long term. It also ensures economical and safe end-of-life management and prevents the loss of valuable materials.
According to the International Energy Agency’s (IEA’s) Sustainable Development Scenario (SDS), better and cheaper electricity storage lies at the heart of the future of global energy, particularly the ability to meet key international energy and climate goals. With that in mind, the Paris-based agency has estimated that close to 10,000 gigawatt-hours (GWh) of batteries across the energy system and other forms of energy storage are required worldwide by 2040, which is 50 times the size of the current market.
“This would enable the world to meet more of its energy needs through clean electricity, the supply of which does not always match the location and time of demand,” the IEA stated in its “Innovation in Batteries and Electricity Storage” report published in September 2020. “However, energy storage—which is a critical technology—is currently not on track to achieve the levels called for in the Sustainable Development Scenario, both in terms of its deployment and its performance. This means that we are failing to put in place the infrastructure that will be needed for renewable energy to expand more rapidly.”
Nonetheless, many believe an inflection point is arriving imminently or has already arrived, with an accelerated increase in battery storage now on the horizon. S&P Global Ratings, for instance, recently forecast that total capital investment in North American battery storage will exceed $3 billion annually starting in 2024. And S&P Global Platts Analytics, an affiliate of S&P Global Ratings, stated that it expects the US storage market to increase nearly nine times in the 2020-23 period, fuelled mainly by advanced battery-energy storage, with cumulative deployment approaching 10 GW (gigawatts) by 2024.