The research institute pointed out that the mismatch between supply and demand of lithium-ion batteries poses a challenge to the transition of countries around the world to renewable energy and the role of energy storage systems in the energy transition.
A weak global economy and political turmoil coupled with significant growth in demand for lithium-ion batteries, mostly led by electric vehicles, have led to supply constraints, which in turn have delayed investment and deployment decisions for battery storage projects.
One of the questions industry players need to answer is what strategies and measures can be taken to overcome this challenge, from start-ups working to deploy energy storage systems to governments seeking to support economic growth based on clean energy.
Cormac O'Laire, senior manager of market intelligence at the American Clean Energy Association, said that in the second half of this year, the pricing of lithium carbonate remains a major concern. Even with more lithium mining in the fourth quarter of 2022, the global supply of lithium materials is expected to remain tight.
O'Laire said, "To address lithium shortages, the world's major lithium battery and cathode manufacturers are entering into long-term agreements with lithium mine developers. After the Russian-Ukrainian conflict triggered global supply constraints of nickel and copper, nickel and cobalt, etc. Prices of commodity metals have been volatile and have now started to fall back.”
While price trends for these metals are expected to remain flat through the end of the year, investment in battery raw material mining is generally grossly under-invested, he said. According to the National Clean Energy Association, the global investment in this field in 2022 will be $5 billion.
However, by 2030, meeting battery demand for electric vehicles will require an annual investment of $15 billion, according to forecast data from industry analyst Matt Fernley.
"Both the government and the private sector need to invest more in raw materials, especially lithium, to address looming supply and demand constraints," O'Laire said.
Downstream of the battery supply chain, China is building more battery production plants dedicated to battery energy storage systems, enough to meet global demand by 2025.
However, Fernley said Europe and the US are also building battery production plants, but on a much smaller scale that cannot meet their own needs.
Meanwhile, China plans to expand its cathode active material (CAM) capacity to 2TWh. Therefore, O'Laire said that the lithium iron phosphate battery market is likely to face a surplus in 2024.
Some industry insiders believe that the situation in the battery supply chain is starting to ease, especially in terms of the impact of the new crown epidemic on logistics and transportation.
The Clean Energy Association noted that some moderation in price volatility could allow battery storage project developers to consider final investment decisions in the third quarter of 2022.
Prices of key battery metals such as cobalt, lithium and nickel have turned around after some of the biggest price increases in years. With lithium product prices having the biggest impact on the cost of these commodities, the Clean Energy Association expects lithium prices to remain relatively flat for the next few months of the year, down from highs seen earlier this year.
O’Laire and his research team said the battery supply and demand balance remains unstable from the fourth quarter of 2022 to the first quarter of 2023, and its prices are likely to continue to rise early next year.
Short-term supply disruptions mean the battery storage industry has to absorb rising battery costs or pass the costs on to consumers. The good news is that demand has not declined, despite the introduction of raw material index (RMI)-based pricing by some companies following the EV industry.
These could have different implications for startups and large corporations. Large energy storage system integrators and battery storage system manufacturers such as Fluence, Powin Energy and Honeywell have signed dozens of gigawatt-hour battery supply deals. For smaller start-ups, it has to continue to compete for battery products in the market.
Nicolo Campagnol, battery solutions manager at McKinsey & Company, said, "For consumers of batteries, no matter their size, they will be in trouble in terms of battery supply, and we need to think outside the box. Interestingly, the echelon of power batteries is used for Companies in energy storage systems are booming.”
He said it would be a mistake to underestimate the role secondary-use batteries play in battery energy storage, where installation rates could reach double digits in the next few years.
Lithium iron phosphate batteries are increasingly becoming the main choice for battery energy storage systems. And this type of battery is also gaining popularity in the electric vehicle industry, especially for short-range, low-priced vehicles, which also affects the availability of batteries used in battery energy storage systems.
Campagnol said that nickel-manganese-cobalt (NMC) ternary lithium batteries have historically been the dominant product in battery energy storage systems, but it is now recognized that lithium iron phosphate batteries with lower energy density and lower cost will be nickel-manganese-cobalt (NMC) batteries. ) Alternatives to ternary lithium batteries.
However, lithium iron phosphate batteries require a higher proportion of lithium than nickel manganese cobalt (NMC) ternary lithium batteries, and the rising price of lithium carbonate has a greater impact on them than other batteries, while the growth in demand for electric vehicles means that lithium iron phosphate batteries are in short supply , at least until more battery production plants come online.
The battery storage industry and other consumers, unhappy with paying such high fees or not being able to get batteries, see innovation and diversification in battery technology as the answer.
For example, some manufacturers are developing and commercializing sodium-ion batteries. The batteries are cheaper and decoupled from the needs of the electric vehicle industry, and McKinsey & Company sees huge potential for the technology. However, as with many other new products, as R&D progresses and production capacity increases, only time will tell if the lower-cost claim is true.
Industry analysts point out that there is now a severe disconnect between raw material supply and production schedules. Solving this problem is not easy, in fact, it is profitable to invest in the development and supply of lithium and other raw materials.
While Germany and the US state of California are working to develop technology to directly extract lithium from brine, McKinsey's Campagnol said lithium can be extracted in a number of ways.
"It's actually very feasible to extract lithium using different techniques," he said. "On the other hand, not all elements can be treated this way, such as cobalt. So not all raw materials can be solved in the same way. Obviously, raw materials The price increase of 's usually boosts development and production, but some are easier to find solutions."