It is well known that the EU will face a complete structural energy change in the coming years, in order to achieve the ambitious objectives, set out in the Clean Energy For All European Package for the period 2021-2030.

In this regulation, renewable energies are the main characters, since their share in the electricity grid will account for the 32%, according to the EU, and for the 42%, according to the particular case of Spain, as stated by the minister for the ecological transition Ribera in her long-awaited Integrated National Energy and Climate Plan (PNIEC). Another main theme of the plan is electric mobility, which foresees the decarbonisation of the transport sector by 2050, which is now contributing almost 40% of emissions from diffuse sectors in Spain.

One of the questions Magnus asks is how the country intends to manage the entry into the network of so much renewable energy. According to the election programme of the new PSOE government, they are supposed to represent 72% of the installed power, but how will this affect the security of supply? Furthermore, how will Spain achieve a 22% penetration of renewables in the mobility sector by 2030?

These questions are usually answered with the magic word “storage”, note as one of the technologies that can offer a flexible response to the imbalances caused by the integration of renewables into the grid, as well as the achievement of the transport sector decarbonization. However, the reality is much more bitter: according to an information document of the European Court of Auditors, the EU needs better storage to meet its energy targets. Auditors identify challenges for this technology, taking into account the battery manufacturing skills of its international competitors. Today, Europe’s share of global cell manufacturing is only 3%, while Asia has an 85% share. For decades, Western states have been lamenting the dependence on Arab countries, not always stable, and now, with the electric car, with which they were expected to be freed, the same situation may occur.

Nowadays, the supply of raw materials is mainly driven by prices and therefore EU production of certain material may not yet be competitive. In some cases, such as lithium, the reduction in the world market price may be due to an objective reduction in production costs, where brine production costs (Latin America, China) represent about half of the production of hard rock, which is the type of deposit presented in the EU (Austria, Spain, Czech Republic, Portugal, etc.).

In addition to the manufacturing monopoly, another major challenge is the availability of resources. According to its report on raw materials for battery applications, the European Commission indicates that these resources are concentrated in only a few countries, as in the case of graphite, with 69% of the world supply coming from China, and cobalt, with 64% originating in the Democratic Republic of Congo. In terms of European supply, China continues to be the largest supplier of graphite, while for lithium it is Chile. The only EU country with a significant supply of Cobalt is Finland, which covers 66% of demand.

Illustration 1: Countries accounting for largest share of EU supply of battery materials (tonnes, % of EU supply) “Report on raw materials for battery applications” – European Commission (November 2018)

In the recent years, the battery market has seen a relative increase in the amount of cobalt and graphite, which, together with rare earths, are used in lithium-ion batteries and electric motors. This increase in demand puts European industrial federations on alert, as in the case of the German one (BDI), which has warned car manufacturers that they run the risk of suffering significant limitations in the supply of raw materials for the production of batteries. In fact, globally, as an example, if 300 million batteries for electric mobility were produced with existing technologies right now (a small part considering the 1.2 billion cars in the world), it is estimated that the current reserves of cobalt would be extinct. Moreover, car batteries are not the only application for this material: only about 50% of global production is used for rechargeable batteries, according to the Cobalt Institute.

Ilustración 2: Demand forecast in the EU for selected raw materials for hybrid and electric vehicles “Report on raw materials for battery applications” – European Commission (November 2018)

One possible solution to the shortage of raw materials is the recycling of batteries at the end of their useful life: companies dedicated to this process are preparing to be able to extract the necessary minerals from old batteries and thus be able to compensate their shortcomings in nature. However, it is a process that does not yet represent an economically viable solution, and therefore companies do not contemplate this possibility. In order for battery producers to begin to consider it appropriate to recycle the preceding materials from old cells, legislation would have to be imposed. We have always realised that in order for something to work and for a change to take place, sanctions must be imposed. And this is just what the EU is doing to promote its great ecological transition project. In Europe today, EC Directive 2006/66 prescribes that lithium-ion batteries in electric vehicles must be recycled by at least 50%. The company with the highest capacity to treat lithium batteries, Umicore, can recycle 35 thousand batteries a year. Although adding the capacities of other European companies (Batrec, Euro Dieze and G&P Batteries), we are still far from the 38.5 million electric vehicles that, according to estimations, will circulate in Europe in 2030.

In its recently published document “Implementation of the Strategic Action Plan on Batteries: Building a Strategic Battery Value Chain in Europe”, the European Commission details the importance of storage in the new phase of energy transition and indicates challenges associated with this technology. Innovative solutions require substantial investment and the EU is aware that the only way to boost storage is to invest in its development. Currently, around 260 industries are participating in the creation of a battery value chain. EIT InnoEnergy is leading this goal, announcing that €100 billion will be invested to develop it. Production plants for raw materials and recycling are being built in Sweden and Poland, respectively, supported by the European Investment Bank.

Facing the challenges associated with this type of technology, Magnus asks whether governments, and in the first case the EU, are aware of the difficulties faced by an energy transition. It is true that urgent measures are necessary to safeguard the well-being of our planet, but does the European plan represent a right transition? Is Europe ready to make such radical changes? Only time will tell us, in the meantime, we hope so.

Cristina Vitale | Energy Consultant

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