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The global lithium-ion battery race and Europe’s role in it
Presentation at ITIF, Washington DC, 7 Nov 2018
Tobias S Schmidt, Energy Politics Group, ETH Zurich
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D GESS
EPG | Energy Politics Group
Agenda
2
▪Why is it a race to lithium-ion?
▪What is Europe’s position in this race?
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D GESS
EPG | Energy Politics Group 3
Why lithium-ion (as opposed to other storage techs)?
Source: Kalhammer et al. 2007
+ high round-trip efficiency
+ low-temperature
+ relatively safe
+ government support (US, Japan, Korea, China)
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D GESS
EPG | Energy Politics Group 4
Historic demand for and innovation in lithium-ion batteries
Source: Battke, Schmidt, Stollenwerk, Hoffmann. Research Policy (2016)
http://dx.doi.org/10.1016/j.respol.2015.06.014
Historic
Hist
oric
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D GESS
EPG | Energy Politics Group 5
Lithium-ion batteries have experienced massive cost reductions and will see more
in the future
Source: O. Schmidt et al. (2017), Nature Energy http://dx.doi.org/10.1038/nenergy.2017.110
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D GESS
EPG | Energy Politics Group 6
Future demand for Lithium-ion batteries will come from three main markets
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EPG | Energy Politics Group 7
Rough cost composition of an EV and its battery pack (as of 2017)
10%
Cathode
2%
12%
Anode
8%
other
materials
Cell
Manufacturing
Packaging
60%
Integration,
rest of vehicle
EV
8%
100%
Source: EPG/ETH Zurich, based on 2017 market numbers
Cell: 30%
Pack: 40%
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D GESS
EPG | Energy Politics Group 8
The market for BEVs (past and outlook)
Source: BNEF
Electric vehicle sales (millions)
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EPG | Energy Politics Group 9
Also stationary storage market is expected to grow massively, where it can create
value in many applications
BNEF: stationary storage (without PHS) is
a USD 1.2 trillion market till 2040
Stationary storage applications along electricity supply chain and by type of value creation
Source: Battke & Schmidt, Applied Energy (2015)
http://dx.doi.org/10.1016/j.apenergy.2015.06.010Source: BNEF 2018, https://about.bnef.com/blog/energy-storage-1-2-trillion-
investment-opportunit§y-2040/?sf94588529=1
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D GESS
EPG | Energy Politics Group 10
Lithium-ion batteries “eat into” stationary storage market
Technology market shares
[Newly-built electricity storage projects]
50%
0%
100%
202620222018 2030
50%
0%
100%
2018 2022 2026 2030
0%
100%
50%
2018 2022 20302026
0%
50%
100%
20262022 20302018
Li-ion (NMC) VRLALi-ion (LFP)Li-ion (NCA) Flow Battery PHS
Low EV demand (5% CAGR) High EV demand (32% CAGR)8
h d
ura
tio
n –
1 c
yc
le/d
ay
4h
du
rati
on
–
1.7
5 c
yc
le/d
ay
Uti
lity
-sc
ale
Source: EPG/ETH Zurich
Preliminary results – do not cite or distribute
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D GESS
EPG | Energy Politics Group
Agenda
11
▪Why is it a race to lithium-ion?
▪What is Europe’s position in this race?
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D GESS
EPG | Energy Politics Group 12
Europe’s current position: pieces of the puzzle do not (yet) match
• Market share in cell manufacturing <1% (mostly very small cells)
• Rel. strong upstream activity (material, manuf. equipment); several packaging plants; quite
successful storage integrators (stationary)
• Plans for “Gigafactories” in DE (CATL, Tesla/Panasonic), PL (LG Chem),
HU (SK Innovation, Samsung); and more announcements (Northvolt)
Battery
industry
Car industry
Government
=> thus far attempts have failed (TerraE) or are faring; buy in from car industry only picking up now (it seems)
• Car industry is crucial for European economy (12 million jobs, 4% of GDP)
• European car industry has low market shares within EV market (except Renault/Nissan); only starting
to roll out high volume EV manufacturing
• Two alternative arguments often put forward:
• Battery cells are commodity-like (no need to produce them locally)
• Wait until next generation of batteries (solid state) is ready and leapfrog current leaders
• Given importance of car industry for EU and cell for EVs, European commission and national
governments (esp. Germany) seek to build a purely European-owned cell manufacturing industry
• Often Airbus is quoted as the role-model
Source: Beuse, Schmidt, Wood, Science (2018)
Source: IEA 2018
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D GESS
EPG | Energy Politics Group 13
Three questions need to be asked (and answered)
1) Is a battery cell a commodity-
like component, to simply
source on the market?
Our opinion:
• Core component (strong
influence on vehicle design)
• Strategic component (better cell
makes a better EV)
• Complex component, requiring
tacit knowledge to design
• Market power might not be as
clear as with other car
component suppliers
2) Is it possible to leapfrog?
Our opinion:
• Hard if not impossible, as next
generation requires a lot of tacit
knowledge in design and
production
• Gaining tacit knowledge requires
experience with design,
production and use of the
technology
• Complex industry value chains
involved, with strong need for
interaction
Source: Beuse, Schmidt, Wood, Science (2018)
3) How to catch up?
Our opinion:
• Generally it is possible to catch
up (see Korea/China from Japan)
• Waiting only widens gap
• Airbus is not a good role model
• We recommend a “technology-
smart” policy
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D GESS
EPG | Energy Politics Group
0%
20%
40%
60%
80%
100%
Product
Combination
Process
Solar PV
0%
20%
40%
60%
80%
100%
1991 1992 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Product
Process
Wind
0%
20%
40%
60%
80%
100%
Product
Combination
Process
Lithium-ion
14
Our research aims to understand technology differences.
Policy should be “technology-smart” in order to be cost effective
Wind
PV
Li-ion
Sources: Beuse, Schmidt, Wood, Science (2018); Schmidt & Huenteler, Global Env. Change (2016); Malhotra, Schmidt, Huenteler; AAAS conference (2017)
What are elements of a “technology-smart”
catching up strategy?
1. Make production in Europe and partnerships
with European firms attractive
2. Create a large and predictable home market
(EV targets; more stringent caps of fleet
emission standards)
3. Only if enough learning and catching-up has
taken place, create incentive for a “European
cell”
HighLow
High
LowMicro hydro plants Solar PV
Wind turbines Lithium- ion batteries
Design
complexity
Manufacturing
complexity
...complex to design technologies:
1) Interactions with downstream
activities
2) Transfer of human capital
3) Stable home market (to get
constant user feedback and new
users)
...complex to manufacture
technologies:
1) Interactions with upstream
activities
2) Transfer of capital goods and
(tacit) integration knowledge
3) Increasing (global) demand
Relevant factors for catching up in…
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D GESS
EPG | Energy Politics Group 15
Thanks for your attention!
web: www.epg.ethz.ch
twitter: ETH_EPG