Last summer, the Chinese government called on its battery cell manufacturers to double electric vehicle (EV) capacity by 2020 by scaling up investment in production facilities. China has long looked enviously at the dominance its South Korean and Japanese rivals have in the battery cell production space, and longs to increase its slice of the storage pie. And what China wants, China tends to get: Goldman Sachs estimates that the lithium-ion battery market will be worth $40 billion by 2025, with China dominant.
U.S. firm Tesla is proving a glitzy counterweight to Asia’s influence, but even at the vast gigafactory lying low in the Nevada desert, it is Japanese firm Panasonic’s cell technology that is being employed to pump out Tesla’s sleek EV batteries.
The parallels with the solar PV industry are undeniable, but not unavoidable. China has not yet reached a stage where it completely dominates battery storage production, and there are signs within Europe that governments, businesses and even some determined individuals are not going to let China have it all their own way this time around.
“Three-quarters of the costs of battery cells are material costs,” said Holger Gritzka, CEO of TerraE, which is a collaborative initiative focused on establishing large-scale lithium-ion cell manufacturing in Europe. “With economies of scale these costs are almost the same for anybody. Only one-quarter of the price comes from production costs. Hence, the cost structure for highly automated products is comparable in Europe as it is in China, Japan and South Korea.”
TerraE was formed in May 2016 by six Germany-based companies including Daimler, 3M, Wacker, Kuka, Varta and Litarion, and has unveiled bold plans to build two lithium-ion cell factories in Germany with a combined capacity of 34 GWh by 2028. The consortium now comprises 17 companies and research institutions that have a direct interest in establishing new battery production facilities in Germany.
The uptake of EVs and stationary storage applications is expected to accelerate in Europe from around 2020, according to a report by Delta-ee on behalf of the European Association for Storage of Energy (EASE), and by establishing local manufacturing, Europe can expedite improvements in lithium-ion technology, Gritzka believes. “The advantages of building cells in Europe are no shipping costs to local markets, no import taxes, advanced production technology, strong R&D capabilities and less local competition,” he said. “TerraE won’t push for a reduction on prices, but we will ensure that we are competitive over the long term by improving the performance of lithium-ion technology.”
Putting the D in R&D
While Gritzka was coy about exactly how TerraE will support the scale-up and industrialization of Europe’s cell production market (“We have USPs in place to strengthen the pipeline between research and industrialization” was all Gritzka would reveal to pv magazine), Peter Littlewood, the Interim Director of the U.K.’s Faraday Institution, outlined in great detail how the new storage program will work with the British government, industry and higher education establishments to build the foundations for cutting-edge battery cell research, development and commercialization, in the U.K. and beyond.
“The U.K. and Europe has specific challenges associated with the fact that we have good R&D in batteries, and of course strong automotive industries across the EU, but by and large we don’t make batteries,” Littlewood told pv magazine. “The Faraday Institution is trying to find ways of onshoring scale up and connecting into product streams. One of the clear challenges is, despite the fact that the UK produces nearly a quarter of Europe’s low-emission vehicles for export, and there is battery assembly here, there is still no cell manufacturing.”
Littlewood agrees with Gritzka that the highly automated nature of battery production means that costs are not necessarily what is holding Europe back. The Faraday Institution’s advantage will be its access to world-class R&D (government funding of more than €300 million is being steered towards a handful of universities across the country, including Harwell Campus and the University of Warwick) that will enable the U.K. to “put better battery technologies into EVs and homes ahead of our competitors,” Littlewood said.
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He explained: “At the moment we see companies employing off-the-shelf technologies that are not the ideal solution [for EVs]. This is because the main challenge in electric automation right now is getting to scale. Although it’s a $30bn business, auto firms are producing in rather small quantities. If you’re putting hundreds of kW of storage into a car, generally there are large manufacturing and technical issues in doing that.”
Littlewood also stressed that future uncertainties over current battery chemistries weigh heavily on auto firms’ decision making. “If a car company is thinking of developing a battery-powered vehicle, it has to worry about issues that are unresolved, such as end of life, recycling, how much value will the battery have at the end of its cycles, and safety issues – so companies are making predictions based on rather uncertain grounds about their products. Frankly that doesn’t matter much if you’re priming your product to sell a few hundred, but if you want to get to mass market you need to understand these things.”
A European flavor
Both TerraE and the Faraday Institution hope to develop new battery technologies that are specifically fit for purpose – be it EVs, behind-the-meter storage in the home, or large-scale frequency regulation capabilities. Typically in academia, Littlewood explains, battery R&D focus is narrowly aimed at having a better battery chemistry. “By speaking closely with industry about their needs, we know what to focus on: recycling issues, and making batteries last longer,” Littlewood said. “The challenge from government is how to work effectively with industry on that. It is not that academia is not interested in commercialization; it’s that industry also needs to be persuaded to engage closely, to share information that is important to them. It is a two-way conversation, particularly in Europe.”
The Faraday Institution will utilize existing research tools, such as high-performance computing and modelling simulation already in situ at leading British universities, and will spend its funding largely on people. “Our focus has to be on training,” Littlewood stressed. “When we speak with companies we find that they all have problems hiring battery engineers – they’re harder to get than software engineers! So the Faraday Institution will focus directly on training at the R&D end, but will also work with industry to understand their needs for apprenticeships, retraining etc.”
Stable government backing – the likes of which have largely deserted the solar industries of many European nations – will be imperative for the Faraday Institution to meet its objectives. Lithium-ion batteries were developed for mobile applications in the 1970s in Oxford, and so the current chemistries are not the technological endpoint of optimum batteries for EVs or home storage, Littlewood said. “We are talking about new technologies developed at the right time to serve the needs of the market – it’s about understanding the capital investment required to get things going.”
Littlewood concluded: “We are approaching a tipping point. If you were to start a car company now, you would not be building internal combustion engines. The electric motor is much more efficient, it is inherently much simpler, it is cleaner. That is going to move the dial quite quickly, but will it be quick enough for Europe? The way that government can back this is not just supporting research, but actually putting policies in place that make sense for industry.”
For the full interview with Peter Littlewood, check out the March issue of pv magazine.