Battery production in Europe takes off

© Michael Marais / Unsplash

The energy and transport transition is in full swing. Support programmes and new regulations in Europe, the USA and especially China are fuelling a boom that has already clearly taken shape. The challenges are great, but so are the opportunities – also for the suppliers represented at POWTECH.

"There are nine million bicycles in Beijing," sings musician Katie Melua since 2005 - and she could now add: "and nine million electric cars in China." With a total of over five million new registrations in 2022, the nine million threshold was already exceeded last summer. And the trend is rapidly rising. Although government subsidies for electric vehicles have recently been cut even more in China than in Germany, this will not stop the trend towards electric cars. Buyers and manufacturers of vehicles with internal combustion engines are threatened with further trouble: while the new Euro 7 emissions standard is still being debated in Germany and Europe, China is demanding even stricter limits with regard to emissions from July 2023 with the 6b standard. It would be a scoundrel to think that the nation, which dominates the battery and thus the electric car market, will make the approval of new internal combustion vehicles, such as those offered by Western manufacturers, virtually impossible.

This example highlights the current changes - and change hurts. There is hardly any other area of the economy where this can be observed as clearly as in the energy transformation: whether hydrogen, building heating, electric mobility or speed limits - the discussion about the best measures for a change in the energy and transport sector towards climate neutrality is causing sentiment to run high. And this could be just the beginning: More than 200 different energy transformation technologies are currently in various stages of market maturity. What they all have in common is that they are intended to help replace fossil fuels in the energy sector. And: the vast majority of them use climate-neutral electricity.

50 battery factories to be built in Europe

But there are enormous opportunities in this change. Companies that actively participate in the energy transformation will profit. Here, too, electromobility may serve as an example. In order to meet the massively increasing demand for batteries for electric vehicles, more than 50 battery factories are currently being planned in Europe alone. Because the production of batteries and battery materials is enormously demanding, plant and machine manufacturers are in demand who can develop these complex production processes and supply the equipment for them.

The market for electrically powered vehicles is also growing rapidly, irrespective of stricter emission values, which in the long term can hardly be achieved by vehicles with combustion engines: In 2022, the volume climbed by 50% to 425 billion US dollars compared to 2021. In the same period, the demand for batteries has doubled. And politicians are adding to the pressure: the "Net Zero Industry Act" proposed by the European Union in March 2023 aims to have around 90% of the European Union's annual battery demand (550 GWh) met by European battery manufacturers by 2030. In the United States, the Inflation Reduction Act provides billions of dollars in subsidies to build supply chains for electric vehicles, batteries and battery minerals. Between August 2022 and March 2023 alone, major electric vehicle and battery manufacturers have announced investments of at least $52 billion in North America, 50% of which will be for battery manufacturing, according to the IEA energy agency.

Modern production technology in demand

The new battery producers in Europe and elsewhere certainly have a chance to close the gap on the dominant battery nation China. After all, there is still a lot of potential for improvement in modern production technology to manufacture more powerful batteries at a lower price. Currently, alternatives to the lithium-ion battery are being developed in the form of lithium iron phosphate and sodium ion batteries, which have raw material and cost advantages. But there is also great potential for efficiency in the production of battery materials: mixing processes with a higher throughput and at the same time higher mixing quality are only one of many detailed aspects.

And here, politics is also setting new framework conditions, such as the new EU regulations that have been in effect since May 2023 and are intended to make the production, use and recycling of batteries more environmentally friendly. According to these regulations, at least 65% of all batteries must be recycled by 2025. The EU has set a binding target of 90% for the recovery of the metals cobalt, nickel and copper, which are essential for battery production. And the EU's Boundary Compensation Mechanism (CBAM) - possibly the most radical change yet for taxing greenhouse gas emissions - will also include precursor metals for batteries, including nickel. These specifications also offer opportunities - not only for recycling companies, but also for suppliers of processes and machinery.

However, factory equipment - whether for the production of batteries or their recycling - is so far often still piecemeal. Often the proprietary manufacturing processes are planned down to the last detail by the operators themselves, which leads to problems at the interfaces between individual process steps, machines and their manufacturers. In addition, there are hardly any plant engineering companies that can build battery factories as EPC or EPCM contractors. Another complicating factor is the high requirements not only with regard to product quality but also operator protection: the materials used, often in powder form, are toxic and flammable and must be handled under hermetically sealed conditions (containment for hazard potential OEB 4 or OEB 5).

The technologies for this are there - now it is a matter of clever cooperation between the actors and the will to implement. For example, it will be several years before the number of electric cars in Germany grows from the current one million to nine million. But "nine million electric bicycles" is something we have already achieved on the way to climate neutrality in 2022, after all.