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Sunday, March 19, 2023

I Like Big Batteries - We Demand Supply

The Supply Crunch

EV popularity is increasing. EV sales from 2012 to 2021 are up 13 fold and the upward trend seems unstoppable. Well, almost unstoppable; there may be one thing that could slow this trend: battery cell availability. 

Battery materials (such as Nickel, Lithium, and Cobalt) costs have skyrocketed over the last two years. Prices are being driven by high global demand and a tight supply of refined materials. Lithium carbonate prices per tonne were up 88% year-to-date in October of 2022.

As you can see in the two graphs below, in 2022, Nickel hit a 10-year high and Lithium hit an all-time high. 

Nickel price history via tradingeconomics.com

Lithium Carbonate price history via tradingeconomics.com

But all is not lost.

More Mining, Refining, and Recycling

Obviously, these higher material costs are not going to help make EVs or energy storage more affordable, but there is a plus to the higher prices. Inflated prices mean it's more profitable to mine and refine these materials. This will bring in more investment and more of the needed materials. 

Once these materials are mined and in batteries, they will be available for this generation of battery tech and the next and the next, ad infinitum. These materials are not consumed like fossil fuels. They are not emitted from a tailpipe or smokestack into the atmosphere. The Nickle that is put into batteries today, will be recycled and put into new, better batteries in the next decade.

The increased cost of raw materials also makes it more profitable to recycle batteries. More on recycling later, back to mining and refining.

Caterpillar's First Battery Electric Large Mining Truck

Mining Is Getting Greener 

Most EV makers have goals to have zero emissions manufacturing. This starts with mining. More mining equipment is becoming electrified. In some cases, the very materials they are mining are the same ones used in the batteries powering the mining equipment. 

Normet SmartDrive battery electric mining vehicle

Demand for EV battery raw materials such as graphite, Lithium, Cobalt, and Nickel is currently outpacing supply. According to Benchmark analysts, unless 384 new mines are up and running in the next ten years, the EV transition will be slowed as carmakers struggle to source battery materials. They estimate that 74 Lithium mines, 62 Cobalt mines, 72 Nickel mines, and more than 100 graphite mines and production plants are needed. 

For comparison, there are currently about 3,760 active coal mines. So, assuming the above estimates are correct, EV batteries will need about one-tenth the number of mines that are currently active, just for coal. 

Battery Recycling 

The good part about these battery materials mines is that they are not consumed after they enter the battery lifecycle stream. The materials can be recycled and placed in new batteries after they degrade beyond usefulness. It can become a closed loop. So unlike coal mines, these materials will reach a state where nearly all of the needed materials can come from recycling streams; rather than a never satiated gaping maw. 

The recycled material streams will be of higher purity since the recycled materials have effectively been refined multiple times and this will result in better batteries. Additionally, recycled materials will be less subject to supply chain disruption and more affordable than newly mined materials. The recycling plants will be near where the batteries are produced, rather than wherever the random vein of various materials happens to lace the Earth.

"Ephemeralization" - computers from the 1960s used to take up an entire room, now the smartphone in your pocket has far more computing power. This same march of progress is happening for batteries, albeit at a slower pace. Battery energy density is increasing by about 5% each year. 

This wraps up part 2. Part 3 (prices will drop) is coming soon.

Three Parts: 

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