The Elements of Innovation Discovered
The Elements of Innovation Discovered
Growing mines-to-batteries supply chain is a huge undertaking Metal Tech News Weekly Edition – August 5, 2020
At roughly 10 million square feet, Tesla's Gigafactory 1 will be the largest building on Earth and able to produce roughly enough batteries to build half a million Model 3s per year.
Lithium-ion batteries are driving unprecedented demand for graphite, nickel, lithium, cobalt, and manganese.
From mines to gigafactories, it is going to take a massive and coordinated effort to scale up the entire North American lithium-ion battery supply chain at a pace that meets the growing demands of the accelerating electric vehicle revolution.
"To replace more of the gasoline cars that are on the road, to benefit from the promise of electrification across all vehicle types and all consumer classes, requires the supply chain to be built out in a bigger way and faster way than it has been done in the last five years," Vivas Kumar, a principal of Benchmark Mineral Intelligence, said on an All Things EV podcast by Sean Mitchel.
Currently, global automakers are building about 2 million passenger EVs per year, an annual figure that is expected to top 25 million by 2030 and 55 million by 2040.
This is going to drive enormous demand for lithium-ion batteries, a burgeoning sector that has already quadrupled in size over just the last five years and is expected to grow 20 times larger over the next two decades.
This means that an automotive sector sized battery supply chain – from the mines that produce the graphite, nickel, lithium, cobalt, and manganese needed to manufacturer the batteries to the gigafactories that produce them – will need to be built up in a very short time.
"The supply chain is geared for making batteries for laptops and mobile phones, it is not geared for making batteries for the size of a car," said Simon Moores, founder of Benchmark Mineral Intelligence.
Efforts to gear this supply chain for the needs of the electric auto sector is underway.
When you add up all the lithium-ion battery facilities either currently in production or being built, there will be about 2.5 terawatt-hours of annual battery capacity being produced globally.
"That is still not going to be enough," said Kumar, who was the global lithium-ion supply chain manager for Tesla from 2017 until 2019.
And building enough EV battery factories may be the easy part.
"The batteries are underpinned by a complicated supply chain with mining elements, chemicals elements, as well as specialty cathode, anode manufacturing," said the battery supply chain expert.
Terawatt way of thinking
Just five years ago, the lithium-ion battery sector produced enough cells to store roughly 75 gigawatt-hours of electricity – nearly all these batteries went into consumer goods such as laptops, cell phones and cordless power tools.
With a vision of delivering affordable fully electric vehicles to the masses, Tesla CEO Elon Musk began the endeavor of transforming this infinitesimal sector into a network capable of meeting the needs of a Tesla-led EV revolution.
This vision of catapulting Tesla as the leader in electric mobility led to the construction of Gigafactory 1 in Nevada, the first lithium-ion battery plant capable of producing annual electrical storage capacity measured in gigawatt-hours.
At roughly 10 million square feet when fully built out, Gigafactory 1 will be housed in the largest building on Earth and will have an annual battery production capacity of roughly 35 GWh, or roughly enough batteries to build half a million Tesla Model 3s per year.
Tesla has since built, or is building three more Gigafactories – New York, Shanghai, and Germany – and just announced plans for yet another factory in Texas. Musk has hinted the coming factory near Austin could be built out to the terawatt scale.
With a terawatt equating to 1,000 gigawatts, just barely breaking above the threshold would make a Tesla Texas Terafactory roughly 30 times larger than Gigafactory 1.
"A terafactory is a massive deal," said Kumar.
This massive undertaking is going to take a new way of thinking when it comes to sourcing the needed materials.
"The business model of relying on external suppliers will have to morph into some sort of incentivization for the external suppliers to grow alongside Tesla, or for Tesla to make directive investments even further up the supply chain," Kumar added.
Musk recently encouraged mining companies to be proactive in bringing online new supplies of the nickel needed for lithium-ion batteries.
"Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way," the Tesla CEO said. "So, hopefully, this message goes out to all mining companies – please get nickel."
More information can be read at Is Elon Musk considering Tesla gigamines? in the July 29 edition of Metal Tech News.
New challenges for old guard
Currently, about 300 GWh lithium-ion battery storage capacity is needed to meet global demand, with more than half going into passenger EVs.
To keep pace with projected growth of EV sales, along with escalating demands for batteries to store renewable energy and power rechargeable electronic devices, it is expected that the world is going to need more than 3,000 GWh (3 terawatt-hours) of battery storage by 2030 and upwards of 6 TWh by 2040.
Expanding this burgeoning sector of the global economy to automotive scale will likely require an organized effort by automakers, battery manufactures, miners, and governments.
Moores says the scaling up the lithium-ion battery supply chain is a new challenge for old guard automakers.
"Everybody alive in the automotive industry has always dealt with a mature industry where the supply chain is already built and scaled," the battery expert said during the All Things EV podcast.
"The way you approach a niche supply chain is completely different to the way you approach a mature supply chain," he added. "It is the responsibility of every automaker, if they want to make electric vehicles, to invest in this supply chain and scale it."
This is especially important for the mines lying at the beginning of the supply chain, if automakers want to ensure that they have adequate supplies of the graphite, nickel, lithium, cobalt, and manganese needed to make a battery – and these minerals and metals are up to the ethical and environmental standards of increasingly aware consumers.
This is because the coming need for lithium-ion batteries is expected to drive five- to 10-fold growth in demand for these materials and it takes much longer to permit and build a mine than it does to build a gigafactory – especially if these mines are developed in countries with strong environmental regulations.
"Any automotive OEM (original equipment manufacturer) that is not taking direct steps toward controlling their battery supply is in a lot of trouble," said Kumar. "The No. 1 reason ... is supply shortages of these critical raw materials."
Coherent supply chain strategy
While automakers are making inroads into building out the battery supply chain, some better than others, Moores believes it will take a more concerted effort for this niche supply chain to gain maturity in the short amount of time allotted.
"There really is not a coherent strategy and I think that is what is missing," he said.
The COVID-19 pandemic may be providing added incentives to establish such a strategy in the U.S.
"What we have seen with the supply chain disruptions and COVID-19, across all industries, is an increased awareness around reshoring critical supply chains," Kumar said.
When it comes to lithium-ion batteries, China is the majority supplier of the finished lithium, graphite, cobalt, and manganese products needed.
"If any one of these raw materials gets disrupted, you can't make a battery," said Moores.
"The only part of the supply chain that is impossible, according to the laws of physics, to move, is the mine," Kumar added.
Fortunately, the United States and Canada have rich supplies of these battery materials. Building a battery ecosystem in the U.S. – large battery plants, along with cathode and anode facilities – would provide a hub for the longer supply chain that runs to the mines.
"All of a sudden, domestic sources of raw materials like lithium, cobalt, nickel, graphite start to become economic because of large customers based in the U.S.," said Kumar.
In a recent testimony before the U.S. Senate Committee on Energy & Natural Resources, Moores suggests that the federal government make a massive New Deal sized investment into a complete mines-to-lithium-ion-batteries supply chain in the U.S., which would position America as a major player in the future of electric mobility as well as help buoy the economy in the wake of the COVID-19 pandemic.
"Instead of dams, you need to build battery megafactories in their multiples. Instead of highways, bridges, and tunnels, you need to build the supply chains to enable these megafactories to operate securely and consistently," he said. "These include the cathode and anode plants, and the lithium, cobalt, graphite, nickel and manganese sources to feed them."
Further details on Simon Moore's testimony can be read at New Battery Deal idea floated to Congress in the July 1 edition of Metal Tech News.
With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.
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