Will Europe overtake US in ‘gigafactory’ race?

BY RICHARD HEAP:
US billionaire Elon Musk knows how to make money – and words too. Don’t believe me? Musk coined the term ‘Gigafactory’ in late 2013 for a huge Tesla battery factory in Nevada. Now the word is not only in my spell-checker but it’s in there with the Musk-approved capital ‘G’. That’s power!

But while Musk coined the term, ‘gigafactories’ are much more than just Tesla.

The growth of lithium-ion batteries for storage and electric vehicles has forced countries to rapidly grow lithium-ion battery production, or get left behind.

In this article, we’ll look at research on the prospects for gigafactories in the next decade, including an emerging battle between Europe and the US.

Challenging China

China dominates the global supply chain for lithium-ion battery production.

Bloomberg New Energy Finance said last September that China controls 80% of raw material refining capacity for batteries globally; 77% of cell production capacity; and 60% of production capacity for other parts. Japan is second and Korea is third.

BNEF also forecast that China and Japan would still be the top two in 2025, but that the US would rise to third (from sixth) over the same period with Sweden fourth. The dominance of China is the result of huge investments it has made in the last decade to support the growth of home-grown battery producers such as CATL.

This story of Chinese dominance is also told by research from Benchmark Mineral Intelligence, which said China currently holds 72.5% of global lithium-ion battery cell production. That is ahead of the rest of Asia (12.9%), North America (9.2%) and Europe (5.4%).

BMI forecast that China will remain in the lead until 2030, but with a reduced share of global capacity (66.9%). It said Europe (16.7%) would overtake North America (11.9%) in the same period, and this is where gigafactories will play a role. These giant facilities ensure that regions can produce the batteries they need in an era of electric vehicles, so are geopolitically important assets.

Where will they be built?

This week, energy storage research centre CIC energiGUNE shared analysis of how gigafactories would grow in North America to support electric vehicles.

Tesla has taken an early lead. It has two operational gigafactories to produce batteries for its electric vehicles – in Nevada and Buffalo – and is planning to add a third with annual battery production of 100GWh in Austin this year.

Asian firms are making headway in the US by teaming up with US carmakers. LG Chem is working with General Motors to open battery production plants, in Ohio in 2022 and Tennessee in 2023. SK Innovation is expanding too.

This activity is being driven by growing US demand for electric vehicles. But we may see a further boost if President Biden wins support for his infrastructure-focused $2.3trn American Jobs Plan, which would include $175bn for electric vehicles. Biden spoke in Congress this week to win support for the bill.

Political backing for batteries is the order of the day in Europe too.

Last year, the European Union’s €750bn Covid-19 recovery plan committed to giving support for sectors that would be important to the energy transition, including electric vehicles and renewables. Countries are due to submit plans to the EU this month about how they would invest these funds, and this will lead to even more focus on investment in batteries and electric vehicles.

CIC energiGUNE said that Germany, Sweden, Norway, Hungary and Poland are leading Europe in growth of gigafactories, as a result of projects by Asian firms. The region is also set to see investment led by local players such as Northvolt, which is looking to grow to 150GWh of battery manufacturing capacity in Europe by 2030.

And there’s Tesla, which is due to open its first European gigafactory this summer and is planning a second too.

The battle for battery dominance is heating up, driven by a combination of supportive policies and a desire by companies to establish a global footprint. Nobody looks poised to oust China – but gigafactories will be key to other regions as they jostle for second place.

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