Critical Minerals and Battery chemistries
Introduction:
The Indian economy is growing at an unprecedented pace, and to keep up with the growing demand for electric vehicles, smartphones, Battery energy storage to meet renewable targets, and other electronic devices, it needs a robust supply chain of Lithium-ion batteries. Lithium-ion batteries are considered the future of energy storage because of their high energy density, longer life, and lower cost. The Indian Government has set forth several initiatives for the manufacturing and adoption of electric vehicles. However, India currently imports almost all of its Lithium-ion batteries from other countries, which makes it vulnerable to supply chain disruptions and price volatility. Therefore, India needs to develop its domestic Lithium-ion battery supply chain as a priority. This article will explore the Indian Lithium-ion battery supply chain and the raw materials needed for Lithium-ion cell manufacturing.
Demand and Supply of Lithium:
The demand for Lithium-ion batteries is on the rise globally, with the electric vehicle industry being the primary driver of growth. According to Research and Markets, the global Lithium-ion battery market is expected to reach USD 129.3 billion by 2027, growing at a CAGR of 18.0% from 2020 to 2027. In India, the annual demand will be 106 GWh/year (minimum) to 210 GWh/year (most optimistic) by 2030, and Electric vehicles are expected to drive approximately 60% of this demand. Apart from the selected beneficiary firm of ACC PLI, there are ~ 7 to 8 other serious players making/planning to make large-sized battery plants in India. In totality, ~ 140 GWh capacity will be developed 2030. The availability of PLI will likely accelerate the setting up of these giga factories.
However, India currently does not produce any Lithium, and it imports almost all its Lithium-ion batteries from China, Japan, and South Korea. India imported Lithium-ion batteries worth USD 1.29 billion in 2021-22 (Apr-Dec)[1]. The Indian Government has taken steps to reduce the dependence on imports by encouraging domestic manufacturing of Lithium-ion batteries.
Sources of Lithium:
The primary sources of Lithium are hard rock mines, brine deposits, and Lithium-rich clay deposits. Most of the world's Lithium is currently sourced from brine deposits in South America, mainly from Argentina, Chile, and Bolivia. Hard rock mining accounts for about 30% of Lithium production, with Australia being the leading producer. Lithium-rich clay deposits are also being explored in various countries, including the United States and Canada.
Recently, the Indian government announced that it has found Lithium reserves in the Reasi district in the Jammu and Kashmir area. The Geological Survey of India estimates about 5.9 Mn tonnes of inferred Lithium resources in the area. While this is a G3 level confirmation and the final Lithium extracted might be small compared to the global reserves, it's a significant development for India's domestic Lithium-ion battery supply chain. The government should execute the auction for the composite license in fast-track mode. This finding is important as only a little digging is required, but rocks are to be lifted from the ground up only.
Processing of Lithium Carbonate:
Lithium carbonate is the most commonly used Lithium compound for Lithium-ion battery production. Lithium carbonate processing involves several steps, including extraction, purification, and precipitation. The most common method of Lithium extraction is from brine deposits, where Lithium is extracted using evaporation ponds. The brine is first pumped into the ponds and left to evaporate under the sun. The concentrated brine is then treated with chemicals to remove impurities and extract Lithium. The extracted Lithium is then converted into Lithium carbonate using a precipitation process.
The Petroleum, Chemicals, and Petrochemicals Investment Region (PCPIR) policy by Ministry of Chemicals and Petrochemicals can be considered as potential sites for setting up of Lithium processing plants. PCPIR is a designated investment region with an area of around 250 sq. km planned to establish manufacturing facilities for domestic and export-led production in petroleum, chemicals & petrochemicals, along with the associated services and infrastructure.
Other Raw Materials for Lithium-ion Cell Manufacturing:
Apart from Lithium, other raw materials required for Lithium-ion cell manufacturing include nickel, cobalt, manganese, graphite, and copper. These materials are used for making the anode, cathode, and electrolyte of Lithium-ion batteries.
Nickel:
Nickel is a critical raw material for Lithium-ion batteries, and it's used in the cathode. The demand for Nickel is on the rise globally, and it's mainly sourced from Indonesia, the Philippines, and New Caledonia. According to a report[2], the demand for Nickel in Lithium-ion batteries is expected to increase from 142,000 tonnes in 2019 to 2.2 million tonnes by 2040.
Cobalt:
Cobalt is another critical raw material for Lithium-ion batteries, and it's also used in the cathode. However, Cobalt is considered a controversial material because of the ethical concerns surrounding its mining, particularly in the Democratic Republic of Congo. The demand for Cobalt is expected to increase from 74,000 tonnes in 2019 to 415,000 tonnes by 20402
Manganese:
Manganese is used in the cathode of Lithium-ion batteries, and it's mainly sourced from South Africa, Australia, and Gabon. The demand for Manganese is expected to increase from 238,000 tonnes in 2019 to 1.8 million tonnes by 20402
Graphite:
Graphite is used in the anode of Lithium-ion batteries, and it's mainly sourced from China, Brazil, and Canada. The demand for Graphite is expected to increase from 167,000 tonnes in 2019 to 1.1 million tonnes by 20401
Copper:
Copper is used in the wiring of Lithium-ion batteries, and it's mainly sourced from Chile, Peru, and China. The demand for Copper is expected to increase from 490,000 tonnes in 2019 to 3.3 million tonnes by 20402
While Lithium-ion batteries are the most common type of battery used for energy storage, there are other battery technologies that can be used for this purpose. Some of these include:
1. Flow batteries: Flow batteries are rechargeable batteries that use two different electrolyte solutions separated by a membrane. They are known for their long cycle life and scalability, but they are still relatively expensive compared to Lithium-ion batteries.
2. Sodium-ion batteries: Sodium-ion batteries are a promising alternative to Lithium-ion batteries. They use sodium ions instead of Lithium ions, which makes them cheaper and more abundant. However, they are still in the development stage, and their performance needs to be improved.
3. Solid-state batteries: Solid-state batteries use a solid electrolyte instead of a liquid or gel electrolyte, which makes them safer and more stable than Lithium-ion batteries. However, they are still in the development stage, and their cost needs to be reduced.
4. Other forms also exist, such as Metal air (Zinc based, Aluminium based) and LiS, at different development stages.
The demand for raw materials for battery manufacturing in India:
According to a report by NITI[3], India's cumulative potential for advanced chemistry cells in India (2021-2030, GWh) can be divided as 136.4 GWh for Grid applications, 46.5 GWh for behind-the-meter applications, 36.4 GWh for consumer electronics, and 380.6 GWh for Electric Vehicles. To meet this demand, India will need to import a significant amount of raw materials such as Lithium, Nickel, Cobalt, Manganese, and Graphite. The other way through which some part of this demand can be met is through recycling and refurbishing these cells.
Government programs supporting the manufacturing of Lithium-ion cells in India:
India has already announced several initiatives for the manufacturing and adoption of electric vehicles, and several companies have already announced setting up Lithium-ion battery manufacturing facilities in the country. However, these companies still rely heavily on imports for the raw materials required to produce lithium-ion batteries. The government needs to encourage the exploration and extraction of lithium and other raw materials to reduce the dependence on imports and ensure a stable supply chain for the domestic lithium-ion battery industry. However, as the first step, processing of these critical minerals should be incentivised so that atleast this capacity can be developed in the short run.
Moreover, the government needs to encourage the recycling of lithium-ion batteries to recover the valuable raw materials used in them. Recycling lithium-ion batteries not only helps conserve natural resources but also reduces the environmental impact of mining and processing raw materials. The government needs to incentivize and set up facilities for recycling lithium-ion batteries to ensure a sustainable and circular supply chain.
The budget announcement on reducing customs duty on Lithium-ion cell manufacturing machinery covers 80% of the machinery and is a welcome move. However, for remaining ~20% of the machinery (which is common among other applications, too) still needs the exemption.
The most important of these programs include:
Production-Linked Incentive (PLI) Scheme: The PLI Scheme was launched in 2020 to promote domestic manufacturing in various sectors, including advanced chemistry cell (ACC) battery manufacturing. The scheme includes incentives for Lithium-ion battery manufacturing. 30 GWh of the proposed 50GWh has been awarded to M/s Rajesh Exports (5 GWh), M/s Reliance (5 GWh), and M/s Ola (20 GWh). The PLI is technology and usage agnostic, and therefore, the cells manufactured by these manufacturers will cater to all EVs and BESS both. The remaining 20 GWh might go through another round of bidding.
In addition to this, beyond Lithium and alternate chemistries promotion Niche ACC program shall also be launched by GoI, with a total capacity on offer to be 5 GWh.
In the long term, from a sustainability perspective, we need to have more Giga scale manufacturing rather than a small-scale setup. It has been observed that small-scale setup emissions are ~60% more (Combined manufacturing and material-related GHG Emissions) than the Giga scale emissions on kg-CO2 equivalent / KWh[4].
In addition, to meet the requirement of skilled manpower, capacity building of technical institutes, testing laboratories, and training institutes must be encouraged. We still need more skilled workers in BMS, Cell chemistry R&D, Lab testing, cell manufacturing equipment operation, etc.
However, we must also improve our power availability and reduce dependence on thermal power. Because even in cell manufacturing, Coating, and drying, as well as formation and aging, have the highest electricity demands, and Technical building system (TBS) corresponds to up to 60% of total electricity demand (in pilot scale production)
Conclusion:
In conclusion, India's demand for energy storage is expected to increase rapidly in the coming years, and Lithium-ion batteries are the most common type of battery used for this purpose. The Indian Lithium-ion, battery supply chain is still in its nascent stage, and India currently relies heavily on imports for its Lithium-ion batteries. However, with the Indian Government's initiatives to encourage domestic manufacturing and the recent discovery of Lithium reserves in India, the domestic supply chain is expected to overgrow in the coming years. Apart from Lithium, other raw materials required for Lithium-ion battery production include Nickel, Cobalt, Manganese, Graphite, and Copper. These materials are mainly sourced from other countries, which makes the supply chain vulnerable to disruptions and price volatility. Therefore, it's essential for India to come out with a policy on critical minerals used in Battery storage and also to develop its domestic supply chain for these raw materials as well.
[1] Author’s analysis and Industry insights
[2] BloombergNEF
[3] NITI Aayog and Green Growth Equity Fund Technical Cooperation Facility, Advanced Chemistry Cell Battery Reuse and Recycling Market in India, May 2022.
[4] Chordia et al. (2021) Environmental life cycle implications of upscaling lithium-ion battery production
