Investors boost battery financing to close clean energy gap

Worker on the production line of a lithium-ion battery factory in Huaibei, China © VCG via Getty Images

In the race to achieve net zero emissions by 2050, advances in power generation and transportation will play a critical role. And behind the new energy-transport nexus hides a technology that is attracting the attention of countries, companies and investors: the battery.

Projections from the International Energy Agency indicate the magnitude of change needed to reach global net zero by mid-century. They show that by 2035 all passenger cars sold must be electric vehicles and by 2050 two-thirds of the world’s energy supply must come from sources such as wind, solar, bioenergy , geothermal energy and hydroelectricity.

All of this will require better energy storage. Batteries allow electric vehicles to store and use electricity to power their motors. And, using vehicle-to-grid technology, they can store and feed energy back into the grid to supplement supply during peak demand.

“We only use cars about 10% of the time, so it’s possible to use the batteries in our cars to balance the grid,” says Billy Wu, a senior lecturer at Imperial College London, whose research interests include energy storage systems.

Meanwhile, since renewable energy is intermittent, the energy must be stored when the wind stops blowing or the sun stops shining. Batteries can therefore reduce the use of polluting “peak” fossil fuel power plants that supplement renewables or support the grid in times of high demand.

“Batteries will play an increasingly important role in enabling high levels of penetration of variable renewables like wind and solar onto the grid,” says Barbara Finamore, visiting senior fellow at the Oxford Institute for Energy Studies. .

The battery demand forecast is causing the upsurge in the construction of large-scale manufacturing plants, or so-called gigafactories. “The numbers are changing so fast that people can’t keep up with how many gigafactories are being prepared,” says Finamore.

Investments are also flowing into energy storage companies. In the first nine months of 2021, these companies raised $5.5 billion in venture capital in 59 deals, compared to $1.2 billion in 91 deals in the same period of 2020, according to Mercom Capital Group. .

China dominates the world production of lithium-ion battery cells. However, Europe is gradually catching up, driven by emission reduction requirements for vehicle fleets and the 2017 launch of the European Battery Alliance, an initiative designed to boost battery production in the EU.

Northvolt battery 'gigafactory' under construction in Skellefteå, Sweden, the first of its kind to be undertaken by a European company on the continent

The Northvolt battery ‘gigafactory’ under construction in Skellefteå, Sweden, the first of its kind to be undertaken by a European company on the continent © TT News Agency/AFP via Getty Ima

As a result, the global battery production landscape may have changed significantly by 2030, according to Finamore. “China will have about two-thirds of that, so they’ll still be ahead,” she says. “But most experts predict that Europe could have around a third of the world’s battery manufacturing capacity by 2030 – that’s a big leap forward.”

In the United States, generation capacity will also increase sharply over the next two years, says Alex Breckel, director of research at Energy Futures Initiative. “It is expected to increase six-fold with just the factories announced,” he says. “It’s extremely fast scaling.”

For now, electric vehicles, not power plants, are driving investment. “Large-scale batteries are integrated into the power system at the wholesale level today, but that’s a smaller share of the total capacity,” Breckel says.

This is partly because it is easier to transform automotive production than energy infrastructure. “Trying to build anything in the electricity business is a time-consuming process that requires a lot of planning,” Breckel says. “The bureaucracy involved has slowed down a lot of projects.”

Additionally, grid-scale batteries are severely limited by their storage time. “Utility-scale storage can last anywhere from two to four hours, but what we really need long-term is weeks or months of storage,” says Finamore.

Damage caused in the mining of the raw materials and the energy used in their production and transport mean that batteries also have their own impact on the environment. Tailings and slag from cobalt mining can seep into surrounding areas, while lithium mining requires the pumping of large amounts of water from the ground.

Many also worry about the disposal of dead batteries. “It’s a huge challenge,” says Wu. “We have processors to recycle lithium-ion batteries, but it’s not economical – it’s always cheaper to use virgin material.”

Efforts to reduce the weight of batteries for use in vehicles mean that their components are usually held together with glue, rather than nuts and bolts, adding to the difficulty of taking them apart and recycling them. .

In terms of the relative environmental sustainability of EV batteries, it all ultimately depends on the energy source used to charge them. For example, recharging a car with energy produced by coal-fired power plants is equivalent to burning two-thirds of a tank of gasoline.

Lex chart showing battery electric vehicle emissions, by country

Much work remains to be done to address these issues, as well as to meet the challenge of producing enough batteries to enable widespread adoption of electric vehicles and shift energy consumption further towards renewables.

Finamore argues that the battles of corporations and nations to dominate the energy storage industry are insignificant compared to this economic and existential imperative. “Our climate doesn’t care where the batteries are produced,” she points out. “The race is against time.”

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