The battery industry, paving the way for a sustainable revolution
Mega funding rounds in the electric battery space have spawned across Europe and the US as both try to catch-up with China in the race to electrification. Beyond the eye-watering numbers lies a structural change disrupting the entire automotive industry. The European Union has created the European Battery Alliance with a 4-billion-euro budget to invest in the industry from factories to training, leading to the creation of more than 40 gigafactories (highly automated giant battery factories) on European soil before 2030.
In 2021, Verkor, a gigafactory project in France raised 250 million euros with Renault, one of the most advanced auto-manufacturers in Europe in terms of vehicle electrification, and funds such as EQT Ventures and the BPI (France Public investment bank). Northvolt, a Swedish battery maker founded by Tesla alumni has raised a total of more than 6.5 billion dollars to support its gigafactory plans and research labs. From Sweden to Germany and France, gigafactories are everywhere.
With the ban of new gas car sales by 2035 in the EU and a couple of American states, batteries have a long road in front of them. However, strong environmental concerns around the production and lifecycle management of batteries imply new standards and regulations that need to be anticipated in product development today.
The entire relocation of such a gigantic industry and the structural change that comes with electrification will no doubt be a catalyst for innovation. We set out to understand this new industry and find the companies leading the way. Below we mapped out a few that retained our attention.
Please don’t hesitate to reach out if you think we’re missing out on some revolutionary companies!
In this piece, we attempt to address the complexity of the battery value chain by summarizing our findings. Mostly based on research studies, meeting with entrepreneurs innovating in the space and phone calls with experts. We hope you enjoy reading about it as much as we did researching it.
Mining & Refining
Challenges
At the primary stage of the battery supply chain are mining and refining companies. Battery components are made of rare metals and minerals found only in a few countries. Chile, Congo, South Africa, Australia, China, and a few others are home to most of the world’s resources in Lithium, cobalt, nickel, graphite, and manganese, the five key resources for batteries.
Mining companies will face major challenges as they try to answer the ever-increasing demand for these raw materials, highly essential to the ecological transition, not only for electric vehicles but for all types of batteries as the same metals are used in our phones, connected watches and electricity storage devices.
Those companies will need to improve their output while finding new sustainable ways to extract the rare metals. Mining is one of the most polluting activities on the planet representing between 4 to 7% of total worldwide emissions, but the battery revolution must be a sustainable one.
Tech implications
DLE or Direct-lithium-extraction is one of the most prominent innovation key mining players are looking at to reduce their environmental impact. DLE consists in using a modified absorbent to capture lithium in brines rather than using the usual, time-consuming evaporation process. It is supposed to be greener as it reduces water consumption and is also faster and cheaper. While some companies such as Lilac Solutions, funded by Bill Gates’ energy fund may seem to have a first-mover advantage, the large market size and the constantly growing need for greener mining methods will fuel a wave of innovation in the sector. French companies such as Adionics or Geolith may reveal themselves as leaders in the DLE space. The first has developed a reusable liquid able to capture lithium from salt lakes in Chile, reducing the need for large quantities of water and pollution as toxic water waste are usually released in nature. The latter has invented technologies which can be applied to deep geothermal sources as well as used oil production waters. Thus, facilitating lithium extraction from other places than South America. But DLE is only one of the many innovations paving the way for a greener and more efficient mining industry.
While innovation will help making the sector greener, increased awareness among people and transparency requirements imposed by regulation will also force mining companies to improve their ethical standards. Being able to guarantee fair and decent working conditions in their mines will become a competitive advantage as battery makers and car manufacturers become more selective and precautious on their entire supply chain.
Identified players: Adionics, Geolith, Lithium de France, Viridian Lithium, Lilac Solutions, Vulcan Energy.
Cell component production
Challenges
A battery is mostly composed of multiple cells linked together. Those cells contain different components and the interaction between them allows to store energy and make it flow through an engine to power a car for instance. Most battery cells nowadays are made of cathodes and anodes (the plus and minus symbol you see on your remote-control batteries). In a cell there are also separators and electrolytes, but the most valuable components are the ones mentioned above.
Cathode and anode production is a very demanding industrial process which is why these components’ production is highly concentrated. As we write this piece, 7 companies make over 55% of total cathode production, 4 companies make 50% of anode production and 5 make 50% of separators. All of them from Asia, and mostly China which houses 70% of cathode production and 80% of anode production. The rest is shared between Japan and South Korea.
As demand for cathode and anode is expected to be multiplied by a factor of 10 and 8 respectively between 2021 and 2030, it is essential for European battery makers to secure access to these precious resources. To do so, Europe must not only support the development of battery gigafactories on EU soil but also encourage innovation in battery chemistry.
Tech Implications
There are various types of batteries depending on the chemistry used in cells. Nickel-based chemistries represent 85% of market demand today but LFP or Lithium Iron Phosphate chemistry has been gaining terrain as it does not need Nickel or Cobalt, the most expensive rare metals out of the 5 mentioned earlier. While LFP batteries do have a lower density and reduced autonomy, they have a longer life expectancy making their cost over time smaller. Their weaker electrical density makes them better fitted for small and medium range vehicles but innovation in the field and price increase in metals have fueled the growth in demand.
In a similar fashion, some companies are betting on the lack of lithium to power our cars and look towards sodium-based batteries. Companies like Tiamat have developed a Sodium-ion battery well suited to power low-range vehicles, scooters, bikes or even toys.
Identified players: Enwires, Echion Technologies, Battrion, Tiamat, Wildcat Discovery Technologies, Theion, Hive Electric
Cell production and pack assembly
Challenges
Cell production and pack assembly are capital intensive and have a strong impact on the battery’s overall performance. Cell production consists in taking the components mentioned above and combining them into a cell that looks like a bigger version of cylindric batteries used in toys. Pack assembly is when the battery takes its ultimate form, welding the cells together and connecting them to the BMS (Battery Management System) which controls the energy coming in and out of the battery. To share capital expenditure, exploit synergies and optimise battery integration to the vehicle, carmakers are building partnerships with battery makers and cell production and pack assembly are becoming more and more intertwined.
Battery efficiency and durability will also be a major challenge for cell producers and carmakers alike in the coming years as consumers will only adopt electric cars if they can drive and keep them as long as gas cars.
Finally, flexibility will be a fertile innovation area. As of now, most battery makers only produce one type of battery cells per gigafactory. To illustrate, Northvolt the Swedish cell manufacturer will only make Lithium-Ion battery based on NMC chemistry (Nickel, Manganese and Cobalt). A cylindric NMC cell will not be able to be combined with cells relying on different chemistries such as Sodium or LFP to make a battery. This lack of flexibility leads to more vertical integration and strong bonds between carmakers and battery producers.
Tech Implications
The most innovative battery makers and the carmakers most engaged in the full supply chain will be the ones coming out on top as they manage to increase vehicle autonomy, battery life expectancy and battery cell flexibility. Moreover, the battery makers integrating recycled cells to their production process might find a competitive advantage on the way as they secure a new access to supply, answer to key regulatory obligations and gain some notoriety in the eyes of the increasingly environmentally conscious public.
While cell production has been trusted by huge, well installed players such as BYD and CATL, new actors are starting to appear in Europe as the continent tries to encourage local battery production. Northvolt built a gigafactory in Sweden and is working with brands such as BMW and Volkswagen. Verkor recently raised 250M€ to build a factory in the north of France and is working with Renault to provide batteries for its electric cars.
Innovation might also sprout around the BMS (Battery Management System) since a good BMS will allow better battery performance and will increase its life expectancy. Safety concerns will represent a strong barrier to entry as an overcharged battery can catch fire. The best BMS innovators will require a strong dual expertise on both the electrical and the software side. Startups like Breathe Battery Technologies or Brill Power have raised 2M$ and 12M€ respectively to tackle the BMS opportunity.
Finally, the passage from individual cells to packaged batteries will also be an interesting area to look at. One of the main innovations improving battery economics and density is cell-to-pack technology or CTP. Cells are usually welded together and inserted into a pack. This impacts the weight of a battery as well as the repairing potential of a battery. CTP allows to assemble the cells directly into the battery pack rather than arranging them beforehand as modules. This reduces the dead-weight without impacting the performance. Gouach a young French startup which recently raised funds with Breega is looking at new ways of assembling batteries to reuse thrown out cells.
Identified players: Verkor, Northvolt, Breathe, Brill Power, BiB Batteries, PowerUp, BatConnect, Wattalps, Silicon Mobility, Zitara, Freyr, BritishVolt, ACC, EasyLi, Otonohm, E-mersiv, Enerstone, Gouach, Entroview.
Recycling and end-of-life
Challenges
As mentioned earlier, the battery revolution must be a sustainable one and for that to happen, we must take a battery’s end-of-life into account.
Encouraged by consumers’ changing behaviours and enforced by laws looking to implement sustainable consumption, products are now being looked at with their entire life cycle in mind. Batteries are not exempt and, in Europe particularly, the new value chain will be closely monitored to make sure batteries are recycled and re-used as much as possible. In Europe, at least 50% of a battery’s weight must now be recycled. A more recent proposal has set out targets aiming for 70% of batteries to be collected and 95% of cobalt, copper, lead, and nickel recovered; 70% for lithium.
Making a value chain fully circular is no easy task, and with products as complex as batteries, it’s a huge challenge. Battery makers and car manufacturers are already looking into ways to control the full life cycle of their batteries and vehicles not only so they can abide by the law or market themselves as “green” but also so they can secure a potentially infinite source of raw materials. Waste managers are also looking into how to collect batteries and retrieve the valuable components and materials in them. The quality of the recycling process will be a critical challenge to ensure a sustainable battery value chain. The economic equation of recycling must be advantageous for both the battery maker buying back the raw materials and for the recycling player selling them.
Tech Implications
As of today, most battery-recycling consists in highly polluting and energy demanding processes where batteries are shredded into thin dust which is then treated to extract metals. Unfortunately, this process destroys the value created by refining materials and creating battery components, a key part of the value chain. Innovation is strongly needed in the field to be able to retrieve cathodes and anodes from old batteries rather than raw metals. A major challenge to make battery recycling more profitable.
Stakeholders are answering recycling and end-of-life challenges through various ways. Car makers are partnering with waste managers and battery makers to develop closed loops for their products and exploit synergies. Renault has partnered with Veolia and Solvay while NorthVolt will collaborate with BMW and Umicore.
Start-ups will play an important role at this level of the value chain by innovating in recycling methods but also by looking at means of extending battery life. Nowos is doing just that by fixing batteries, setting up collection points and circular supply chains with its clients. Mecaware tackles the recycling part by using CO2 to retrieve metals from old batteries and gigafactories’ scraps.
Identified players: Mecaware, Nowos, Li-cycle, Redwood Materials, Battri, Cylib, tozero, Li Industries, Sortera, Posh, Doctibike.
Transparency, Traceability and Training
Challenges
Across the entire battery value chain, transparency, traceability, and training aspects will also need to be addressed. From the metals being extracted to a cell being produced or the battery being shredded, the battery value chain will need to be transparent and will require a new type of workforce to answer all the challenges we pointed out.
Transparency and Traceability
As of now, the complexity of the chain has forced battery makers such as Verkor to use specialised consulting firms for transparency purposes, which no existing players have yet been able to challenge. For instance, Verkor has hand-picked Optel and Bureau Veritas.
Transparency claims will have to answer both environmental and ethical concerns with the mining industry not only being one of the most polluting in the world but also one of the most obscure. In Congo alone, an estimated 250 thousand people work in artisanal mines where safety measures are limited, and human rights neglected if not absent. Child labour is also commonplace with Unicef estimating about 40 thousand children work in Congolese mines.
Unfortunately, we have found very few companies able to provide trust-worthy solution for transparency purposes. Some, like Seedtrace are experimenting with blockchain technology to make sure payments are received by cocoa farmers in Africa, a technology which might one day be used for miners but still very far from the precision one could hope for. If you feel like your company is tackling transparency, we’d love to hear about it !
Training
Finally, to answer the huge industry need for a qualified workforce, estimated around 800 thousand people in Europe, many players will have to evolve. Existing curriculums in engineering schools will have to adapt and include new modules to train adequate engineers. As evidence of this critical gap in the workforce supply, only one school in France is specialised in electro-chemical engineering with only 40 graduates a year.
Some companies have already taken the matter into their own hands. Verkor has signed partnerships with schools and training institutions to create the “battery school” and hopes to train around 1600 people a year. The European Battery Alliance has also launched a program to help create the battery industry in Europe, with onsite training as a core part of its development. IFP Training, an institution previously focused on oil and gas industry skills is also offering masters related to the battery industry.
Identified players: Bureau Veritas, Optel, Circulor, Seedtrace, Verkor, EiT InnoEnergy, IFP Training, CEA, La Solive, Tilkal, EcoVadis
The race for electrification brings along major opportunities to innovate. All stakeholders from start-up founders, industrials, and investors to government officials, research labs and schools will need to work together to drive breakthroughs in a context where sustainability is key, and everyone needs a battery. We set out to explore the battery industry, understand the challenges it will face and the companies trying to solve them, but our research is naturally non exhaustive. We would be thrilled to extend the discussion by learning about challenges we missed, opportunities we didn’t see or companies we didn’t hear about. Feel free to reach out, we hope you enjoyed the read.
Authors
Benjamin Cuningham — Junior Analyst @Citizen Capital
Diane Roujou de Boubée — Investment Director @Citizen Capital
