Lithium battery technology will be one of the most important technologies of the 21st Century. That is not because there is anything special about batteries. Battery technology has been known to man for 2,000 years. But the development of batteries based on the lithium atom, the fourth lightest element in the universe, has made batteries a critical, strategic technology.
The significance of the light weight, high energy lithium-ion battery is that it can supply electricity to any point in space without the need of an electrical cord. This has opened the possibility of consumer electronics, electric vehicles, drones, renewable energy, implantable medical devices, and high energy weapons at a scale and quality not before possible. It is a virtual certainty that lithium-based batteries will power numerous new devices that will shape human society in 2050 in ways we cannot even conceive of in 2021. Regardless of what becomes of infrastructure packages or clean energy standards, lithium batteries are set to become a critical technology of the 21st Century.
On April 16, NAATBatt held a webinar “Developing a Supply Chain for Lithium-Ion Batteries in North America”. The program focused on five segments of the lithium-ion battery supply chain: raw energy materials, processing energy materials, cathode and anode materials manufacturing, cell and pack manufacturing, and recycling and reuse of the lithium-ion batteries. The webinar explored the question of what would need to happen for North American companies and workers to become world leaders in those business segments, or even to just become viable. Today North American companies lag dangerously behind foreign rivals in all of those business segments.
What the program did not focus on was exactly why it is important that North American companies become leaders in those business segments, rather than just relying on imported battery-related goods and technologies. That question has been a frequent focus of this column in the past. The first reason for that importance is because lithium-ion battery technology and manufacturing will be a significant driver of future economic development. Lithium battery production is likely to spin out new technologies, manufacturing techniques and industries that will be major sources of future job and wealth creation.
The second reason is energy security. Energy security is a broader topic than it may seem. Much has been written about the potential ability of China, which today manufactures about 70 percent of all lithium-ion battery cells and refines 90% of the cobalt used to make those cells, to cut off supply of lithium-ion batteries to the United States in the event of a military conflict. This is a serious and real concern, as lithium-ion batteries power much military kit today.
But the likelier energy security risk of not having a viable domestic lithium battery supply chain is not the risk of military conflict, but the risk of serious economic disruption. It is not just that lithium, nickel and cobalt will become the new oil. It is that the nature of electric vehicles will move the immediate risk of supply constraint-induced price spikes from consumers onto the vehicle makers and battery makers themselves. Given that the auto industry is the second largest employer in North America (after healthcare), this threat has to be taken seriously.
A useful analogy may be found in the airline industry. Fuel price spikes somewhat routinely force weaker airlines into bankruptcy. The problem is that airlines cannot easily pass sudden fuel price spikes through to consumers. Stronger carriers hedge that risk by entering into long-term futures contracts for fuel. Those long-term contracts reduce a carrier’s vulnerability to fuel price spikes, allowing them to survive a spike and live to fight another day.
Electric vehicles basically move the risk of fuel price spikes from consumers, who buy the vehicle fuel today, to car makers and battery makers, who will buy the lithium battery “fuel” of the future (i.e., lithium, nickel, cobalt, etc.). Properly understood, what China is doing in buying up energy materials reserves around the world and domesticating energy materials refining capacity is buying a long-term futures contract on lithium-ion battery supplies that will allow their auto makers and battery makers to survive any future supply shortages or disruptions and resulting price spikes. The European Community seems set to following the same strategy. If the United States does not do the same, it risks having companies such as General Motors, Ford and Stellantis go the way of Eastern Airlines, Pan American and TWA. The resulting disruption to the U.S. economy and job market would be profound.
It is important to understand exactly what the supply chain for lithium-ion batteries is and the degree of redundancy within each segment of that chain. Domestic manufacturing or supply of each such segment is not essential, if redundancy can be assured in other ways. But having a robust domestic source of supply will in many if not most cases be the best way to assure that redundancy.
Earlier this year, several NAATBatt committees worked together to create a mind map of the entire supply chain for lithium-ion battery technology. This coming week, NAATBatt expects to enter into a contract with the National Renewable Energy Laboratory (NREL), to create a database listing every company in North America that is active in each segment of that supply chain. The database will provide an excellent resource for our members in outlining potential business opportunities in the lithium-ion battery supply chain. It will also provide the U.S. and Canadian governments with a good illustration of the supply chain segments where lack of redundancy may be a serious concern.