Bridging the US battery supply chain chasm
Li-Bridge alliance assembles to span $1 trillion energy rift Critical Minerals Alliances - September 12, 2023
Last updated 9/11/2023 at 9:36pm
There is nearly a $1 trillion chasm between where the United States' lithium battery supply chain is today and where it needs to be by 2035 in order to build the envisioned green energy future where electric vehicles are charged with low-carbon energy. Roughly 40% of this investment will need to go toward ensuring there is a plentiful supply of cobalt, graphite, lithium, nickel, and other battery materials.
Simon Moores, CEO of Benchmark Mineral Intelligence and one of the world's foremost authorities on lithium battery supply chains, has dubbed this wide abyss the "great raw materials disconnect."
"A disconnect where the mine supply is going about half the pace of battery EV demand. And that gap is going to take a long time to bridge, it's going to take more than this decade to bridge," he said during the opening address of Benchmark's Battery Gigafactories USA 2023 conference in Washington, DC.
Amongst the crowd listening to Moores' impassioned battery supply chain speech were members of Li-Bridge, an alliance of America's national laboratories and companies along the entire lithium battery supply chain that was assembled for the very purpose of bridging the rift that lies between today's lithium supply chain realities and the clean energy future.
"Li-Bridge is optimistic that the U.S. industry can build sustainable competitive advantages, overcoming any comparative disadvantages the United States may have in the form of higher costs or a lack of critical mineral resources and enabling the U.S. industry to thrive without perpetual government support," the public-private alliance penned in its Building a robust and resilient U.S. lithium battery supply chain report published in February.
Forging a battery alliance
Created as a vehicle to accomplish the directives laid out in President Joe Biden's Executive Order on America's Supply Chains, Li-Bridge was convened by the U.S. Department of Energy in 2021 and is helmed by Argonne National Laboratory, which is known for its ability to move battery innovations from the lab to the market.
Understanding that bridging the great lithium battery supply chain disconnect will require an all-hands-on-deck effort, Argonne forged alliances with three U.S.-based groups – NAATBatt International, NY-BEST, and New Energy Nexus – that represent more than 600 industry stakeholders across the battery ecosystem.
"While the U.S. has all the pieces to achieve these goals, they are fragmented. The Li-Bridge alliance will bring these pieces into a cohesive whole," said Venkat Srinivasan, director of the Argonne Collaborative Center for Energy Storage Science.
After more than a year of meetings with its members, Li-Bridge published a national blueprint with 26 key steps to ensuring the U.S. has a reliable supply of the critical minerals, manufacturing capacity, and talent to establish a robust and sustainable supply chain for lithium battery technology that will power the clean energy transition in North America.
"From enabling renewable energy and providing reliability and resilience for our electric grid to powering our future electrified transportation systems, batteries are at the center of the clean energy transition," said NY-BEST Executive Director William Acker.
Starting from behind ... China
Li-Bridge and its government and private sector members, however, know that the U.S. has already fallen well behind Asia and Europe when it comes to building lithium battery supply chains, and even if the strategy outlined in its blueprint is followed precisely, the nation will not achieve complete lithium battery supply chain independence by 2030.
"Although we are starting to see activity in the domestic battery manufacturing sector thanks in large part to the Bipartisan Infrastructure Law and the IRA (Inflation Reduction Act), U.S. industry is still 10 to 20 years behind Asia, and about five years behind Europe, in commercializing manufacturing of this critical technology," said NAATBatt International Executive Director James Greenberger.
China, which recognized the importance of lithium battery technology nearly two decades ago, has positioned itself as a dominant global player along the entire supply chain.
Moores addressed China's jump on the rest of the world when it comes to critical mineral and lithium battery supply chains during his keynote address in Washington.
"China's forward thinking and aggressive industrial strategy to build gigafactories, chemical and critical mineral refining plants has ensured the flow of the world's key raw materials is towards China. As a result, huge downstream value is created," the Benchmark CEO and founder said. "Today, Benchmark data shows 80% of the world's lithium-ion batteries are made in China."
He advised the attendees of the lithium battery supply chain conference in the nation's capital that a U.S. strategic decoupling from China will require the development of a robust domestic supply chains that sit alongside this global supply chain base.
"This makes building mines, chemical plants and gigafactories here – at speed and at scale – of paramount importance, regionally and globally," the Benchmark founder and CEO said.
Li-Bridge agrees with Moores' assessment and adds that establishing a domestic lithium battery supply chain under U.S. laws and standards offers enormous ESG advantages over sourcing these materials from countries with far less concern for the environment and human rights.
"Reshoring supply chains reduces environmental footprints and builds social resilience during the energy shocks we're facing this decade," said New Energy Nexus CEO Danny Kennedy.
Three challenges to overcome
With a later start and weaker foothold, Li-Bridge says the U.S. needs to take definitive actions if it is going to overcome domestic challenges that threaten to thwart the building of a robust and sustainable domestic lithium battery supply chain that extends from the mines supplying battery materials to the American EV drivers charging those batteries with renewable energy.
This transition to low-carbon energy is expected to drive a massive 600% increase in lithium battery demand in the U.S. by 2030.
Benchmark calculates that at least $514 billion will need to be invested across the global battery supply chain by 2030 and $920 million by 2035. More than 40% of these investments need to be made in mining, and to a lesser degree recycling, to ensure there is a plentiful supply of raw materials.
"Battery makers, OEMs, and indeed countries – especially the world's leading economy here in the US – need joined-up thinking for this," said Moores.
Aside from the geopolitical risks inherent with being heavily reliant on imports from China, this rapid rise in demand for batteries and the materials they are made from has American automakers and battery manufacturers competing in a global market where demand is outpacing supply.
And, with U.S. military equipment increasingly dependent on lithium-based batteries, relying on imports for the raw materials and components for these batteries is a strategic risk to the nation.
Moores said this has thrust lithium-ion batteries supply chains to "the top of the geopolitical agenda" for nations around the globe.
In its 2023 report, Li-Bridge outlined three major challenges to establishing a domestic lithium battery supply chain that will dramatically increase U.S. national and economic security – impatient money, uncertain permitting, and a dearth of critical minerals.
Impatient Western money
Building an entire lithium battery supply chain from the ground up in the U.S. is going to take an enormous amount of cash and patience.
From the mines to the mineral processing plants and onto the lithium battery materials and manufacturing plants, the facilities required to meet the energy storage needs for EVs and renewable energy must be built at giga-scale.
Not only do mines and factories at this scale take massive investments, but they also require a lot of time to design, permit, and build.
For example, a U.S. mining project that has already completed a feasibility study that demonstrates it could offer healthy returns on investment has a long runway before it is cashflow-positive – permitting a large mining project in the U.S. is expected to take at least four years, and often much longer, and then another roughly two years for development. This means that a large U.S. mining project entering permitting today would likely not begin delivering materials into the lithium battery supply chain until the end of the decade.
While lithium battery processing and manufacturing facilities tend to take less time to permit and build, they require large initial investments in research and development, time to design and build the manufacturing equipment, and a somewhat lengthy runway to scale up to full commercial production.
These long timelines, coupled with the associated risks, often dissuade Western investors that determine their cash would be better allocated in areas with proven technologies and returns in the nearer term.
Due to differences in business culture, however, Asian investors tend to take a longer-term view.
"Consequently, Asian investors fund a disproportionate share of U.S. battery-related projects. This has historically resulted in the transfer of much U.S.-based know-how and battery-related intellectual property offshore," Li-Bridge inked in its report.
The alliance believes that expanded and better-designed incentives on both the supply and demand sides of the equation will make the U.S. battery supply chain more attractive to American investors.
While the battery supply chain incentives in the Inflation Reduction Act go a long way to addressing this issue, Li-Bridge says that more must be done.
The public-private alliance recommends the following:
• Capex incentives: Expand incentives to offset capital expenditures for mining, processing, and manufacturing.
• Production incentives: Expand incentives, such as production tax credits, to offset production-related costs.
• R&D incentives: Quickly develop and implement tax treatment and incentives that make investment in battery research and development more attractive.
• Demand incentives: Expand EV sale incentives to include trucks, buses, construction, agriculture, mining, and other offroad equipment that include domestic material requirements.
• Government procurement: Leverage government procurement programs to support next-generation technologies and provide advanced market commitments that reduce commercialization risk.
• Insurance pools: Create insurance pools for battery and battery material producers to hedge against the risk of product recalls and make it easier for U.S. companies with smaller balance sheets to compete with established foreign suppliers.
"The U.S. government must take actions to enhance the expected returns on financial investments in U.S.-based lithium battery supply chain-related projects (e.g., battery materials, components, cells, or manufacturing equipment) and reduce the perception of demand uncertainty in the U.S. battery market," Li-Bridge penned in its report.
The federal government has begun to make the type of large and meaningful investments needed across the entire battery supply chain, including investments in helping companies like Jervois Mining USA and Graphite One Inc. complete feasibility studies for domestic cobalt and graphite mines; $2.8 billion in grants for 20 projects to expand the domestic manufacturing of materials for lithium batteries; and a $2 billion to support Redwood Materials Inc.'s expansion and construction of a battery recycling and manufacturing complex in Nevada.
"In order to meet the needs of the rapidly growing EV market, the United States will need to expand battery recycling capabilities, as well as grow our domestic capacity for producing battery precursor materials," Jigar Shah, director of DOE's Loan Programs Office. "By lowering the cost of the critical materials for lithium-ion batteries using recycled materials, electric vehicles can become more accessible to lower income communities."
Uncertain and lengthy permitting
One way to provide American lithium battery investors with more confidence and a quicker return on investment is to bring some predictability to the uncertain and lengthy permitting process in the U.S., especially when it comes to the mining projects that feed materials into the supply chain.
"Several Li‑Bridge participants cited delays in their projects ranging from six months (cell manufacturing and grid energy storage projects) to a full decade (mining projects)," the battery supply chain alliance inked in its report.
Li-Bridge pointed to four major factors that contribute to long and unpredictable permitting timelines in the U.S. – opaque bureaucratic decision-making, a lack of firm permit process deadlines, inconsistent appeals process, and resistance from community groups.
The long mine-permitting timelines in the U.S. is something that is weighing heavily on the minds of American auto executives scrambling to find reliable, sustainable, and preferably domestic sources of the raw materials needed to build EVs that were not required for internal combustion vehicles.
Ford Motor Company, a member of Li-Bridge, has been particularly vocal about the need for mine-permitting reform in the U.S.
"Today's lengthy, costly and inefficient permitting process makes it difficult for American businesses to invest in the extraction and processing of critical minerals in the United States," Christopher Smith, the chief government affairs officer at Ford, penned in a 2022 letter to the U.S. Department of Interior.
While automakers like Ford want to ensure that the materials going into their batteries are sourced from the U.S. or allied countries, which will make the EVs they build eligible for tax credits offered to American car buyers, they also want to be able to tout the ESG credentials of their electrified models – something that would be easier to do if the mined materials came from a country with strong environmental and labor laws.
"As I've stated before, we currently get our materials for EVs from China, where environmentally responsible mining and processing is non-existent and has caused significant harm to surrounding areas and populations (yet good enough for us to use in EVs, wind turbines and other renewables)," Smith penned in his letter to DOI. "And still, there's opposition to environmentally responsible mining in the US!" the Ford exec added.
Li-Bridge's top priority for Congress is to pass mine permitting reform that will help U.S. companies secure the minerals needed to build the low-carbon future.
This includes improving mine permitting predictability with time limits, transparency, and a lead agency that guides a harmonized permitting process.
These issues were partly addressed during the July debt ceiling negotiations that resulted in the Fiscal Responsibility Act of 2023, and there is legislation in the Senate that tackles the other permitting issues outlined by Li-Bridge.
For more information on large project permit reforms in the U.S., read "Will US permit a clean energy transition?"
Dearth of critical minerals
Even with a streamlined permitting process, the mining sector faces a challenge when it comes to feeding enough battery minerals and rare earths into the automotive supply chain until the first generations of EVs traveling American highways are recycled.
Based on current formulas and technologies, EV batteries alone are expected to consume around 2.4 billion lb cobalt, 1.6 billion lb of lithium, 12 billion lb of graphite, and 7.2 billion lb of nickel per year by 2040.
This equates to six times more cobalt, six times more lithium, nearly five times more graphite, and roughly the same amount of nickel produced for all sectors at every mine on Earth during 2022.
To fill this demand, a lot more battery mineral deposits must be discovered, explored, permitted, and developed into mines.
Benchmark Mineral Intelligence estimates that more than 300 new mines will need to come online by 2035 to meet the demand for cobalt, graphite, lithium, manganese, and nickel for the lithium batteries powering EVs.
This is a tall order when measured against the typical decades-long mineral discovery-to-producing mine timelines, which tend to be longer in the U.S. due to the longer permitting process.
In addition to streamlining U.S. mine permitting, Li-Bridge has seven recommendations to ensure plenty of minerals are fed into the American battery supply chain:
• Critical minerals databases: Expand and accelerate the creation of a national database of critical mineral resources and make this data available through an online portal and interactive map. At the same time, develop a dashboard that tracks and forecasts international supply chains.
• Foreign partnerships: Support prioritized access to critical mineral mines in partner countries through financial support from the U.S. International Development Finance Corp. and continue to strengthen country-level cooperation.
• Circularity: Establish an industry-led waste battery end-of-life program, harmonize regulations for transporting waste batteries, and support the recovery and use of domestically recycled content.
• Trade control: Recalibrate trade controls to encourage U.S. companies to develop high-energy-density solutions and compete for global business. Consider export controls to reduce leakage from the U.S. energy materials supply chain.
• Critical minerals sea mining: Conduct definitive environmental studies on critical mineral sea mining that serve to remove uncertainty regarding U.S. company participation in sea-based mineral extraction and purchasing
• Stockpile: Bolster the National Defense Stockpile for battery-critical minerals and materials in a manner that smooths commodity pricing cycles and does not exacerbate supply shortage or inflate raw material costs for U.S. manufacturers.
• Infrastructure: Invest in more clean energy generation and upgrade port and rail systems to make the U.S. lithium battery supply chain more economically competitive.
• Industrial zones: Select and designate special industrial zones for battery production to support the efficient clustering of battery-related operations. Steer government financial support to those zones. Implement within those zones streamlined regulatory processes recommended by industry and approved by local authorities and communities.
"The United States must work simultaneously to encourage the development of minerals and materials mining domestically and to secure the supply of raw products from reliable trading partners abroad," Li-Bridge penned in its battery materials blueprint. "An effective raw materials strategy must also include significant support for lithium battery recycling and developing a battery materials export control policy."
Above all, an alliance
While the U.S. battery material blueprint is an important asset that offers solutions to nearly every conceivable challenge associated with building a North American lithium battery supply chain, the Li-Bridge alliance itself is the capstone.
"The public-private partnerships described in this report will be crucial to realizing that safer, cleaner future that will benefit generations of Americans to come," said U.S. Deputy Secretary of Energy David Turk.
Bringing together the political clout of government agencies, the brainpower of American academia and the national lab systems, and the expertise and financial wherewithal of companies that span the entire lithium battery supply chain creates a powerful alliance that can tackle the challenges much more efficiently as a group than they can individually.
This includes a united front in gaining bipartisan support in Congress and the White House for policies that support building a domestic supply chain at the pace needed to achieve America's energy transition and climate goals.
The alliance also offers the potential to create a consortium for purchasing critical battery-related minerals and materials from domestic and foreign sources that improves buying power. This would make the U.S. battery industry more competitive against countries, such as China, that have large state-backed companies and are more directly involved with materials production and purchasing.
Li-Bridge believes the formalization of its alliance, coupled with the U.S. government implementing the recommendations in its blueprint, will ensure the U.S. can capture 60% of the economic value from U.S. domestic demand for lithium batteries by 2030 and become a global power in the lithium battery industry and a major exporter of finished batteries and battery-related technology by 2050.
"By moving forward aggressively with the recommendations Li-Bridge is advancing today, the U.S. will be well positioned to unlock the benefits batteries can provide to improve our environment and our economy," said NY-BEST's Acker.