Gigascrap: The Path To Matching Li-ion Production & Recycling Capacity In Europe
- The European Union/European Economic Area (EU) proposed battery regulation seeks to create a closed-loop, cradle to cradle battery production ecosystem with mandatory, traceable recycling and recycled content in lithium-ion batteries.
- Production scrap from new EU factories will necessitate a rapid ramp-up in recycling capacity. A mix of incumbent recyclers and startups will deploy newly developed technology native to lithium-ion through acquisitions, licensing, and public financing.
- Second-life, early scrap age, total loss accidents, and “vestigial hybrids” will shift the majority of recycling feedstock away from OEM repair shops and towards “orphan” or “stranded’’ batteries. Point of collection diagnostic and processing which reduce hazardous shipping will provide solutions to expensive and complex logistics arising from an increasing number of collection points.
Regulation Induced Development
On December 10, 2020 The European Commission released a proposal for the regulation of lithium-ion batteries. This proposal encompasses the entire cradle-to-cradle lifecycle and has proposed standards in the lithium-ion ecosystem that have prompted many stakeholders to act. This has also impacted ecosystems outside the EU in anticipation of a similar regulatory framework.
In practice, the energy storage value chain will operate within EU borders as much as possible, necessitating the need for European li-ion recycling facilities amongst other supporting industries. The amount of new investment needed for recycling facilities will be in the billions of euros by the end of this decade, so it is critical to determine when and how much recycling capacity is needed.
We have analyzed recycling technologies, feedstock, and waste process paths to gain a better understanding of the quantity and throughput of waste batteries. In-process and end-of-line production scrap will amount to GWh equivalents if the EU gigafactory pipeline meets capacity as planned. We have also spoken with senior engineers and managers in battery production to aid in forecasting lithium-ion recycling capacity requirements within the EU.
Recycling Ecosystem — Technology Shift & New Entrants
Until recently, lithium-ion batteries were only recycled using pyrometallurgical processes. The combination of low material recovery and high processing costs resulted in recyclers assessing ‘gate fees’, often resulting in excessive costs for proper disposal. Recently developed mechanical and hydrometallurgical processes have lowered costs and increased material recovery enough to make recycling profitable without gate fees, in many cases giving waste batteries intrinsic value.
The announcements of significant precursor capacity in the EU by BASF, Terrafame, and others will help ensure that recovered battery material from all EU sources are used to produce batteries in EU factories. With local customers and feedstock suppliers as well as easier facility siting than pyrometallurgical smelters, European recyclers can achieve economies of scale and in some cases, be co-located with customers and suppliers.
Manufacturing Scrap — Generated from electrodes and other trimmings as well as in-process and finished products that fail quality control.
Consumer Electronics — Typically smaller-format prismatic or cylindrical cells with high cobalt content.
Auto OEM EV Batteries — Traction batteries from HEVs, PHEVs, and BEVs. We are assuming that all BEV batteries will be placed in a second-life application and will not need to be recycled before 2030. We will only model HEV and PHEV traction batteries.
ESS — Energy storage systems typically use similar or the same batteries as BEVs and are lightly cycled in many applications. We predict many ESS batteries will not need to be recycled before 2030 and will not model this relatively small segment.
Manufacturing Scrap — Material wastage from all production processes can account for 10%-30% of material inputs. We will conservatively estimate 30%, 20%, 10%, and 5% in years one, two, three, and thereafter, respectively and apply it to the January 2021 European Gigafactory pipeline by Roland Zenn. We also assume EU capacity will meet EU demand using the BNEF EV forecast.
HEV + PHEV — We utilized sales data from the Bloomberg terminal and assumed a 15-year peak scrap age with average pack sizes of 10 kWh and 2 kWh for PHEVs and HEVs, respectively. We do not foresee many packs being replaced before the cars are scrapped due to light duty cycles and consumer behavior. Most consumers are unwilling to pay for a repair that Is comparable to the cost of the car. We predict that this will lead to ‘vestigial hybrid’ batteries in cars that operate normally without a functioning traction battery. For others, a damaged battery pack during an accident will lead to a higher number of total loss accidents per capita for all EVs. This will lead to an earlier overall scrap age. In all cases, we see most EOL EV batteries originating from auto recycler yards as ‘orphan’ or ‘stranded’ batteries and not OEM repair shops as many have assumed.
Conclusion — EU Recycling Capacity Forecast
Based on available and reliable market data and forecasts along with the preceding assumptions, we believe the EU should have at least 20 GWh/200,000 tons of native lithium-ion recycling capacity by 2023 and resume building capacity after 2030 to accommodate end of life BEV batteries and additional scrap from the expansion of EU battery manufacturing.
[Our assumptions are conservative and we discounted or omitted relevant but less significant factors like the export of used xEVs and consumer electronics. We wanted to keep the model simple in the 2021–2030 window to show that production scrap will be the impetus to ramp up recycling capacity for the EOL batteries being manufactured by EU gigafactories. This also assumes scrap exports will continue as long as scrap supply exceeds regional recycling capacity.]