NewEnergyNews: TODAY’S STUDY: Global Battery Energy Storage Competition Tightening

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    Tuesday, December 05, 2017

    TODAY’S STUDY: Global Battery Energy Storage Competition Tightening

    India’s Energy Storage Mission: A Make-in-India Opportunity for Globally Competitive Battery Manufacturing

    November 2017 (NITI Aayog and Rocky Mountain Institute)

    Introduction

    In line with its aspiration to achieve 100 percent electric vehicle (EV) sales by 2030, India can rise among the top countries in the world in manufacturing batteries. To do so, however, will require a strategy designed to overcome India’s relatively weak initial position in battery manufacturing while claiming an increasing share of total battery value over time.

    India’s market for EV batteries alone could be worth as much as $300 billion from 2017 to 2030. i India could represent more than one-third of global EV battery demand by 2030 if the country meets its goals for a rapid transition to shared, connected, and electric mobility (Figure 1). Since the battery today accounts for about one-third of the total purchase price of an EV, driving down battery costs through rapidly scaling production and standardizing battery components could be a key element of long-term success for India’s automotive sector. India's EV mission could drive down global better prices by as much as 16 percent to $60 per KWh. Given the projected scale of its domestic market, India could support global-scale manufacturing facilities and eventually become an export hub for battery production.

    Analysis by NITI Aayog and Rocky Mountain Institute (RMI) indicates that domestic battery manufacturing to supply the transition to EVs is an important market opportunity for the Indian economy. It would bring economic and social benefits from reduced oil imports, improved public health, and increased integration of renewable energy supplies into the electric grid. This analysis estimates that 25–40 percent of the total economic opportunity represented by battery manufacturing for India’s EV ambitions can be captured in India even under the least favorable scenario, where India imports all lithium-ion cells and assembles these cells into battery packs. As India’s battery manufacturing capabilities mature and supply chains are established, India will have the opportunity to produce both battery cells and packs, while importing only the cathode or its raw materials from mineral-rich regions. In this scenario, India stands to capture nearly 80 percent of the total economic opportunity.

    Figure 2 shows the value contribution of different battery components from Tesla’s gigafactory in the United States and the stages by which India could advance a make-in-India strategy for batteries that would capture progressively more value over time.

    We suggest that the development of India’s battery manufacturing industry can proceed in three stages, with progressively larger economic value capture at each stage, as follows:

    • Stage One – Developing battery pack manufacturing capacity and establishing a multistakeholder research and development consortium.

    o India’s cumulative EV battery requirements between 2017 and 2020 will be at least 120 GWh on a trajectory to 100 percent EV sales by 2030. Assuming that India will be manufacturing primarily battery packs from imported cells during this period, India stands to capture 25–40 percent of the economic opportunity from battery sales, an economic value of between INR 0.4 lakh crore and INR 0.5 lakh crore.

    • Stage Two – Scaling supply chain, capitalizing on research and development, and realizing the benefits of the consortium-led approach to set strategy and planning for battery cell manufacture.

    o India’s cumulative EV battery requirements between 2021 and 2025 will be at least 970 GWh. Assuming that India will still be manufacturing only packs in this period, India continues to capture 25–40 percent of the total economic opportunity, an economic value of INR 2.0–2.9 lakh crore. If battery cell manufacturing scales too, this value will increase.

    • Stage Three – Scaling end-to-end manufacturing capacity for batteries, particularly focusing on battery cell capacity.

    o India’s cumulative battery requirements between 2026 and 2030 will be at least 2,410 GWh. Assuming that India will be manufacturing both cells and packs while importing only cathodes (depending on technology used), India stands to capture nearly 80 percent of the total economic opportunity, an economic value of INR 9.3–13.7 lakh crore.

    While these stages reflect progressively more challenging levels of manufacturing prowess and greater value capture, they could overlap in practice as India’s battery manufacturers pursue different strategies. Some Indian manufacturers might move relatively quickly to full-scale battery production through partnerships with today’s leading lithium-ion battery manufacturers, while others could adopt a more gradual approach, including developing new battery chemistries and production methods.

    By developing battery manufacturing expertise and scaling its domestic production capacity, India can build durable economic advantage in this key sector. While securing raw materials will be critically important to India’s battery manufacturing supply chain, recent analyses indicate that for most key constituents, sufficient supplies should be available to meet projected increases in demand. For example, a recent study by BNEF found no long-term issues with global supply of lithium. Under optimistic projections for lithium demand, only a very small share of extractable reserves of lithium will be required for global EV battery production through 2030. The lithium requirement to meet projected demand for EV batteries in 2030 is about 60,000 metric tons—just 0.7 percent of known global reserves.1

    Temporary raw material supply shortages that may emerge as the industry ramps up could be addressed by opening new mines or expanding production by building additional evaporation pools to extract lithium from brine. 2 While India is not rich in domestic reserves of minerals such as lithium, manganese, and cobalt that many of today’s common EV batteries require, India can build manufacturing capabilities that capture a significant portion of the value chain in this sector, as other countries are doing.3

    But what might be the overall impact on India’s balance of trade? Even though India’s electric mobility policies are likely to necessitate significant imports of batteries, battery components, and/or raw materials as India scales up its domestic battery manufacturing capacity in the years ahead, the reduction in oil import costs is likely to more than offset the costs of these imports.

    Under a business-as-usual scenario, India would need nearly 1.6 billion metric tons of oil equivalent of petrol and diesel to fuel its passenger mobility sector from 2017–2030. At a conservative crude-oil price estimate of $52/bbl (lower than today’s prices), this oil import demand would cost nearly $670 billion or INR 44 lakh crore over the period 2017–2030.iii Assuming India continues to import 80 percent of its oil, this could represent a total import bill of roughly $550 billion or INR 36 lakh crore.

    In contrast, meeting India’s EV ambitions through 100 percent domestic manufacturing of batteries would require at least 3,500 GWh of batteries at a wholesale cost of $300 billion (INR 20 lakh crore)iv from 2017–2030—less than half the cost of the avoided oil imports. In addition, battery manufacturers could seize 25-40 percent of the market’s value at the onset by assembling battery packs in India and importing only battery cells. In this case, India’s total value of imports for EVs would be between $180–225 billion or INR 12–15 lakh crore. Noting that India may still be consuming nearly INR 17 lakh crore worth of petrol and diesel, this would still represent an import saving opportunity of INR 4 lakh crore for Indiav (see Figure 3).

    Batteries are a one-time upfront investment for EVs, serving as an asset (with potential for additional revenue streams through secondary use in stationary applications in India) and contrast with ongoing operating expenses for fuel needed for petrol or diesel vehicles. Every battery purchased will reduce oil imports for many years to come, improving future years’ trade balance and reducing India’s exposure to oil price shocks.

    To advance Make in India, shifting to electric vehicles and batteries allows India to become its own supplier of energy for transportation (electricity produced in India) and a leading manufacturer of the batteries used to store and transport that energy…

    Global Context And Impact…Key Challenges To Scaling India’s Battery Industry…Three-Stage Solution Approach…

    Conclusion and Next Steps

    Battery manufacturing represents a huge economic opportunity for India. Ambitious goals, concerted strategies, and a collaborative approach could help India meet its EV ambitions while avoiding import dependency for battery packs and cells. This could help establish India as a hub for cutting-edge research and innovation, boost its manufacturing capabilities, create new jobs, and foster economic growth. India’s strengths in IT and manufacturing, its entrepreneurial and dynamic private sector, and its visionary public and private sector leadership will be key factors in realizing these ambitions. Aggressive forward movement in battery manufacturing could cement India’s opportunity for radical economic and industrial transformation in a critical and fast-growing global market.

    Our analysis of India’s battery manufacturing opportunity yields the following conclusions:

    1. India’s demand for batteries to meet its mobility transformation goals will support global-scale production that could place India among the world’s leading battery manufacturers. By 2030, India could account for more than one-third of the global market for batteries for electric vehicles.

    2. While India is starting from a relatively weak position in battery manufacturing globally, the scale of its market opportunity is attracting strong interest from leading companies in India and globally. Battery production in India could ramp quickly if manufacturers have confidence in future market growth.

    3. Clear and stable policies to guide India’s transition to EVs are fundamental to support investment in vehicle and battery manufacturing capacity in India.

    4. Coordination among industry stakeholders and government can help to define a pathway to growth and competitiveness by establishing a shared technology roadmap, creating common standards, and aligning policies. Building on the recommendation from India Leaps Ahead: Transformative Solutions for All for an “India Platform for Vehicle Manufacturing,” NITI Aayog and RMI recommend that India create a consortium of battery manufacturers, OEMs, government officials, and subject experts to inform and coordinate the deployment of capital and intellectual resources and advance to a position of global leadership in battery manufacturing.

    a. The government will play a key role in catalyzing, convening, and driving this consortium. The government’s active engagement will not just infuse urgency and purpose; it will create an opportunity for open dialogue on the policies around battery manufacturing and technology development.

    b. The consortium could include key global battery R&D and manufacturing partners to bring India up to speed with global innovations, avoid past failures, and invest resources in areas that can help India build competitive advantage in battery manufacturing.

    c. This consortium will help key stakeholders coordinate and collaborate on a technological pathway for battery manufacturing in India. By focusing on joint R&D on long-term, high-risk opportunities, the consortium will support continuous innovation across the whole supply chain.

    5. While the agenda and the role of the consortium should to be flexible to ensure that consortium members see sustained value in the face of evolving market needs and challenges, some initial objectives of such a consortium could include:

    a. Developing a common technological roadmap for the battery manufacturing industry

    b. Coordinating R&D on new and advanced battery technologies, including those that leverage innovative manufacturing technologies and alternative chemistries

    c. Driving adoption of domestically manufactured batteries in multiple additional use cases

    d. Conducting advanced research on battery reuse and recycling to reduce need for imported minerals

    6. This consortium approach can also be extended to the vehicle design and manufacturing process, as an increasing number of vehicles will be utilized for service provision as opposed to personal ownership in the future. In such a future, many common parts will be indistinguishable to the enduser customer/rider, and many vehicles could share common components. Common design and manufacturing of such parts could further reduce overall manufacturing and design costs and improve delivered quality.

    7. Start-up incentives can be used to de-risk early stage investments in battery manufacturing and accelerate the development of India’s domestic battery manufacturing industry. These incentives could include land grants, tax incentives, streamlined permitting, encouraging foreign investment, direct subsidies, and R&D support. 8. Scaling of battery production can be supported through supply chain coordination and debottlenecking, infrastructure development, and end-to-end planning and coordination.

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