The adoption of electric passenger vehicles is expected to be instrumental in a global frenzy to beef up the world’s Li-ion battery manufacturing capacity to meet surging demand.
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Together with other forms of electrified transport and storage applications, annual demand for batteries will approach 7 terawatt hours (TWh) in 2030. Given that factory capacity stood at just 0.76 TWh at the end of 2020, investments of some $560 billion are likely needed to cover the shortfall, a Rystad Energy report shows.
With cumulative historical investments made in Li-ion manufacturing having reached a relatively modest $128 billion by the end of 2020, this decade’s spending to meet demand will mean the Li-ion battery manufactory industry will raise cumulative historical investments in the sector to about $690 billion by 2030, and to more than a trillion dollars in the years that follow.
The costs to build battery manufacturing capacity have shrunk over time and the expected investment will drive total manufacturing capability in the 2030s to 6.9 TWh. Of that, 6.5 TWh include the current capacity and coming additions by planned investments, along with unspecified projects that global companies have proposed. The remaining 0.4 TWh should be plugged in with other projects that are needed if global demand is to be met.
Plans for so called gigafactories – facilities able to produce an annual capacity of 1 gigawatt-hour (GWh) or more – are growing and are contributing to economies of scale that allow more cost-efficient fabrication of battery cells. Our outlook for the decade includes around 3 TWh in announced projects thus far, with an additional 3.4 TWh expected to come into the mix by 2030 on the back of expansion plans put forward by Contemporary Amperex Technology Limited (CATL) and Tesla.
“Our research shows that $80 billion of battery sales are lined up for 2021, a 26% increase on 2020 levels. Given the surge in demand for batteries, we expect annual sales will reach $130 billion in 2025 and almost $160 billion in 2030. This growth rate is lower than that of global capacities, but due to the expected changes in battery chemistries and learning curve savings, battery costs are expected to drop this decade, increasing profit margins,” says Matthew Wilks, senior analyst at Rystad Energy. ■
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