Europe had been a frontrunner in global cleantech investments until recently, attracting substantial investments in electric vehicle (EV) manufacturing, batteries, and component production. Consequently, over half of all lithium-ion batteries used in the European Union in 2022 were locally produced, and nearly 50 gigafactories were in the pipeline to be built by 2030.
However, the landscape has changed rapidly, largely due to the US Inflation Reduction Act, which injects a significant sum, at least USD 150 billion, into battery components and metals manufacturing in the US and friendly countries. This has disrupted the balance, causing Europe’s share of global investment in lithium-ion batteries to plummet from 41% in 2021 to a mere 2% in 2022.
While it might be tempting to envision parallel development of European and American battery supply chains, the reality is starkly different. Europe faces challenges in terms of a skilled workforce, access to company capital for procurement and permits, and a secure supply of raw materials like lithium.
T&E’s report employs an in-house methodology that examines project maturity, funding, permits, and links to the US. The findings reveal that approximately one-fifth of the announced battery projects are at high risk, with an additional 52% at medium risk. Altogether, almost 70% of potential battery cell supply in Europe is hanging in the balance, and these projects may face delays, scale-downs, or even cancellation if swift action is not taken.
Key projects, such as Northvolt in Germany and Italvolt in Italy, are among those at risk, emphasizing the urgency of the situation.
To counteract the threat posed by US subsidies, Europe needs a robust green industrial policy that harnesses its strengths, including stringent climate regulations on electric vehicles. This policy should create investment certainty and streamline approvals for top-tier projects without compromising environmental safeguards.
Furthermore, T&E emphasizes the need for Europe to prioritize battery value chains, renewable energy sources such as wind, and smart grids. To achieve this, the report suggests establishing a European financial framework, potentially through the European Sovereignty Fund and reallocating EU recovery and other funds in the short term.
The report also addresses concerns about raw materials availability. While Europe is not a mining superpower, a combination of responsibly sourced global imports, sustainable domestic projects, and the recovery of critical metals from waste streams can help ensure access to these essential materials.
In conclusion, Europe’s aspirations in the battery value chain face a significant challenge from China’s dominance and the US Inflation Reduction Act. However, the T&E report underscores that with prompt, targeted, and sustainable action, Europe can still remain competitive and safeguard its position in this critical industry.
Source: “How not to lose it all” | Transport & Environment
