Will Europe run on Polish lithium-ion batteries?

2021-01-29

Lithium-ion batteries for electric vehicles have become one of the specialties of Polish exports. They mainly go to other EU member states. But in order to maintain the position of the EU leader and, at the same time, successfully compete with Asian producers, Poland must not only further develop its production capacity, but also produce lithium-ion batteries with a lower carbon footprint.

By Michał Strzałkowski

Their invention and popularization changed the world. It has already given us the ubiquitous mobile devices, and now it will allow a huge revolution in the automotive industry and the spread of electric cars. It is no wonder that the development of lithium-ion batteries was awarded the Nobel Prize in Chemistry in 2019.

When in Stockholm the royal award was granted to three scientists who over the years worked on this invention and its improvement, who used each other's experience, and it was the American - John B. Goodenough, the British - M. Stanley Whittingham and the Japanese - Akira Yoshino, Poland was already the largest exporter of lithium-ion batteries for electric vehicles in the European Union,

The prospects for further development of this industry are large at the Vistula River, but there are several challenges to overcome - mainly of energy, climate and environmental nature.

Export keeps growing

The economic crisis caused by the COVID-19 pandemic did not stop the growth of export of lithium-ion batteries produced in Poland. According to the data of the Central Statistical Office, its value exceeded EUR 400 million at the end of 2020. And it keeps rising.

Batteries are also the number one of Polish export commodity. At the end of the last year, they moved to the first place of Polish products, which are most sold abroad. All this is mainly due to the increase in the production of lithium-ion batteries in Poland.

"The battery of every ninth electric car in Europe will come from Poland," Prime Minister Mateusz Morawiecki said in 2017, when the construction of the largest currently existing European lithium-ion battery factory in Biskupice Podgórne in Lower Silesia began.

The plant belongs to the Korean concern LG Energy Solutions (formerly LG Chem). Up to 100,000 batteries are produced there per year. But there are many indications showing that there will be even more Polish batteries in European electric cars.

The largest lithium-ion cell factory in the world will be located in Poland

LG is going ahead. The Korean concern announced on the 21st of January, the expansion of its plant in Kobierzyce near Wrocław. This factory is to employ up to 10,000 people, when it will be finally expanded at the end of 2022.

“It will be the largest EV battery factory in the world. It can satisfy up to 60 percent of the current demand for such batteries in Europe, said the president of the Industrial Development Agency, Cezariusz Lesisz. The IDA expressed its support to Korean investor.

The scale of the latest planned LG investment in Poland is best evidenced by the fact that the plant in Kobierzyce is planning to produce batteries with a total capacity of 100 GWh per year. This would allow more than 1 million electric cars or nearly 10 million plug-in hybrids to be equipped with batteries and significantly increase the global annual lithium-ion cells, which in 2019 was 180 GWh. The largest plant that is fully operational today is located in China. BYD's factory in Qinghai, however, has a production capacity of 60 GWh for the family.

In Poland, other concerns from South Korea, such as SK Innovations, Nara Battery Engineering, Foosung and Enchem, are additionally investing in the production of lithium-ion batteries. Production plants were established not only in Lower Silesia, but also in Kędzierzyn-Koźle in the Opole region or in Dąbrowa Górnicza in the region of Zagłębie. Investments in Poland are moreover carried out or planned to be carried out by - Belgian Umicore, British Johnson Matthey and Swedish Northvolt.

There is not only the production of finished cells, but also their components - separators, cables or electrolytes taking place in Poland. The Chinese concern Zhangjiagang Guotai-Huarong New Chemical Materials has a plan to build the largest electrolyte plant for lithium-ion batteries at the territory of Poland. The Chinese Capchem also wants to build this type of plant here. On the other hand, Korean Kyungshi is preparing to expand cable production in Poland.

The recipients are mostly from Germany, but not only

Most of the Polish production of lithium-ion cells is located in the western part of the country for a reason. The largest recipients of batteries manufactured in Poland are German companies - Volkswagen, Daimler and BMW. Moreover, Polish batteries go to vehicles manufactured under the Škoda brand. But in Poland, batteries are also manufactured for electric and hybrid French (Renault), British (Jaguar) and Korean (Hyundai) cars. The new plant in Kobierzyce will additionally produce batteries for the American Ford - Mustang and Transit.

"We cannot forget that the BMZ concern in Gliwice in Silesia produces batteries for electric bicycles, scooters, electric tools and electrified buses" - adds Jan Wiśniewski from the Polish Alternative Fuels Association in an interview with EURACTIV.pl.

The gradual decline in prices of lithium-ion batteris has a positive impact on the demand for their use. In the years 2010-2019, the price of one kWh produced in such a battery decreased, calculated in dollars, by as much as 90 percent. A few years ago, 60 percent of the final price of an electric car was the cost of the battery. Now, however, it is about 30 percent.

This was achieved, on the one hand, thanks to the greater efficiency of the batteries themselves, as well as the introduction of solutions to reduce the amount of expensive and rare elements needed for production, such as cobalt or lithium.

Will Tesla's success propel production in Poland?

The fact that interest in lithium-ion batteries in the world will grow is also evidenced by the last year's success of the American company Tesla, which despite the economic crisis caused by the COVID-19 pandemic made its plan. Or at least, was extremely close to achieve it. Out of the planned 500,000 Tesla vehicles only 450 of them did not hit the market.

Elon Musk's company was also extremely easy to raise new capital. Its stock exchange value increased by as much as 754 percent in 2020 compared to the end of the previous year, which raised the company's founder to the first place on the list of the richest people in the world, although a year earlier he was on the 50th place.

Tesla is therefore working hard to increase its production capacity, in which the so-called Gigafactory are supposed to play a significant role here. One of them will be built in Europe, and more specifically in Germany, next to Berlin. However, the concept of Gigafactory assumes the production of not only complete vehicles, but also components for them.

Musk has already announced that by 2030 Tesla will produce lithium-ion batteries annually in its own factories with a total capacity of 3 thousand GWh. But the American concern will probably still need external suppliers - at least during the current decade.

As Rafał Bajczuk from the Foundation for the Promotion of Electric Vehicles explains in an interview with EURACTIV.pl, Tesla is currently buying batteries from Korean LG Chem, Japanese Panasonic and Chinese CATL.

“The American car manufacturer is also working on its own production of a new type of 4680 battery cells (their name comes from the dimensions: 46 mm in diameter, 80 mm in length). The cells will be produced in the American Tesla factory and - from summer 2021 - in the European factory in Berlin. But new cells for Tesla will also continue to be produced by Panasonic, and probably also by LG,” explains the expert.

In his opinion, "the probable sales success of Tesla will result in an increase in orders for cells from external producers, including Poland. The growing popularity of electromobility will further increase the demand for the production of batteries for these cars. The sector has great development prospects,” forecasts Bajczuk.

The fact that such a large production of lithium-ion batteries or their components is located in Poland was due to lower labor costs than in Western Europe and attractive geographic location, i.e. the proximity of many European automotive factories with the simultaneous existence of good communication connections, but also public financial support for investors. In 2019, the Polish government announced the allocation of up to EUR 3.1 billion for this purpose.

Several challenges for battery producers in Poland

The industry faces serious challenges as well. Jan Wiśniewski indicates administrative issues. "The best example is the planned Guotai-Huarong electrolyte factory in Godzikowice in Lower Silesia, where the Local Government Appeals Court has revoked the commune's decision on the environmental conditions of the investment and the whole process had to start anew," the expert explains.

Furthermore, in Śrem in Wielkopolska, where Capchem is planning to start electrolyte production on the premises of the former BASF plants, there is still no consent from the poviat starosty. The local government authorities took into account the protests of some residents who are afraid of pollution. And they found that the investor had not prepared an appropriate environmental risk assessment.

Wiśniewski, however, draws attention to one more challenge. "The idea is that so many plants are located in Poland should be used internally as effectively as possible - in the form of developing competences and building an ecosystem involving Polish entities in the production process."

On the other hand, Rafał Bajczuk points to another issue - meeting the requirements of the planned EU directive on batteries, which assumes that from 2027 battery producers will have to report the carbon footprint of their product.

“For Poland, which has one of the most emissive energy mixes in the EU, this may mean that we will cease to be an attractive place for investments in the battery production sector. If we want Poland to be an attractive place for the battery production sector in the long term, we should also ensure good regulations and attractive conditions for investment in battery recycling, in order to guarantee producers access to raw materials for the production of new battery cells,” he says.

Competition with Asia is possible, though difficult

China remains the largest producer of lithium-ion cells. In the area of smaller ones - for laptops, smartphones or other mobile devices - they will rather remain number one. Most of the production of devices that require such cells is also located in the Middle Kingdom. But it may not be the case with batteries for electric vehicles. Their production is spread all over the world, and many factories are located in Europe.

But - as Jan Wiśniewski points out - the Old Continent still has a lot of catching up to do. “In 2020, the leading producers of lithium-ion cells were Asian countries: China, South Korea and Japan. Last year, The Middle Kingdom accounted for as much as 77 percent of cells produced in the world and, respectively, 80 percent of raw materials and 60 percent of components related to the battery sector.”

In Europe, investments are being made to reduce this distance - such as the Northvolt factory in Skellefteå, Sweden - but Asian producers are building more plants, also in Europe (e.g. CATL in Germany). In addition, out of the already existing 142 large lithium-ion battery factories in the world, 109 are located in China.

However, gaining independence in the field of battery production has become a priority for EU institutions. The European Commission announced last year that the EU would be self-sufficient in such production by 2025, and even, once the needs of the European automotive industry were met, it would manage to build export capacity.

Europe invests heavily in its production. According to the EC's calculations, in 2019 alone, around EUR 60 billion was invested in the entire battery value chain in the EU, which is three times more than in China. In competition with Asian producers, it is also expected to focus on environmental issues.

“The new EU battery legislation proposal also aims to create competition based on sustainable development. It is not only about a low carbon footprint, but also about sustainable and in this sense ethical sourcing of materials. In this area, EU players can be successful,” explains Bajczuk.

But here we are returning to the challenge that Poland has to face, which is to reduce the carbon footprint of Polish factories. The Swedes, when building a factory in Skellefteå, immediately assumed competition with the Chinese not only in terms of the price and efficiency of the product, but also the ecological nature of its production.

Jan Wiśniewski calls the plans for the EU to become self-sufficient in the production of lithium-ion batteries in the next five years as "very optimistic". "Bloomberg New Energy Finance forecasts assume that Asian countries will maintain their dominant position until 2025," he notes.

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