The Li-ion battery industry is experiencing an explosion in demand due to the increasing adoption of battery electric vehicles (BEVs). As those vehicles retire, the battery pack remains a valuable asset. A scarcity of critical resources for batteries and a growing push to reduce waste are driving many players along the value chain to consider battery recycling to produce more battery materials.
Commercial battery recycling in its current form consists of a majority of consumer electronics batteries that are fed into pyrometallurgical processes, which cannot recover lithium. In this blog, we aim to understand the extent to which recycled batteries can address raw materials concerns. Here we present the market for recycling Li-ion batteries from both plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs) based on historical data and our energy storage forecast.
We took historical data of GWh demand from both PHEV and BEV in the Automotive Battery Tracker and then combined that with our Global Energy Storage Forecast to determine the total size of battery demand from 2010 to 2035. Then, assuming the average battery lifetime shifts from 10 years to 15 years over the forecasted time, we built up a retirement rate distribution of each year's battery demand spread out over 20 years.
This model ignores any second-life applications that may offset the recycling timeline for the battery pack. In the case of second-life usage, the recycling of the battery is only deferred.
By 2030, the battery recycling supply will be rapidly growing but will require innovative recycling processes to obtain as many materials from the battery pack as possible. Even with recovery rates upward of 90%, raw materials supply from recycled batteries will account for less than 5% of demand in 2035. China's early adoption of electric cars will give the country a lead in battery recycling demand. Still, as BEV markets expand in the next 10 years across Europe and North America, demand growth will rise sharply across all regions. In almost all cases, the end markets for end-of-life batteries will be where the BEV is retired. Regulations of the transport of hazardous materials limit batteries' mobility across regions so that the recycling ecosystem will be dependent on local collection and processing. The forecast does not account for second life, international trading of vehicles, or manufacturing waste.
Asia serves as the most significant market opportunity for battery recycling due to China's dominance in BEV sales. However, China has regulations for keeping materials within the country and similarly does not either import or export black mass. To tap into the vast recycling market in China, companies must partner with existing waste collection schemes. While batteries' initial processing will be done through a network of facilities, black mass that results from the process can be more easily transported to a central location.
Black mass is a byproduct of battery processing that contains cathode active materials, which can be extracted through further processing. An already established black mass market opens up the opportunity for a main metals recovery hub within Asia, particularly somewhere near battery production. Policies limiting the flow of hazardous materials also drive growth in Europe and North America, where local battery manufacturing is beginning to take hold.
Europe recently announced a proposal for stricter battery recycling regulations, particularly increasing battery collection rates up to 70% by 2030 and demanding a minimum recycled content in new batteries. The EU Commission proposes new batteries containing a minimum of 4% recycled lithium, 12% recycled cobalt, and 20% recycled nickel by 2030. If most recycling is done regionally, Europe will have a total market of 8 GWh of recyclable batteries from BEVs.
Demand for plug-in hybrid electric vehicles (PHEV) and BEVs alone will approach 400 GWh. Despite metallurgical methods improving recycling rates by upward of 90%, recovered materials will account for less than 2% of Europe's demand. With the proposed regulations in place, Europe will need to recover its battery materials from more than just recycled Li-ion batteries.
Not included in our forecast are second-life applications for retired BEV batteries and increased supply from manufacturing waste. Second-life batteries used in stationary storage applications will likely be a small portion of retired BEV batteries. Batteries in the next five to 10 years will have shorter lifetimes and are not well-suited for second-life applications.
Regions that import second-life batteries for stationary storage applications will have a slightly larger supply of batteries to be recycled. Manufacturing waste is a particularly reliable source of battery waste, as cell manufacturers can set up recycling in-house to supplement their supply. However, the percentage of waste by production capacity can vary from 3% to 30%, depending on the facility. The addition of manufacturing waste to battery recycling demand is expected to have a more considerable near-term impact that becomes less relevant as manufacturing is optimized.
Despite the relatively unimpactful effect that recycling has on supplying future batteries for BEVs, Li-ion batteries will remain valuable throughout their entire lifetime. Battery recycling will be a requirement in markets with high BEV penetration, either via government regulations or the high value of recovered materials. In the near term, few players will use battery recycling to resell the recovered raw materials.
In the long term, the recovered materials will exclusively be utilized in cathode powders as cell manufacturers explore alternative sourcing for their materials. Companies investing in battery recycling to secure a supply chain are misguided. This is because the recovered materials will make up for 1% to 2% of total demand by 2030 and will be an even smaller proportion as battery demand skyrockets.
Instead, government regulations and increased efforts from companies around sustainability and renewable energy will drive battery recycling implementation at a commercial scale. Governments find battery recycling attractive because it locks in critical battery materials imported from batteries made elsewhere, and it has the advantage of decreasing future dependence on battery imports. Meanwhile, companies interested in producing more sustainable BEVs will push higher recycling rates with innovative technologies that recover the most material from a battery.
Innovators should view battery recycling as a necessary addition to the Li-ion battery ecosystem but must not ignore the mismatch between the TWh demand and the GWh supply of retired batteries. To stay up to date on energy storage technologies and our energy transition research, be sure to subscribe to our newsletter.