What role will batteries and lithium play in the energy transition?

How fast has the EV market been growing?

Batteries are at the centre of a structural and foundational shift that is impacting many aspects of our lives, most visibly in the secular shift from internal combustion engine (ICE) vehicles to EVs.

The mass adoption of ICE vehicles that began around a century ago provides a guide to the scale of this shift. In the US, for example, 14 out of every 100 people owned a car a century ago. Today, 90 out of 100 people own a car.¹

We can expect something similar to happen with EVs, as a combination of technological innovation, lower battery pack prices, higher consumer demand, growing awareness of the threat posed by climate change and supportive government policies leads to rapid growth of the market.

In the US, EV penetration has now surpassed the 5% mark (at 6.6%).² According to FastMarkets, this milestone may be just the start of a much bigger trend, boosted not only by the Inflation Reduction Act but also by the new Environmental Protection Agency standards, requiring a minimum of 60% original equipment manufacturer vehicle production from EVs. The US plans to achieve 50% EV auto sales by 2030.

Support for continued EV growth is also evident in Europe, where the European Commission aims to end the sale of CO2-emitting cars by 2035, while the UK has vowed to ban petrol car sales by 2030.

Globally, there were 26 million electric cars on the road in 2022, up 60% on 2021 and more than five times the 2018 level.³ But this growth phase seems only to have just begun. According to Bloomberg NEF’s Economic Transition Scenario, there could be 335 million electric cars on the road in 2032 (over than 10 times more than today) and 730 million by 2040 (over than 28 times more than today).⁴

How has EV growth shaped demand for certain minerals?

The high-growth opportunity presented by EVs has in turn made certain minerals highly sought after. While EVs are much more efficient than petrol or diesel vehicles in terms of turning fuel into forward motion,⁵ building them requires significant mineral inputs:

Among the inputs shown above, lithium stands out for several reasons. One factor that makes lithium a particularly important part of the EV story is its near universality in the underlying chemistries of the battery cells that power these vehicles. This is a result of its combination of low weight (lithium is the lightest of the metal elements) and high electrochemical potential.

Partly as a result of a surge in EV production and the complexity of extracting lithium, the metal saw rapid price escalation between 2017 and 2022, with the price rising 6.7 times according to the International Energy Agency (IAE), compared with 3.1 times for nickel and 1.5 times for copper.⁶

What’s the longer-term outlook?

According to the International Energy Agency, in a scenario in which we are on track to meet the goals of the Paris Agreement, sectors contributing to the green energy transition will be responsible for over 45% of total copper demand, 61% of nickel demand, 69% of cobalt demand and a staggering 92% of lithium demand by 2040.⁷

In the next part of this blog series, we will answer some questions on the supply side of lithium. To learn more, read our whitepaper: The battery value-chain: how batteries and lithium are powering the energy transition.

1. Source: https://www.energy.gov/eere/vehicles/fact-841-october-6-2014-vehicles-thousand-people-us-vs-other-world-regions 

2. Source: https://www.fastmarkets.com/insights/ev-and-ess-demand-what-this-signals-for-2023-and-beyond 

3. Source: https://www.iea.org/reports/global-ev-outlook-2023/trends-in-electric-light-duty-vehicles 

4. Source: Bloomberg NEF 2023. Long-Term Electric Vehicle Outlook 2023.

5. Source: Where the Energy Goes: Electric Cars (fueleconomy.gov)

6. Source: Critical Minerals Market Review 2023 (windows.net)

7. Source: https://www.weforum.org/agenda/2023/01/minerals-metals-energy-transition-davos2023/