Saving the environment of the planet is supposed to be one of the key reasons why people should be switching to battery-powered electric vehicles in the future. The argument goes that battery-powered EVs cause less pollution than their petrol-powered rivals but as western society’s more environmentally conscious citizens consider whether to switch to so-called eco-friendly EVs we now realize that damaging forms of air and water pollution are blighting large tracts of China. Unfortunately a contributory factor in the Chinese pollution syndrome is caused by a vital constituent of EV batteries – namely graphite.
Industry analysts have estimated that output from Tesla’s Gigafactory could increase natural graphite demand by as much as 37% by 2020. The Gigafactory, which is scheduled to begin production by 2017, is targeting an output of 35 GWh/y by as early as 2020, which would more than double the size of the current lithium-ion battery market.
Tesla’s EV growth plans have been focused on lowering lithium-ion battery costs by more than 30% per kilowatt hour, which would allow the company to bring a more price-competitive EV to market. Tesla Motors’ CEO Elon Musk has stated he believes the cost of Li-ion batteries can drop to $100 per kilowatt-hour which also makes them a ready-made solution to peak demand energy storage.
Billionaire entrepreneur Musk says lowering the price of the batteries will be critical to the company’s goal of producing an electric vehicle that will cost about $35,000. Based on lower EV prices leading to increased sales volumes the company forecast that by 2020 the Tesla vehicle volume would be @ 500 000 per year with the Gigafactory’s cell output estimated to be 32 GWh/yr. The 2020 Gigafactory pack output is forecast to be 50 GWh/yr.
“The Gigafactory will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation," claimed Musk.
Unfortunately, there are now signs that a large polluted cloud on the horizon could interfere with the battery price reduction strategy. Industry experts estimate that every EV contains about 50 kilograms of graphite this compares with hybrid cars which only use about 10 kilograms. Other big users of lithium-ion batteries such as laptops contain about 100 grams of graphite while mobile phones contain about 15 grams.
Recent clampdowns by the Chinese authorities on the graphite industry could impact as much as a third of worldwide production. A good deal of the world’s graphite is mined and processed in China where graphite pollution has been raising health scares by fouling air and water supplies and damaging agriculture production. Chinese authorities have begun closing a number of graphite mines and processors in a bid for cleaner air despite the rapid upswing in global demand for graphite which is being spurred on by the clamour for mobile device technologies and the prospect of the threatened sea-change in EV-based urban transportation.
Hydrochloric acid is used in China to process raw graphite into a usable form. The highly corrosive acid is already implicated in waste water pollution at incidents in China and is another factor in the squeeze being applied to graphite producers in that country.
China’s tougher environmental regulatory stance looks like pushing graphite prices up by as much as 30 percent this year. Although some analysts say that China’s tougher stance would have an only minimal impact on the overall price of electric cars it certainly could slow the hoped for long-term decline of battery prices.
Tesla’s battery Gigafactory plans on their own could double demand for graphite in batteries which would be probably equivalent to bringing six new mines into production somewhere in the world.
The graphite pollution issue in China may well interfere with Tesla’s and other EV manufacturers’ plans for battery cost reductions because China has been cutting back on graphite in recent months with more than 50 graphite operations being suspended in Shandong province owing to environmental breaches. The province represents 10 percent of global supply and the Chinese government intervention is also threatening to extend the clampdown to other poorly-run graphite producers.
The upshot of the Chinese authorities tightening up of environmental controls is going to reduce production capacity which will probably push up raw materials prices for batteries. Industry analysts suggest that a 30-percent rise in graphite prices could increase the price of battery packs for electric vehicles by as much as five percent. That would put a spanner in the works of the EV price reduction strategies as a stroke.
China has not opened any major graphite mines in the country since the 1980s. A consequence of the global capacity downturn is that ‘mothballed’ graphite mines such as the Uley graphite mine in Australia is re-opening this year after being closed for more than twenty years.
Although the predicted upsurge in EV sales in the next few years will help drive up demand for lithium-ion batteries the bulk of any growth will stem from portable mobile devices in the form of smartphones, tablets and e-readers.
Leading brands like Apple, Tesla, Toyota, Samsung and Panasonic to mention a few are all watching the graphite supply situation and are trying to come up with plans on how to maintain a stable, secure supply of graphite to help fuel their own growth plans into the medium term. For the moment graphite prices are staying reasonably stable but the pressure to drive prices up is building and looks likely to slow the forecast decline in battery prices.
The large-mesh flake graphite market is currently in balance but a supply crunch was already looming as the world economy slowly recovered from the global recession. Consumption from the battery sector constituted eight percent of global natural graphite demand in 2012 but that share is likely to keep climbing steadily into the next decade.
At present there are no new graphite mines planned to come on line this year, which, combined with potentially fluctuating supplies from the world’s leading producer, China, could result in rising prices. There are several new graphite-mining projects planned for development in the medium term. The majority of these are located in Canada.
One estimate suggests that the Gigafactory would consume at least 28 000 tonnes of spherical graphite every year if operating at capacity. That equates to about 93 000 tonnes of flake graphite each year if produced at current standards of raw material wastage which is around 70%. Although Tesla’s aim is to create a more efficient battery production process at today’s level of performance battery demand for natural graphite is likely to increase 112% from today’s levels of 83 000 tonnes per year and that figure assumes no other growth in regions such as Asia, which is the current primary consuming region worldwide.
To avoid a troublesome shortfall between raw material supply and consumer demand it looks that battery manufacturers will have to rapidly develop more efficient production processes (the Gigafactory claims that is a key aim) or accelerate the introduction of new battery designs using new chemistries and/or new anode and cathode constructions. At current levels of performance it is doubtful these changes will be achieved in the necessary time scales so it looks that battery pricing is going to be an even fiercer battleground than ever before.
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