Batteries are the new oil — and the U.S. is lagging behind Europe and China in the race to make them.
Why it matters: The historic shift to electric vehicles will give the U.S. a fresh chance to achieve energy independence, but it will require complex strategic moves that won't pay off for years.
The big picture: Most of today's advanced batteries — not only to power cars and consumer electronics but also to store clean energy — are sourced in Asia.
- Demand for batteries will skyrocket over the coming decades. If the U.S. wants to control its own energy destiny, it'll need a secure, resilient supply chain for critical minerals and other components.
- "If we don't do this, if we don’t as a country invest in our supply chain, it will go to the lowest-cost country, which is China," says Michael O’Kronley, CEO of Ascend Elements, a battery recycling company.
By the numbers: President Biden wants half of all vehicles sold in the U.S. to be electric by 2030. But the U.S. has only about 5% of the manufacturing capacity needed to hit that target, Jigar Shah, head of the Energy Department's Loan Programs Office, told Reuters.
- At the same time, other countries are setting equally aggressive EV goals — driving up prices for lithium, nickel and other materials.
Where it stands: The federal government is taking some of the necessary early steps to build a domestic battery industry, but experts say there are still some big gaps in that infrastructure.
- Last month, Biden invoked the Cold War-era Defense Production Act to encourage domestic mining, processing and recycling of critical minerals —such as lithium, nickel, cobalt, graphite and manganese — that are required for EVs and clean-energy storage systems.
- And the government has given foreign companies incentives to build up refining and manufacturing capacity in the U.S.
- Meanwhile, carmakers are scrambling to build their own battery plants to guarantee supplies for their upcoming EVs.
"This is direct U.S. government action into building a heavy industry from scratch — the stuff of presidents past," said Simon Moores, CEO of London-based Benchmark Mineral Intelligence.
Yes, but: There's still a gaping hole in America's efforts, said JB Straubel, a Tesla co-founder who is now the CEO of a battery component company called Redwood Materials.
- Even with more battery plants in the U.S. and more minerals extracted from U.S. soil, the two most essential and expensive components of lithium-ion batteries — cathodes and anodes — are still produced almost entirely in China.
- Redwood plans to invest more than $2 billion to start building anodes in the U.S. later this year, and cathodes by 2024.
"If the U.S. does not connect every link in the supply chain from mine to battery cell, then its EV ambitions could fall apart," Moores said.
What they're saying: "We’re at an important point," RJ Scaringe, CEO of the electric truck startup Rivian, tells Axios.
- "It's a bit inspiring, provocative and scary. If you look at the entirety of our supply chain ... all the way back to the mines ... today what we have installed represents well under 10% of what we will need as a planet. Meaning greater than 90% of that supply chain does not yet exist. So we have an opportunity as a planet to decide where that goes, and how it’s built."
What to watch: Over the next decade, Morgan Stanley analysts forecast the "balkanization" of the battery industry as governments and regions race to establish their own secure supplies of battery manufacturing capacity and key raw materials.
Editor's note: This article has been corrected to show cathode production will begin in 2024 (not in 2022).
