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What are the EU's prospects in the global battery market?

What are the EU's prospects in the global battery market?

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28.02.2023

Battery technologies are one of the pillars of the energy transition. Batteries enable the electrification of the transport sector and the integration of renewable energy sources into the energy mix. These two areas of development are at the heart of the European Union's strategy to achieve climate neutrality by 2050.

The global energy storage market is booming. By 2025, stationary battery storage capacities and sales of lithium-ion batteries for cars are expected to increase by 450% to 78 GWh and 390% to 700 GWh respectively compared to 2020. In value terms, the European market alone could be worth two hundred and fifty billion euros per year from 2025, according to the European Commission. Moreover, batteries are a strategic issue for the automotive industry: they represent between 30% and 40% of the price of an electric car.

The market remains heavily dependent on government support in both the automotive and stationary storage sectors. Reducing the cost of storage solutions is the best way to achieve sustainable growth. These cost reductions depend primarily on innovation and economies of scale. Battery manufacturers are investing heavily in new production capacity and research. Innovation efforts are also important among integrators, i.e. the entities that finalise the complete solution for the end user Operators are also preparing to address increasingly challenging constraints in terms of environmental impact and integration into the circular economy. Constraints that, on the other hand, hold the potential for many opportunities for further progress through the reuse of used batteries and recycling.
The electrification of transport could reverse the balance of power in the global car market in favour of China and accelerate the decline in European industrial production that has been observed for some time.

Almost three-quarters of global battery cell production capacity was in China in 2019. This industrial dominance goes even further and extends to the production of key battery cell components: two-thirds of cathode and anode production is located in China. China has also asserted itself in the previous links of the value chain. Batteries are at the heart of the new geopolitics of raw materials. Chinese mining companies have cleverly completed major overseas acquisitions to secure long-term supplies of raw materials.

The European Union now faces many challenges. Battery production will have to be competitive to withstand Chinese competition. Battery recyclability remains a key objective. Last but not least, there is hope that new technologies under development based on new chemical compounds needed for battery cell production could potentially reverse the current unfavourable trend for Europe. The development of the European battery industry is therefore a priority to enable the EU to secure the energy transition and defend its economic interests.

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