India could jump a complete technology phase by moving straight to novel battery technologies and strategically reduce its battery import dependence and risks of supply squeeze.
The coronavirus pandemic has strengthened the need for encouraging domestic manufacturing in India since it is overly dependent on imports to suffice its requirements. This has gained urgency since substantial commodities are imported from China, a country, with whom India’s geopolitical tensions is making trade increasingly difficult. With mega targets to ramp up the renewable energy mix, especially solar, to its power generation capacity, and an increased focus on electric vehicles (EVs), India has to make concerted efforts to incentivise the domestic manufacturing of EV components, renewable energy equipment and batteries.
India bought batteries worth USD 1.2 billion in 2019-20 making this sector heavily dependent on imports. The key sectors that will drive the demand for batteries is the growth of electric vehicles (EVs) and renewable electricity storage. EVs are poised to reduce India’s oil import bill and contribute to cleaner air and hence the country has set a target of having 30 percent EV penetration by 2030. India is also tendering many renewable energy plus storage projects where the stationary storage component will be catered to by batteries. India lacks the capacity to manufacture cells commercially and, hence, to cut the capital expenditure on imports, the Indian government has made plans to indigenise battery manufacturing.
A report by NITI Aayog has stated that if India has to meet its EV targets through 100 percent domestic manufacturing of batteries, it would require at least 3,500 GWh of battery storage at a wholesale cost of USD 300 billion, which will be less than half the cost of oil imports thus avoided. The India Energy Storage Alliance (IESA) has estimated a 300 GWh demand till 2025 taking into consideration the EV and energy storage system opportunities.
In lieu of the growing battery sector, the Indian government launched the ‘National Mission on Transformative Mobility and Battery Storage’ last year to promote phased manufacturing programmes for battery and EV components. The initiative will support setting up of large-scale export competitive integrated battery manufacturing plants in India. NITI Aayog has proposed setting up gigafactories aggregating a capacity of 50 GWh over the next ten years at projected cost of USD 5 billion.
The most dominant battery technology today is the lithium ion (Li-ion) batteries. All the other breakthroughs in battery innovation are not scalable commercially as of now. Research shows that cost of Li-ion battery packs fell by 85 percent in the last decade and will further fall by 35 percent by 2024 to below USD 100 per kWh. A recent report states that the Li-ion battery manufacturing capacity will grow fourfold to 1.3 TWh in 2030 compared to 2019. Asia Pacific dominates this capacity by accounting for an 80 percent share and, within this region, China, who is the leader, is expected to double its capacity from 345 GWh to more than 800 GWh by 2030.
Rare earth metals like lithium, cobalt, nickel, manganese, etc. are the basic raw materials required to manufacture Li-ion batteries. Both the mining of these metals and setting up manufacturing plants are highly capital intensive. China has made heavy investments locally and overseas (Latin America, Africa and Australia) in mining lithium and rare earth metals. Also, China has financed a massive battery manufacturing capacity making it difficult for other countries to compete.
India has so far not surveyed if it has sufficient reserves of lithium. Last year India discovered around 14,000 tonnes of lithium, but this is far less compared to 8.6 million tonnes in Chile, 2.8 million tonnes in Australia and 1.7 million tonnes in Argentina. In order to succeed in building a battery manufacturing industry, India needs to urgently explore its reserves of rare earth elements. India needs to leverage its diplomatic ties to secure a supply of rare earth elements from different parts of the globe either by signing long-term purchase contracts or by investing in mining activities in these regions. This will help in boosting the investor confidence to fund the establishment of battery manufacturing facilities. India has recently set up Khanij Bidhesh India Pvt. Ltd. to explore strategic mineral assets abroad. India and Australia recently signed a preliminary deal to supply India the critical minerals required for a new-energy economy.
India was late to the solar power equipment and Li-ion manufacturing race, but it should not miss the future battery technology opportunity. India should explore new approaches by providing for long-term research in multiple aspects of battery manufacturing. These include solid state batteries, battery-chemistries with higher energy densities, new battery materials and chemicals withstanding higher temperatures, hydrogen fuel-cells, etc. If India lays a strong research foundation for battery technology, it can use this unique opportunity to lead in a sector that interests many economies. India could jump a complete technology phase by moving straight to novel battery technologies and strategically reduce its battery import dependence and risks of supply squeeze.
Bridging the rift between industry and laboratories can aid faster transitioning towards commercial manufacturing of batteries. The government can offer venture funding or high-risk funding to research institutions focusing on battery technology which shall enable them to showcase the commercialisation potential of their innovations. An example could be sodium-ion battery technology whose performance is inching close to that of Li-ion batteries and the raw material for these batteries can be sourced locally resulting in low costs as well.
As the number of batteries start multiplying, it will lead to a significant question of battery waste disposal since this can have serious environmental implications. A report has predicted that by 2030, the battery recycling industry in India can be a million-dollar opportunity. Recycling at an industrial level is done by EU and China, but the market is at a nascent stage. To reduce imports and attain sustainable battery manufacturing, it would be important to invest in battery recycling too. Deriving rare earth elements via recycling will also benefit in reducing dependence on imports. There is a need for an enabling framework where a circular economy of manufacturers undertaking battery recycling or new enterprises that focus on recycling develop in the coming years.
Government of India has renewed its support to the domestic industry to make India self-reliant under its ‘Atmanirbhar Bharat’ scheme. The Indian government has also recently declared battery storage as a ‘champion sector.’ Alongside these efforts, the Indian government has to holistically plan a roadmap for the future of battery sector with different ministries like power, new and renewable energy, road transport, department of science and technology, heavy industries, external affairs, mining and environment, forest and climate change working in sync as all of them would govern some aspect for the success of the sector. With the inevitable growth of EV and renewable energy sectors, it is imperative for India to forge an ecosystem that enables setting-up an indigenous battery manufacturing industry. India has been dependent on external imports for oil, solar PV equipment and now even batteries to fulfill its requirements. This makes India susceptible to becoming hostage to risky supply chains and geopolitical tensions along with mammoth capital expenditures. India cannot afford to lose the bus in the battery sector which is becoming key for achieving a low carbon economy.
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Ameya Pimpalkhare is an Associate Fellow at ORFs Mumbai Centre. He works on the themes of energy and transportation. His key research interests include: sustainable ...
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