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Europe could be the second-largest market for battery production by 2024 if the regulation is effective
While Europe is the second-largest market for e-vehicles and the third largest in stationary energy storage, the region only accounts for approximately 6% of the global cell and battery manufacturing capacity. However, Europe’s climate neutrality and energy transition path depend on batteries. Sustainable batteries are a key technology for a carbon-free economy and moreover, for the digitalisation ambitions of the EU. It is crucial that when EU decision-makers discuss the new rules for batteries, they address the holistic picture and guarantee that all measures of the new EU Batteries Regulation can deliver on advancing the decarbonisation, as well as the energy and digital transitions, while also ensuring the European batteries industry becomes a competitive global leader. In the context of the Russian war on Ukraine, the EU needs to realise the danger supply chain dependencies bring. The EU needs to develop a strong batteries value chain in Europe and decrease the high dependency on imported batteries. When moving away from fossil fuels, Europe should simultaneously become more autonomous and support the electrification and renewables development with a European batteries industry.

MARKET DEVELOPMENT Since the creation of the European Battery Alliance in 2017, over a dozen Europe-based “gigafactories” have been announced. According to the European Battery Alliance, the European battery market is estimated at €250 billion from 2025 onward. Some 800,000 new jobs are expected to be created in Europe by 2023 alone. In 2020, in the context of the EU Industrial Strategy update, the European Commission reviewed a number of areas that can be considered strategic for Europe’s interests. Lithium batteries were identified as one of the strategic areas of interest for the EU. The Commission estimates that Europe could become the second-largest manufacturer of lithium-ion cells by 2024. Our share of global production capacity may increase to 14.7% by 2024 and 16.6% by 2029, compared to 5.9 % in 2019. The political ambition and objective being clear, we now need an efficient regulation to unlock the investments and potential.

UNDERSTANDING THE MARKET The number of leading technologies is relatively limited: mainly zinc alkaline and lithium metal for primary batteries (non-rechargeable), and lead-acid, lithium-ion and nickel-based for the rechargeable batteries. Some other technologies are on the market, like sodium-based batteries, rechargeable zinc batteries, sodium-sulfur batteries and other technologies, however, they represent less than 0.1% of the global market. Nevertheless, the number of applications where the batteries are used is very large, and growing, as many new applications are using batteries, such as drones, robots, Internet of Things (IoT) and existing applications such as cars, buses and trucks are also electrifying. The vast majority of applications have dedicated battery design, suitable for the level of power and energy reserve they require for their usage and the service they deliver. As a result, the number of battery models is almost as large as the number of electrical equipment designs placed on the market. The number of battery models, per battery category, is very large: more than 500 models for Light Means of Transport (LMT) batteries, 1,500 models for automotive, about the same for EV models, more than 20,000 for portable applications and more than 100,000 for industrial batteries.

RISK ASSESSMENT The lack of enforceability and market surveillance feasibility of proposed measures in the Batteries Regulation could jeopardise the overall ambition and success of the legislation .
The introduced sustainability requirements—such as the carbon intensity and the recycled content provisions—could become useless if not implemented and enforced correctly at Member State level. As a result, the selection of a relevant scope when deciding about a sustainability measure in the regulation is of the highest importance. The size of the scope (the number of models to which the measure is applicable) must be understood to make sure that the measure can be applied and enforced, particularly when the measures are requiring third-party verification. A too ambitious initial scope, which cannot be verified and controlled effectively, can incentivise false declarations, knowing that control would become practically impossible, and jeopardise the effectiveness of the measure. The carbon footprint declaration can be of vital importance if the measure can be properly enforced and if it is based on fair and non-discriminating calculation rules.

BATTERY ECOSYSTEM Considering the limited environmental benefits of the recycled content requirements for batteries, the proposed obligation currently remains unjustified and creates an uneven playing field. Battery waste, including production scrap, has reached significant volumes in Asia, making it easier for Asian companies to access recycled battery materials. Volumes of available secondary raw materials in Europe are still low and a too early recycled content obligation would jeopardise the competitiveness of European batteries. In the next ten years, a recycled content obligation will steepen EU dependency on third country (secondary) raw materials. The industry has recommended establishing Article 8 of the proposed regulation on the recycled content provisions is voluntary to begin with. Based on the future availability of secondary materials, driven by clear recycling targets and end-of-waste criteria, meaningful targets for recycled content should be assessed in 2027 for the 2030 horizon. The Batteries Regulation will shape how the European battery value chain will develop and how it will be able in meeting expectations to support Europe’s EU Green Deal and carbon-neutrality objectives. A thriving batteries industry is needed in Europe’s path to climate neutrality. The industry is ready to deliver, provided the Regulation sets an enabling framework. •

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