Gigafactories an Essential Element of the Energy Transition

Constructing gigafactories is an essential element of the energy transition, allowing us to reach our net-zero and decarbonisation objectives, retain autonomy and control over the electrification of the automotive and renewable energy sectors, and benefit from the remarkable environmental, social and economic advantages associated with the battery industry.
Currently, China is the leading producer of battery cells worldwide, accounting for 80% of global lithium-ion battery cell production. As a result, the majority of gigafactories are either located in China or in the process of being constructed there.

In consideration of this, the United Kingdom (UK), European Union (EU) and United States (US) are all aggressively competing for market share and are doing so rapidly. Three primary motivating factors can be used to broadly categorise the motivations for this global battery arms race:

Economic: industry professionals generally agree that attracting battery makers to the nation is essential to the success of the nation’s larger automobile manufacturing sector. This is because there are financial benefits to assembling electric vehicles (EVs) nearby or at the same facility as the process for making battery cells. Given the weight and transport costs of battery cells relative to internal combustion engines, these economic gains may offset any short-term cost advantages from purchasing cells made in China. Additionally, there are environmental benefits to avoiding long-distance transportation of battery cells in favor of decarbonization activities.

Political: politicians globally have been vocal in their demands for energy security in response to recent events in Ukraine. Growing apprehension about achieving net-zero goals and the potential reliance of the battery industry on China in the future are similar in nature.

Environmental: global initiatives to transition away from Internal Combustion Engines (ICEs) towards a more sustainable future have identified gigafactories as a critical element. By providing an attainable and localised alternative to ICEs, countries will be able to shape market behaviour and foster domestic electric vehicle (EV) production. It is no surprise then that there has been a marked increase in the number of gigafactories being built or planned globally, with over 30 planned in Europe alone.

In conclusion, China is the dominant producer of battery cells globally, with many gigafactories already established or in the process of being constructed. The United Kingdom, European Union, and United States are all vying for market share, driven by economic, political, and environmental considerations, such as cost savings, energy security, and sustainability. Gigafactories are critical to achieving energy transition goals and achieving net-zero and decarbonisation targets.

Source: Building a battery supply chain across Europe and North America | Akin Gump (available in the reports database)

Gigafactories an Essential Element of the Energy Transition
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