How not to lose it all

This report by T&E analyses the risk to Europe's 1.8 TWh battery factory pipeline potential due to factors such as US subsidies and project maturity, funding, permits and links to the US. It reveals that almost 70% of the potential battery cell supply in Europe is at risk of being delayed, scaled down or not realised at all if further action is not taken.

Published

March 2023

Until recently, Europe dominated in worldwide cleantech investments because to its pioneering climate policies, such as the Fit for 55 package. Hundreds of billions of dollars have been invested on growing electric vehicle (EV) manufacturing, batteries, and component manufacture. As a consequence, more than half of all lithium-ion batteries (LIB) used in the EU in 2022 were made domestically, with around 50 gigafactories planned by 2030.

But, in addition to China’s dominance in EV supply chains, the US Inflation Reduction Act, which invests at least USD 150 billion in battery components and metals created in the US (or friendly nations), is rapidly altering the rules of the game. In terms of worldwide LIB investment monitored by BloombergNEF, Europe’s share fell from 41% in 2021 to 2% in 2022, while investment in China and the US increased.

In principle, one might argue that European and American battery supply chains may expand concurrently and benefit from efficiency. In actuality, experienced labor, corporate cash to invest in procurement and licenses, and, most importantly, raw minerals such as lithium are all in limited supply. This means that the global drive to grab battery production is more of a zero sum game. Businesses ranging from Northvolt to Polestar to Iberdrola have already indicated plans to expand in the United States.

Using an in-house methodology that looks at project maturity, finance, permissions and linkages to the US, T&E has estimated how much of Europe’s 1.8 TWh battery manufacturing pipeline potential is at danger. According to the research, approximately one-fifth (or 285 GWh) of the announced projects are at high risk, with the remaining 52% (or approximately 910 GWh) at medium risk. Over 70% of Europe’s potential battery cell supply is at jeopardy. If no additional action is taken, the projects may be delayed, cut back, or never realized.