In Europe and worldwide, the battery market is undergoing revolutionary changes. The World Economic Forum predicts that global demand for batteries will be 14 times greater in 2030 than it is today. This means that the number of plants producing them must increase significantly. In 2030, the European Union could account for 17% of the global market demand for batteries. Among other things, this is influenced by the growth of the digital economy, low-carbon mobility, and renewable energy. The number of problems related to battery production and unregulated issues has inspired the European Commission to make decisive changes in European law, the effects of which will be felt not only by the battery industry but also directly by consumers.
Storage of energy
Today, in relation to the ambitious goals of the European Green Deal and the Fit for 55 green transition package, batteries have taken on special importance. By 2030, 55% of energy is to be derived from renewable energy sources, and this means a greater need for technologies storing energy that might otherwise be lost. Battery storage is also gaining value due to changing atmospheric conditions, whose unpredictability shows how important stored energy resources are.
The requirements of the European Union regarding renewable energy sources are causing the energy market to undergo a revolutionary transformation, and energy storage technologies along with it. The EU’s proposed new Battery Regulation will directly impact energy storage.
The simplest and most common way to store energy is through batteries. One of the most popular is the lithium-ion battery, which has found applications in electric-powered cars and other electrical devices. Poland is a major exporter of such batteries. Therefore, the new regulation will have a considerable practical significance here.
The draft is ready
In connection with implementation of the European Green Deal objectives and activities related to the circular economy plan, the European Commission submitted to the European Parliament and the Council of the European Union a legislative proposal for a Regulation concerning batteries and waste batteries, which would replace the 2006 Batteries Directive. On 10 March 2022, the draft legislation was adopted at the Parliament’s plenary session. The draft was particularly influenced by the report of the Committee on Environment, Public Health and Food Safety (ENVI), which sought to significantly expand the scope of the proposal.
On 17 March 2022, the Council adopted the draft regulation. Now, the Council and the Parliament will enter into tripartite negotiations to reach an agreement on the final text at first reading. If negotiations are successful, the regulation could be adopted as early as this year, but then there will be some time before the regulation enters into force. The Parliament wants to introduce measures mandating simpler battery replacement as early as 1 January 2024, while the Council is proposing to delay the date of entry into force of the regulation further to allow more time for manufacturers to adapt.
Therefore, the regulation’s effective date is still unknown, but due to strong decisions by European bodies, we can expect that this time regulations on batteries will finally be adopted.
Key features of the draft
Each EU body involved in the legislative process has already made its key demands regarding the draft regulation, but the final wording is still unknown. Below we discuss the most frequently mentioned and most likely changes that will significantly impact the battery market.
New category of battery. The draft provides for introduction of a new category of battery—a battery for light transport vehicles. It will join the existing categories of portable, automotive, and industrial, which in Polish law are included in the Batteries and Accumulators Act of 24 April 2009. This means that batteries for scooters, motor scooters and electric bikes, which are gaining in popularity, will also be regulated.
Reducing the carbon footprint. The regulation calls for introduction of special labels clearly indicating the carbon footprint, informing users of the environmental impact of the life cycle of a particular battery. Additionally, requirements are to be introduced regarding the origin of cobalt, lead, lithium and nickel used in the manufacturing process. By the end of 2025, 90% of cobalt, copper, lead and nickel and 35% of lithium is to be recycled. By 2030, 95% of cobalt, copper, lead and nickel and 70% of lithium is to be recycled.
Reducing the carbon footprint of the battery market is part of the EU’s low-carbon policy. Batteries are another area that will require the market to invest in renewable energy sources. These products, whose acceptability depends on the production cycle and recycling requirements, are an example of how Europe is making yet another industry sector dependent on clean energy, putting more carbon-intensive players at a disadvantage. The exact method of calculating the carbon footprint has not been officially announced yet, but it will largely determine whether Poland and Polish companies are ready for the changes.
The regulation places heavy demands on the market, but also creates new opportunities for investments in renewable energy, without which production may be very difficult or even economically unfeasible. This may discourage investors and, as a result, waste the potential of the Polish battery industry (in 2020, Poland was one of the most important exporters of lithium-ion batteries in the world). These changes mark just the beginning of how the European Union wants to shape the low-carbon industry market. For Poland to become an investment destination for new battery manufacturers, an adequate supply of energy from renewables must be online as soon as possible. This will ensure Poland is better prepared for the new battery rules.
Raw materials. Also thanks to the new rules, diversification of the sources of supplies of raw materials needed for production of batteries may be a factor affecting climate neutrality in this area. By 2050, the demand for these raw materials could increase by as much as 1,000%, demonstrating the importance of being able to mine them independently in the EU. Cobalt, lithium and nickel are often mined in unstable countries, such as the Democratic Republic of Congo, Russia, China or Cuba, which makes imports increasingly risky. Therefore, the EU’s policy is to seek independent, secure supply and extraction of these commodities in European regions such as Czechia, Portugal and Scandinavia. There are some 260 deposits of these materials throughout the EU, but only 20 of them have been developed so far.
Transport. Transport is another sector that will exhibit a high demand for batteries in the near future, due to the rapid development and popularisation of electromobility. The number of electric-powered cars is estimated to grow to 900 million by 2040, which will significantly impact the demand for automotive batteries and industrial batteries.
Recycling. The regulation points to an increase in recycling itself, which is to be based, for example, on an increase in the collection targets for portable batteries and waste from other battery categories, which to date have been too low in the EU. Based on the regulation, due to the circular economy plan, the battery market in the EU will rely to a large extent on recycling.
Supply chain control. Producers are to be inspected to ensure that human rights are not violated at any stage in the supply chain and that there is no environmental damage. The regulation extends the due diligence regime to those who place any batteries on the EU market, thus covering the entire value chain, e.g. sourcing, processing and trading raw materials.
These provisions can make a significant contribution to improving the human rights situation around the world. Often, critical raw materials are extracted in violation of fundamental rights, and some are still not subject to any controls, e.g. cobalt, which is mined in South Africa using child labour.
By 1 January 2024, portable embedded batteries and batteries for light-duty vehicles are to be designed for easy and safe removal and replacement.
The European Union’s aim
The European Commission plans that, due to new regulations, the EU should become a leader in the battery sector, including by achieving autonomy at every stage of the value chain. In the near future, this means that some 30 gigafactories producing battery cells will be built in Europe, and the EU will be able to start competing with the largest producers in the world.
Rafał Pytko, Stanisław Majewski, Energy practice, Wardyński & Partners