A report by the Rocky Mountain Institute highlights how a domino effect of surging battery demand could put global climate goals within reach by enabling a 22 Gigatons per year reduction in CO2 emission.
The Surge in Battery Demand – A Domino Effect
The report suggests that the world is witnessing a shift in energy dynamics due to the exponential growth in battery demand, due to a phenomenon driven by what it describes as a “domino effect” that will cascade from country to country and sector to sector.
The report highlights how this unprecedented battery demand isn’t just a trend and could be a critical enabler in significantly contributing to the abatement of transport and power emissions and (hopefully) the phaseout of half of the global fossil fuel demand. The assertion is that this domino effect of battery demand could be the thing that sets the world on a clear trajectory towards achieving over 60 per cent of the necessary milestones for a zero-carbon energy system.
The S-Curve of Battery Growth
The Rocky Mountain Institute report highlights how, central to understanding this shift, is the S-curve pattern of battery demand. Imagining an ‘S’ (on its side a as a graph illustrating the growth of battery demand), the curve begins slowly, accelerates sharply, then levels off. The report explains that this is because:
– Battery sales have been doubling every two to three years and by 2030, sales are expected to increase by six to eight times, potentially reaching 5.5-8 TWh (terawatt-hours) per year.
– The costs of making each battery will decrease as production increases – for every doubling of production, costs are projected to fall by 19 to 29 per cent.
– As well as cost reduction, battery quality will improve. For example, battery energy density (power stored for their size) is expected to increase by 7 to 18 per cent each time production doubles. By 2030, therefore, top batteries may store as much as 600-800 Wh/kg (watt-hours per kilogram).
– The report highlights that the above effects could mean that by 2030, battery cell costs may have fallen to $32-54 per kWh, making them much more affordable and efficient.
The “Domino Effect” (Across Sectors and Geographies)
The domino effect of battery demand and usage that the report talks about refers to how once new battery technology is successful, it jumps sectors as well as geographies. For example, initially rooted in consumer electronics, battery technology then expanded into motorbikes, buses, and cars. Its current trajectory is towards stationary electricity storage, road haulage, and eventually, short-haul ships and planes by 2030. Geographically, the effect mirrors this sectoral spread. For example, after gaining momentum in early adopter nations, battery technology is now being rapidly adopted in major markets like China, Europe, the United States, Southeast Asia, and India.
The Largest Clean Tech Market Emerges
This explosive growth in battery demand has catalysed the most significant capacity ramp-up since World War II. The race to the top has led to the construction of 400 ‘gigafactories’, capable of producing 9 TWh of batteries annually by 2030!
This development has propelled the battery market to become the largest clean tech market, surpassing combined investments in solar and wind power.
Impact on Fossil Fuel Demand and Climate Goals
If the figures highlighted in the report come to fruition, the implications for fossil fuel demand are, of course, likely to be profound. It could mean, for example, that batteries are poised to replace significant portions of fossil fuel demand in electricity (175 EJ) and road transport (86 EJ), while also challenging the remaining demand in shipping and aviation (23 EJ). If this shift occurs at this scale, it could be pivotal in reducing global emissions by 22 Gigatons of CO2 per year, thereby representing a significant leap towards meeting global energy-related emissions targets.
Challenges and Opportunities Ahead
Despite the promise highlighted in the report, challenges remain. Stressed supply chains and the need for sustainable raw material sourcing are likely to be critical concerns. Also, building the infrastructure for a battery-dominated energy system looks like it’s a monumental task that will require consistent innovation and investment. That said, the ongoing efforts of companies, governments, researchers, and climate advocates, plus the fact that serious progress has to be made in reducing global CO2 emissions (to keep below 1.5°C of warming) are likely to mean that these challenges could be overcome.
It’s Not All Positive
Some of the other major challenges caused by a huge surge in demand for (and production) that the report doesn’t talk much about include :
– The environmental damage from mining. Extracting raw materials like lithium and cobalt can cause habitat destruction, water pollution, and soil erosion.
– Supply chain risks. For example, although the report sees a domino effect of battery adoption across many countries, there is still likely to be a reliance on a few countries for critical materials which raises geopolitical and supply chain concerns, particularly with materials sourced under conditions of environmental or social harm.
– The considerable carbon footprint of battery manufacturing. Battery production is energy-intensive and, if powered by fossil fuels, contributes to carbon emissions.
– Massive recycling and waste management issues. Disposing of (and recycling) rapidly increasing numbers of batteries could pose environmental and health risks due to toxic materials. Current recycling rates are low, and processes can be costly.
– The scarcity of resources. Increased demand for materials like lithium and cobalt could lead to scarcity and higher prices.
– The social and economic impacts of shifts in job markets, particularly in regions dependent on fossil fuel industries, will require new skills and training.
– Transportation hazards from moving large quantities of batteries, e.g. fire and chemical spill hazards.
– Market oversaturation risks. Overproduction could lead to economic challenges in the battery industry.
Mitigation efforts will, therefore, need to include sustainable mining, improved recycling, responsible supply chain management, and development of less environmentally impactful battery technologies – something which is still very much in the research stage.
What Does This Mean For Your Organisation?
The battery revolution outlined in the report could have significant and broad implications for all kinds of businesses and other organisations. This shift presents a unique opportunity for businesses to be at the forefront of a sustainable future. Adopting battery technology could lead to a significant reduction in carbon footprints, offering a pathway to meet environmental goals and adhere to increasingly stringent regulations. Beyond compliance, it may also open avenues for innovation in product development, energy management, and operational efficiency.
This rapidly evolving energy landscape, however, will require organisations to reassess their supply chain strategies and the surge in battery demand implies a need for more robust and sustainable supply networks. Businesses will, therefore, need to ensure a stable supply of materials, potentially reconfiguring sourcing and manufacturing processes to accommodate the growing battery market. This could involve forming new partnerships and investing in technologies that align with the shift towards renewable energy sources.
Also, companies may need to invest in (or partner with) entities for charging infrastructure and energy storage solutions. This investment may not be just a cost but an opportunity to be part of an emerging market that is set to outpace traditional energy sectors.
For organisations in the energy sector, we appear to be at a pivotal moment to move towards clean technologies. The battery market, now overshadowing solar and wind investments, presents new opportunities for growth and innovation. Energy companies could leverage their expertise and resources to lead in battery technology and storage solutions, carving out a significant role in the new energy ecosystem.
This transition to batteries will also bring challenges for workforce skills and knowledge. Organisations will need to invest in training and development to equip their workforce with the necessary skills to navigate the changing technological landscape. This will include an understanding of battery technologies, renewable energy systems, and the accompanying intricacies of new regulatory and market environments.
The change, of course, isn’t likely to be confined to the energy sector alone. Industries like automotive (already with EVs), transportation, and manufacturing are directly impacted and will need to adapt their business models. This might involve transitioning fleets to electric vehicles, rethinking logistics based on battery storage capacities, or redesigning products to be more energy efficient.
Organisations will also have a role to play in shaping policy and public opinion. Collaborative efforts with governments, research institutions, and environmental groups could help in advocating for favourable policies, incentivising renewable energy adoption, and educating the public about the benefits of this transition.
The battery revolution suggested in this report isn’t just a shift in energy preference but a comprehensive change in how businesses will need to operate, innovate, and grow. Being part of a sustainable future will require proactive adaptation, strategic planning, and collaborative efforts. Organisations that embrace this change will not only contribute to a greener planet but also position themselves competitively in a world increasingly driven by clean technology.
