Impacts on batteries, metals, charging infrastructure and emissions

Batteries and metals

EV battery demand is also rising quickly, with 2020 shipments 45% higher than in 2019. By 2030, demand grows almost 15-fold to 2,576GWh in the Economic Transition Scenario. Manufacturers have announced plans totaling 2,539GWh of annual capacity due by 2025. China still dominates, but capacity is growing in other regions.

Average battery pack prices go below $100/kWh on a volume-weighted average basis by 2024, driven by the introduction of new cell chemistries and manufacturing equipment and techniques. Simplified pack designs for battery-electric vehicle platforms also help. By 2030, pack prices hit $58/kWh, but high levels of investment will be needed to keep prices falling.

New EV battery chemistries are being adopted faster than in the past. NMCA batteries will enter the market in 2021, two years ahead of our previous expectation. This chemistry provides higher energy densities and a longer cycle life than the equivalent NMC or NCA material. By the end of the decade new chemistries using more manganese will become prevalent to reduce pressure on nickel. Lithium and cobalt mining and refining capacity is sufficient for the 2020s, but new nickel and manganese salt production capacity will need to come online to avoid a supply crunch.

We expect the supply of lithium, cobalt, manganese and nickel to be sufficient to meet lithium-ion battery demand out until 2030 under our Economic Transition Scenario. New refining facilities and investment will be required, but we are confident the market will respond to this need. Under our Net Zero Scenario the rapid increase in demand for lithium-ion batteries will require huge volumes of raw materials.

To evaluate the impacts of this we have created two chemistry-mix scenarios. Our base chemistry mix relies heavily on the current generation of nickel-based cathodes, while our progressive chemistry mix uses next-generation cathodes that use fewer raw materials.

Battery recycling is a critical enabler for our Net Zero Scenario. Without it, by 2050 cumulative lithium demand exceeds currently known reserves. With universal battery recycling, however, not only does primary lithium demand remain below known reserves, but there is also the prospect of a fully circular battery industry, with supply of recycled lithium exceeding total annual demand by mid-century.

Overall, EV adoption is not derailed by metals supply constraints even under our Net Zero Scenario, despite the very large volume of material that will be required. For metals like manganese, supply from currently known

reserves is sufficient to meet demand up to 2050. In order to keep demand in balance for lithium, nickel and cobalt, a range of approaches will be needed that will require governments, automakers, cell manufacturers, miners and recyclers to work together. This includes the need for dense charging networks, new cell chemistries, widespread recycling and investment in new mining and refining capacity. New extraction technologies and sustained high prices could also change known reserves.

The trend over the last decade has been for average battery-pack sizes to increase. This may not continue, and could reverse. We have modeled the impact on material demand if battery pack sizes were 25% lower by 2040, compared to our main scenario. As an example, battery packs for SUVs would average 54kWh, instead of 71kWh. In this analysis cumulative demand for lithium-ion batteries would be 18% lower. For nickel this means that even under our Net Zero Scenario, using our base chemistry mix, reserves and recycling would meet cumulative demand.

Further reductions in average battery pack sizes are possible, and desirable. There is a strong argument for governments investing heavily in public EV charging infrastructure networks because denser networks can help enable much smaller battery packs, leading to further economic and environmental benefits. Switching to vehicle regulations based on life cycle emissions could also help push the market to smaller battery packs.

Emissions

In our Economic Transition Scenario, CO2 emissions from road transport bounce back relatively quickly from the Covid-19 pandemic and return to above 2019 levels by 2023. Despite the rapid rise of EVs, emissions from road transportation do not peak until 2030, when they reach 7.1GtCO2. This is an increase of about 7% from 2019 and is driven mainly by rising emissions from heavy vehicles. After peaking in 2030, road transport CO2 emissions in 2050 are 28% below 2019 levels in our Economic Transition Scenario.Heavy trucks account for 59% of all remaining direct road transport CO2 emissions in 2050 in the ETS, highlighting the urgent need for action in this segment.

The Net Zero Scenario entails a much more rapid transformation than the ETS, and the rate of emissions reductions diverges sharply from 2030 onward as more internal combustion vehicles are taken off the road. These figures refer to tailpipe emissions only. Fully capturing the emissions benefits of electric and hydrogen fuel cell vehicles will also require rapid decarbonization of the power sector and hydrogen production.

Charging infrastructure

In our Economic Transition Scenario, by 2040 the charging network needs to grow to over 309 million chargers across all locations. The total is dominated by home chargers, which reach 270 million in this time period and account for 87% of the total network. In addition to these, there are 24 million public chargers, 12 million workplace chargers and 4 million bus and truck chargers required.

Over $589 billion of cumulative investment is needed in the network to install all these chargers in the Economic Transition Scenario. For comparison, global investment in renewable energy capacity was $304 billion in 2020 alone.

Required investment reaches a peak of $39 billion annually in 2037 for all chargers and a peak of $15.7 billion annually in 2035 when focusing in on public chargers. While public fast and bus and truck chargers make up just 2% of all chargers, they account for almost half of the total investment by 2040 in the Economic Transition Scenario. Home charging remains the largest category though, making up 40% of the total.

The needs of the network will change dramatically between now and 2040 as electricity demand from shared vehicles, vans and trucks grows. This will increase the need for more high-powered charging hubs in urban areas and along highways, specifically to serve these vehicles.

The needs of private car drivers will also vary as the mass-market EV driver is likely to have less access to home charging. Counterintuitively, the number of EVs per public charge connector rises to between 30 and 40 in most markets from between 5 and 20 EVs per public charge connector today, as use of charging infrastructure and average power delivery rises.

Autonomous vehicles quickly rise to 10% of all EV electricity demand in 2040 and 20% of demand in 2050. This has the potential to change the requirements of the charging network just as mass-scale roll-out is completed. Wireless and robotic charging could become more important in this scenario.

Vehicle-to-grid has the potential to become a major tool for grid operators in managing peak energy demand. By 2040 in Germany, if all electric vehicles in the fleet in our Economic Transition Scenario were vehicle-to-grid-capable and available to the grid, they could provide triple the amount of power than our projected peak energy demand. If only 25% of the fleet were V2G capable and 50% of those vehicles were available to provide services, the power available could still equal 40% of total peak demand.

To reach the Net Zero Scenario, the required number of chargers increases to 504 million connectors by 2040 and 722 million connectors by 2050. This requires a cumulative $939 billion in investment by 2040 and $1.6 trillion by 2050. Some 47% of the additional investment required between the Economic Transition Scenario and the Net Zero Scenario is for charging infrastructure for trucks and buses.

Support for charging infrastructure needs to be expanded dramatically to stay on track for the Net Zero Scenario, including for remote and otherwise under-served locations. Governments should also review cost-recovery mechanisms for grid upgrades and grid connections to enable more charging points, and consider if these can be included in the rate base of relevant grid operators in a given area.