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Cars Are Going Electric. What Happens to the Used Batteries?

@EQUITYMATES|8 November, 2021

Lithium. It is on the forefront of every Australian investors mind. It brings together the oldest love of Australian retail investors – mining speccies – with the latest trend in the retail investor community – ESG and sustainability. The promise and potential of lithium-ion batteries is huge. They are the technology underpinning the world’s transition from internal-combustion engines (ICE) to electric vehicles (EV). Yet, one big questions remains. What to do with these batteries once they are used?

By the end of this decade, the International Energy Agency estimates there will be between 148 million and 230 million battery-powered vehicles on the road worldwide. This will be ~12% of the global automotive fleet. The problem is – lithium-ion batteries are toxic and can cause fires, especially when stored together. A recent American EPA report found that lithium-ion batteries caused at least 65 fires at US waste facilities last year.

The dream scenario for old lithium-ion batteries is to embrace the philosophy of the circular economy and find a way to refurbish and reuse them. There are a number of startups working to make this possible, including Redwood Materials a firm led by former Tesla executives. However, at this moment, these are more ideas than scalable solutions.

Currently, ICEs are sold for scrap and taken apart. This works because there is a market for scrap metal and for auto parts. Even lead-acid batteries used in ICEs have a 95% recycle rate (mainly because of regulations requiring it). This second hand market and regulatory framework doesn’t exist for lithium-ion batteries, creating a problem that needs to be solved.

Landfills won’t take lithium-ion batteries because of the fire risk. Recyclers won’t take them because they cannot profitably be recycled. So governments are realising the problem and proposing solutions. However many of the solution proposed, including one from the EU last year, will likely add cost to EV prices up front and slow down the transition from ICE to EV. There is no doubt this problem will get solved – either with government intervention to make recycling profitable for recyclers, new technology to reduce recycling costs, or new battery technology itself – however, in the meantime, the more EV’s on the road, the more old batteries the world will have to manage in a decade or so when they reach their end of life.

This is an excerpt from our Thought Starters email. Once a week we send you 5 interesting articles that have caught our attention, to get you thinking. No spam, we guarantee.

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