BATTERY FUTURE IN INDIA.

 

"To further provide impetus to green mobility, customs duty exemption is being extended to the import of capital goods and machinery required for the manufacturing of lithium-ion cells for batteries used in electric vehicles", said our finance minister as she delivered India's 74th budget. India has been consistently talking about green energy and mission 2070. Even though the budget failed to shed some light on other green investments or on capital expenditures expected in the renewable segment, India's policy regarding a carbon-free economy by 2070 is rock solid. 

One of the critical components that would play a significant role in transforming this oil-based economy into a green economy is the battery. If semiconductors are the brain, then batteries surely deserve to be where the heart is. Currently, China holds the position of the world's largest battery manufacturer. India is trying hard to become a manufacturing hub for various consumer electronic goods like TVs, smart phones, etc., but battery manufacturing is a different ball game. Our fundamentals are weak. China was able to dominate the manufacturing process because its fundamentals were intact. What are these fundamentals? 

Metals and an appropriate business environment. 

Today, let's learn what it would take for India to become self-reliant in the battery manufacturing process. What brilliant move did China make to get to where they are now? And what can India do to improve its situation? 

Disclaimer: I tend to quote China a lot in my blogs. This has nothing to do with my liking the country. I love India, for it has given me everything. I just marvel at the way the Chinese do business. That's it. 

The 5 critical metals required for battery production are lithium, cobalt, nickel, graphite, and manganese. Looking at the battery supply chain, Chile, Argentina, and Bolivia famously make up the "lithium triangle," collectively accounting for 58% of globally identified lithium resources. Around 68% of the cobalt comes from the mines in the Democratic Republic of the Congo. South Africa produces 28% of the world's manganese reserves. Australia produces almost half the world's manganese and has the largest nickel reserves. Now, having metal deposits is not a big deal. Rather, luck plays a crucial role. But where luck ends, China begins. Take a wild guess as to which country has a monopoly on refining all of these rare earth metals. That's right, China.  

China tops the list with 80% of global refining capacity for raw materials needed for batteries and 60% of the world's graphite production. Unlike the US, China's power comes from metals, mining, the supply of critical raw materials, manufacturing, refining, and other rare earth metals. China is either the largest producer or the largest consumer in many scenarios. China holds a staggering 85% of the global raw material capacity and dominates midstream refining. Refining is a high-margin game. Sometimes you can mine a metal, and sometimes you can't.But refining is a continuous process. You either refine a new batch of metal or you refine the inventory. The business never stops. Well, I was going to talk about batteries and the renewable energy goals of India, then why am I flaunting Chinese supply chain achievements so much? That's because the supply chain is like salt. You need it, but be careful with the quantity.

The problem with India is that we are completely dependent on the imports of these raw materials, and hence, even if we construct a healthy infrastructure for EVs, the dependency on these raw materials increases the cost per unit. To that end, the Indian government is attempting to establish an entirely new supply chain in collaboration with private players, employing three strategies: 

1. Ensure direct raw material supply from mines.
2. Shift mid-stream processing and key components to India, and
3. Rethink the mining policy in light of the ban on some of these key raw materials available in India.

At first, India is trying to sign long-term agreements with countries that have high deposits of these metals. For example, India has agreed to supply lithium to Argentina and has identified two mines that may accept long-term leases. State-owned Khanji Bidesh India has been set up by the government to oversee these raw material operations. They are exploring joint ventures with Bolivia for the supply of lithium. The foreign trade agreement with Australia is going to affect the country positively, as Australia is the world’s largest producer of lithium. But this process will take time. As a result, many electric companies, such as Ola, have begun their own discussions with mining companies in order to secure direct supply of raw materials. 

For other raw materials, the process is easier compared to lithium. In the case of nickel, there is already a robust supply chain from Russia and Indonesia that can be leveraged. However, with Indonesia banning the exports of nickel ore, things could get complicated. For graphite, even though China controls the mid-stream and refining markets, India is looking to partner with local steel companies to produce synthetic graphite, which can be formed from coal tar, which is a by-product in the steelmaking process. Yet the bigger challenge will be to shift large parts of the mid-stream processing of lithium to India, given that the bulk is still imported from China and Hong Kong. 

FUN FACT 

India doesn't have a lithium-ion refinery. Recently, the Gujarat government announced plans to set up India's first lithium refinery.

The reason India never had a lithium refinery was because the EV penetration never improved. Experts say that if this penetration for 2-wheelers goes to 25–30% and 10% for cars, then there is no point in setting up a refinery. According to NITI Aayog, India will account for 13% of global battery demand by 2030, requiring 26 more gigafactories of 10 KWH each.So, India is a market that material refining companies cannot miss out on.

The government is also thinking of lifting the ban on the mining of lithium, whose reserves have been found in Karnataka. Auto companies are also pushing for lifting the ban on mining thorium, for which India has substantial reserves in Kerala, Tamil Nadu, Odisha, and Andhra Pradesh. Thorium is always found near the coast. A lot of thorium had been smuggled by the Indian mafia and some politicians in the 1990s and the early 2000s to China. How the hell does a country with no thorium reserves become a nuclear power?

The government is pushing hard to start lithium-ion battery manufacturing, but are lithium-ion batteries worth the effort? 

A superior material that can easily counter lithium-ion batteries is sodium. Following are the advantages of sodium-ion batteries:

1. Under SIO (sodium-ion batteries), sodium is used. found on the earth's surface and in the water in large quantities. Import dependency on lithium increases the per-unit cost.

2. LIO batteries have a range of -20 degrees to 40 degrees Celsius. In a country where average temperatures range between 25 and 30 degrees Celsius, LIO batteries can last easily. E.g., Europe. But, for a country like India, the average temperature crosses 35–40 degrees C during the summers. In May, Hell Akola reaches 40 degrees Celsius.

3. SIO batteries, on the other hand, can easily operate between -40°C and 60°C.That’s the reason why SIO batteries can perform better.

4. LIO batteries can hold 3.2 volts of electricity, whereas SIO batteries can hold 3.7 volts of electricity. Currently, SIO batteries are under development, and hence, in the future, their electricity density capacity will rise. Furthermore, the life cycle of SIO batteries is 20-25% greater than that of LIO batteries.Hence, an SIO battery can hold electricity in a vehicle for a long time.

5. It is very important to recycle LIO batteries after consumption. But, because LIO has nickel, cobalt, and rare earth metals like manganese, recycling LIO batteries becomes a costly process and also causes environmental hazards. On the other hand, recycling SIO batteries is very easy. Transportation of LIO batteries is also difficult because one cannot completely discharge a LIO battery. Whereas in the case of SIO batteries, they can be discharged completely, making transportation easier.

Gujarat is India's largest producer of sodium and the world's third-largest producer. The state contributes 76% of the total salt production in India. In terms of countries, China is the world’s largest sodium producer. Sodium is malleable (can be drawn into thin sheets) and ductile (can be drawn into wires), whereas carbon is neither malleable nor ductile.

Conclusion: India should focus on manufacturing sodium-ion batteries rather than lithium-ion batteries. Building an entirely new supply chain sounds exciting, but it isn't. Speed matters. If India truly dreams of becoming the battery manufacturing hub of the world, then we should integrate our efforts towards sodium-ion battery manufacturing. And the only person who is moving aggressively into the manufacturing of sodium-ion batteries is Mr. Mukesh Ambani. How? We will talk some other day. Keep an eye on Reliance, though.

 

HAPPY INVESTING.