Why India needs to secure lithium supplies as the renewable energy and electric vehicle industry grows rapidly
At a recent inter-ministerial meeting, RK Singh, Union Minister of Energy, stressed the need to meet India’s growing demand for lithium. India is lagging behind in terms of lithium reserves, so there is a need to secure lithium sources for growing demand. According to the minister, India would need 120 gigawatt hours of battery storage to meet its addition of renewable capacity. Besides storage, India also needs lithium to run automobiles, making a stable source of lithium needed to reduce carbon emissions and dependence on imported oil.
Why is the demand for lithium increasing?
As India shifts to renewables, with several large companies entering the sector, the country would need storage capacity to balance the grid. Electricity is consumed as soon as it is produced. The production of renewable energy sources is highly dependent on climate, weather and other unpredictable factors. As a result, they could produce more electricity during the period when the actual demand is low, while providing less when the demand is much higher. Thus, for constant production, large energy storage systems must be deployed to make renewable energies more reliable.
Electric vehicles, especially in the two-wheeler and three-wheeler space, were quickly adopted with the right political impetus and rising prices for conventional fuels. The total cost of operation is lower than that of internal combustion engine (ICE) vehicles in some cases. Over the past few months, dealer-level data has shown that despite a gloomy sales climate, sales of electric vehicles have increased seven to eight times for some companies.
For example, Hero Electric recorded sales of 7,021 two-wheelers in November 2021. During the same period last year, the company had sold 1,169 two-wheelers in the market. Likewise, Ather Energy has experienced a 7-fold increase, with the number of vehicles sold increasing from 360 in the previous year to 2,198 in the current year. The sales growth rate contrasts sharply with the sales decline observed by gasoline vehicle operators.
Is lithium-ion technology our best bet?
While there are several battery technologies available for the automotive industry, none of them are as mature as the lithium-ion battery. Lithium-ion batteries are unlikely to be replaced in the next five years in the automotive industry, according to an Avendus report. As new technologies continue to evolve, the industry appears to be in favor of lithium-ion batteries with several significant investments made in the mass production of these batteries.
Since 2010, around $ 10 billion has been invested in manufacturing Li-ion batteries. In addition, there are 115 giga-factories online, betting on increasing production. Charging infrastructure providers have built stations with this particular technology in mind, perhaps cementing it even more. As a result, India should secure the lithium or should seek alternative technologies if it is unable to secure the rare metal.
China’s Growing Influence on the Lithium Supply Chain
Currently, most of the batteries are imported from China. The country has secured significant lithium supplies through the acquisition of mines in areas rich in rare metals. For India, a dependence on Chinese lithium could prove problematic in the future, given the past relations between the two countries.
Argentina, Chile and Bolivia have seen the Chinese take over several lithium and cobalt mines – both minerals are essential in making batteries for electric vehicles. While India has set up a company for the acquisition of critical mineral mines – Khanij Bidesh India Limited, so far there has not yet been much progress on this front. China and India have huge populations whose energy needs must be met. Between 2018 and mid-2021, China led the $ 4 billion lithium-related merger and acquisition, followed by the United States at $ 1.4 billion, according to a Standard and Poor’s report. .
The country’s holdings are estimated at 50,500 tonnes of lithium carbonate equivalent, or about 12% of the supply in 2020. Apart from that, lithium reserves have also continued to increase. China alone acquired 6.4 million tons of reserves in 2021. By 2020, the total acquisitions in space had been 6.8 billion. In addition, significant investments have also been made in new battery manufacturing complexes. The country’s lithium investment spree could increase supply chain risks for other countries. So far, the tight supply has pushed lithium prices higher, near all-time highs.
Growing opposition to mining
Another issue with India’s dependence on imported lithium is growing resource nationalism, environmentalism, and other factors. Several governments have focused on re-nationalizing mines or increasing royalty rates in recent years. The citizens also opposed mining because it can have a negative impact on the environment. Serbia, for example, has seen anti-mine protests as citizens oppose lithium mining because the process could destroy nature.
How can India establish itself in the supply chain?
A 2017 NITI Aaayog report estimated that India’s EV battery market alone could be worth $ 300 billion from 2017 to 2030 if India can move quickly to EVs. Growth in electric vehicle adoption would bring social and economic benefits, the report said, as dependence on imports declines, public health improves, and renewables are integrated into the grid. The report highlights the lack of lithium reserves in India, but offers a solution to the problem.
“India will have the opportunity to produce both cells and battery packs, while only importing the cathode or its raw materials from mineral-rich regions. In this scenario, India is expected to seize nearly 80 percent of the total economic opportunities, ”the report said.
Therefore, a focus on battery manufacturing could allow India to take advantage of the electric vehicle boom. The report also estimates that imports of some of the battery components would be more than offset by lower imports of oils, allowing the country to reduce its imports. India may also step up operations and become an exporter of batteries, according to the report.
Also, as countries like Bolivia focus on increasing lithium production, we might see a relatively more stable supply going forward. In addition, new technologies are being developed to make the manufacture of electric vehicles more profitable and less dependent on rare elements.
But until then, India must take action to prevent lithium from becoming a weakness for the country.