10 ways to help build a thriving battery recycling industry in Europe

We have three choices when deciding what to do with spent lithium-ion batteries: recycle, reuse or dispose.

One way to dispose of batteries involves sending them to landfills, but this presents significant environmental risks. The European Commission (EC) is working on a long-term framework, the European Battery Directive, that actively encourages recycling with a phased approach to mandating minimum recycled content thresholds across key commodities.

A second alternative to battery recycling in Europe involves repurposing batteries for a second life, particularly in energy value chains. This option is likely more suitable for lithium iron phosphate (LFP) batteries than it is for lithium nickel manganese cobalt oxide (NMC) batteries. This is because the value of recycled materials in LFP batteries is lower, their lifecycle is significantly longer and performance requirements are not as critical.

As electric vehicle (EV) batteries drop below 80% rated capacity, they can be used in other applications ranging from static storage to EV charging infrastructure. Once again, however, making repurposing commercially viable means overcoming significant challenges. One challenge — among many others — involves understanding the residual value of a spent battery.

Until such issues are resolved, recycling remains the most viable — and fastest growing — option. As battery recyclers take steps to capitalize on proliferating opportunities, significant investment is flowing into R&D partnerships behind the emerging technologies designed to make the recycling process more efficient and sustainable.

Currently, pyrometallurgy is the most common recycling technique. Again, this proved particularly suited to batteries with a high cobalt content, when economic viability depends only on recovering cobalt. Now, with high-nickel chemistries becoming increasingly prevalent, recovering the value of other materials is increasingly important.

But pyrometallurgy is not challenge free. Among other drawbacks, the technique is highly capital- and energy-intensive, with critical temperatures achieved by burning fossil fuels. Growing pressure from consumers and regulators — notably the European Commission (EC) — to move away from such environmentally inefficient techniques is just one reason why European players are deploying significant capital into more sustainable hydrometallurgical leaching methods to extract and separate high-value metal salts, including lithium and nickel salts. This capital inflow is likely to accelerate as the EC introduces increasingly ambitious policy measures designed to encourage cradle-to-grave recycling.

Another factor driving investment into recycling high-value salts, such as lithium and nickel, is that these elements are vulnerable to supply pinches from primary or virgin sources. Overcoming these pinches means applying upward pricing pressure until it becomes cost-effective for miners to greenlight new projects. And even if a project gets the go-ahead, it can still take seven years or longer between discovering the initial deposit and mining the first batch. By contrast, new gigafactories are coming onstream with lead times as short two years. So, from a supply perspective, the timing challenge is very real.

As the battery recycling industry in Europe begins to take shape, more and more players are joining the contest for relevance and market share. These players range from materials and cell manufacturers to Original Equipment Manufacturers (OEMs), independent recyclers and waste management companies. Among the strongest players, there is already a noticeable trend toward cross-sector partnerships, alliances and integrated business models rather than direct investments. Since 2017, the lithium-ion battery recycling space in Europe has seen 20 transactions and 24 alliances. Transactions and alliance activity is highly concentrated in the hydrometallurgy technology space, with 19 alliances and 13 investments.

China offers one possible view as to how the European market will ultimately pan out. After years of fragmentation, the country’s localized recycling market is now dominated by battery material suppliers, with the principal OEM taking up a smaller market share primarily focused on its own batteries. Europe is likely to follow the Chinese model, with players across the ecosystem participating in recycling.

Significantly, Asian and North American players are filing patents to establish their license to operate in Europe, keen not to squander another market opportunity after missing out on gigafactories. But it is still unclear who the winners will be in the European lithium-ion battery manufacturing sector. Apart from anything else, there is still no single model for an EV battery recycler in Europe. But it is clear that the players who master the following key capabilities will be able to establish a strong lead:

Scale

The minimum efficient scale for operations tends to be around the four kilo tonnes per annum (ktpa) capacity. Players capable of securing and aggregating this level of feedstock will be better positioned to achieve the required cost economics. However, notably this scale isn’t anticipated until feedstocks grow significantly until the mid to late 2020s as EV batteries start reaching the end of their useful first life in cars.

Collection and distribution

With transportation costs accounting for around 30% of overall recycling costs, players that effectively manage waste loops and logistics will be able to scale, particularly given the regional recycling dynamics. Several leading contenders currently operate a hub-and-spoke model, where primary dismantling takes place close to large supply hubs, while black mass processing is centralized to achieve cost efficiencies.

Integration of recovered metals

The players looking to gain most from recycling materials in their battery design will have a natural advantage given that original battery manufacturers are focusing increasingly on more and more complex cell designs and chemistries. Also, players such as cathode active material (CAM) companies can have the most to gain from reintegrating the materials back into their manufacturing as they know the chemistry best and can manage the warranties best.

Technology development

Technology development is largely centered around how much can be recovered — both in number and volume of materials — and the commercial viability of operations at scale. While cell makers may not lead on in-house technology development themselves, with other independent recyclers currently taking the lead, having a secure pathway to accessing this technology – through ventures, alliances and other partnerships — will be crucial.

Partnering

As technologies evolve rapidly and service delivery models become increasingly regionalized, players with strong technology ecosystems and waste management network partnerships will prevail.

The value case for battery recycling is based on recovering more materials. Accordingly, the partnerships are most likely to succeed will connect a broad range of commodity players through a well-thought-through series of loops and flows. Each player will be focused on a single commodity in the recycling chain, such as nickel, cobalt, lithium aluminum and so on.

The lithium-ion battery recycling industry is still young and has much to learn from the more established lead-acid battery recycling industry. That said, there are immediate steps that the key lithium-ion players — including recyclers, battery and component manufacturers, as well as policymakers — can take to lay the foundations for a thriving and sustainable circular battery recycling economy in Europe. With this prize in mind, we have drawn up a 10-point action plan for the industry’s future.

Actions for recycling value chain players including recyclers, component manufacturers, cell and battery pack makers

Actions for policymakers, institutions and industry bodies