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INTERVIEW: EV supply chain needs to be as clean as possible to achieve net zero: Vulcan

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INTERVIEW: EV supply chain needs to be as clean as possible to achieve net zero: Vulcan

Highlights

Race to net zero, EVs key part of narrative

Autos require clean supply chains, mine to mouth

ESG metrics top of investors agendas

New York — The entire battery supply chain, from mining to end-user, needs to be as green as possible for the electric vehicle market to maximize its ambitions for a lower-carbon future, Vulcan Energy's vice-president for business development, Vincent Ledoux Pedailles told S&P Global Platts Sept. 10.

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In the wake of the coronavirus pandemic local supply chains have been thrust into the spotlight, as Environmental, Social and Governance metrics continue to climb the ladder of importance for investors.

The European Battery Alliance has called for investment in the value chain -- from extraction of raw materials all the way through to recycling at the other end of the value chain -- to build the industry and create job security.

Talking to Platts Pedailles said that the recent pandemic has amplified the need not only for local supply chains, but also a reduced carbon footprint across mining and processing of lithium. He, like others, argued that the footprint of EVs could be hindered if the materials going into manufacturing them comes from highly polluting practices.

"We live in an age of ESG investing. Money is now being allocated to business that back up what they say they will do, and provide a more sustainable future for everyone," he said.

He added that investors are seeking out alpha linked to proper ESG metrics; "we're all in this for the long haul, we need to think about best practice across the supply chain."

Pedailles recently joined Vulcan Energy, having previously worked for another European developer, Infinity Lithium.

Zero Carbon Lithium

Vulcan is aiming to decarbonize the currently high carbon footprint of lithium-ion batteries used in EVs, by producing a unique, world-first Zero Carbon Lithium™ product from its Vulcan Project in Germany.

"We will be producing both battery grade lithium hydroxide and renewable energy from geothermal brines in the Upper Rhine Valley. A number of lithium projects are needed in Europe to satisfy the region's growing demand powered by E-mobility and energy storage," he said.

"I led Infinity to become the first project to secure EU funding and put the company at the forefront of lithium extraction in Europe. I am now joining Vulcan Energy as I believe that battery and automakers are looking to secure high quality lithium products with the lowest impact on the environment possible, which is exactly what Vulcan is offering, with a Zero Carbon Lithium™ project," the VP added.

The European Investment Bank expects to increase its backing of battery-related projects to more than €1 billion ($1.09 billion) of financing in 2020, matching the entire fiscal support of the last decade.

There are a clutch of developers in Europe all looking to bring lithium projects online to meet the region's forecast growth in demand from the nascent EV market.

Platts Analytics forecasts 2020 EV sales at 1.97 million units, down 11% on the year. By 2040, it expects sales of 46.7 million EVs. Even prior to the pandemic, Platts Analytics expected EV sales in 2020 to decline slightly year on year, almost entirely on account of a broader slowdown in China.

One market source said that the industry needs to find solutions to reduce the CO2 footprint of lithium production, both hard rock and brine, as well as the waste caused by both processes. Europe also needs to de-couple supply chains from China, in order to reduce hefty carbon footprints associated with shipping of material from region to region.

Local supply chains in focus

Europe, and particularly the UK, need to secure an electric vehicle battery supply chain in order to maintain a competitive edge in the sector, according to Britishvolt founder Orral Nadjari in a recent conversation with Platts.

Nadjari said that the coronavirus pandemic had created an opportunity for Britishvolt, as it highlighted the need for local supply chains.

"Things are heating up in the UK," said one market source. "There's no denying that electrification is the trend, and the UK will be a big market, we need local supply chains to manage net zero ambitions. Hopefully the coronavirus pandemic leads us to a greener, more sustainable future," he added.

An insider who helped shape the European Commission's latest critical minerals assessments revealed efforts to make the EC more responsive to the European Union's needs amid criticism of lithium only just being added to its list; the efforts are expected to lead to more streamlined permitting, S&P Global Market Intelligence said Sept. 9.

The EC added lithium, bauxite, strontium and titanium to its latest updated list Sept. 3, which drew comments from battery supply chain experts on social media and in interviews varying from "better late than never" to "it's about time." Such comments were made particularly in relation to lithium, which is key to lithium-ion batteries in EV and renewable energy and storage technologies.

Vulcan could help autos

Automakers are not just rushing to move to electric for the sake of humanity, they also face hefty fines linked to carbon emissions of their fleets.

Pedailles said that Vulcan's project can offset CO2 penalties, a major boon if successful.

"Let's take Volkswagen as an example. They are targeting to produce 28 million EVs by 2028. If VW produces those EVs using lithium that has been processed using traditional routes, every single EV that the German automaker will produce will emit 675 kg of CO2 just from the production lithium used in the battery cell. Multiply this by 28 million EVs and VW will have emitted more than 19 million mt of CO2 linked to just the lithium used in its cars," he said.

If VW was going to source a greener product such as Vulcan's, they would actually generate -238 kg of CO2 emissions per car or -7million mt of CO2 for their entire EV fleet," according to Pedailles.

"This could help VW, and other automakers, to reach their sustainability targets by offsetting CO₂ generated by the rest of their supply chain," he added.

Volkswagen is one of the few automakers already implementing its long-term electrification strategy and preparing for mass-scale electric vehicle manufacturing, despite the negative outlook for the auto industry due to the coronavirus pandemic.