Published April 17, 2023 | 2 min watch
Key Points
- Battery storage investment is likely to double in 2023, but that number will increase even further in the coming years.
- Creating the right policy environment will be key to helping to drive investment into the battery value chain.
- New technologies and new chemistries will also be needed, not only to handle limited supply of raw materials, but also to create the best battery for each use case.
For storage in 2022, battery investments were expected to be around $16 billion. In 2023, that number is likely to double as installed capacity does and increase exponentially thereafter, according to Ross Board, Director in EMEA Energy Transition at RBC Capital Markets.
“There are very ambitious policy and government targets across the world to install storage over the coming years,” he said.
“There are very ambitious policy and government targets across the world to install storage over the coming years.”
ROSS BOARD, DIRECTOR IN EMEA ENERGY TRANSITION, RBC CAPITAL MARKETS
The US and Europe take different tacks
These policies and targets are a key driver for investment into the space and it’s becoming clear that the US and Europe have very different views on how to create the right policy environment. The US Inflation Reduction Act is offering huge subsidies, with $45 per KWH available for battery manufacturers. That’s going to attract a lot of companies to consider the US when setting up new manufacturing facilities.
Europe, on the other hand, is focused on regulation. Its new Rules of Origin will subject companies that don’t source materials from within Europe to additional levies. Given the location of materials and manufacturing in the battery landscape, complying with these rules will be challenging.
“I think there needs to be a complete reform of legislation within Europe and that needs to move in line with the US to make us more competitive,” said Betts. “We’ve just seen Volkswagen announce that they are putting one of their battery plants on hold and they’re focusing on developing that capacity in the US – they estimate that they should receive around $10 billion in credits from the US government.
“In the UK in particular, it’s very disappointing to see how things have been so slow to develop. That was one of the primary reasons for the downfall of Britishvolt and following on from that we've seen both Tata and Jaguar come out asking the government to invest $500 million into the UK auto system.”
“I think there needs to be a complete reform of legislation within Europe and that needs to move in line with the US to make us more competitive.”
PAUL BETTS, MANAGING DIRECTOR, M&A EUROPE, RBC CAPITAL MARKETS
The right battery for the right use
On the technology front, batteries are evolving to suit different types of vehicles, but also in response to rising commodity prices. If the OEMs pass on all the inflationary increases, at some point, EVs will become unaffordable.
Either the margin squeeze that the OEMs are feeling needs to be shared further up the value chain or there needs to be a sharing of wealth across different technologies and battery chemistries to effectively smooth out the demand for upstream commodities.
