| | | | | Happy Thursday. In our first ClimateTech memo we explored the start-ups using Artificial Intelligence to identify promising new reserves of critical metals and minerals, to tackle emerging supply-demand gaps, and support the green energy transition. | This week we’re jumping to the other end of the value chain, and exploring the role battery recycling and reuse has to play in combatting supply-demand gaps for critical minerals. | Anyone working in climate will have seen the rise of the American battery recycling industry. Redwood Materials, Ascend Elements and Li-Cycle have raised over $5bn, and Redwood alone is valued at over $5bn. There are some amazing resources spotlighting the rise of the recyclers and their hardware innovation. | Today, however, we’re focussing on software providers helping unpick the challenges that battery recycling faces. | TL;DR: | 🔋 Demand for critical minerals is expected to skyrocket in response to the clean energy transition. Reuse and recycling has the potential to relieve the pressure on primary supply requirements by up to 10%. | ♻️ For recycling and reuse to continue to scale, challenges must be addressed to ensure processes are consistently cost-competitive Vs mining of virgin metals… | 💰️ Battery recycling softwares aim to make recycling faster, cheaper, more transparent and more efficient to help improve battery recyclers’ margins. |
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| | | | | 🔋 Why is battery recycling so important? | Decarbonisation technologies demand significant volumes of metals and minerals. Demand for certain critical minerals is expected to outstrip supply. Copper demand will 2x by 2050, and demand for Lithium will 15x according to some forecasts. Supply shortages are expected in lithium, copper, nickel and cobalt. (For more details on why, check our first article in the series.)
| At the same time, decarbonisation technologies are expected to generate a growing volume of end-of-life scrap. At the moment, most EV battery recycling involves “process waste” from factories producing batteries. As a wave of Electric vehicles reach the end of their usable lives (currently reaching > 12 years!) we are expecting post-2030 to see a tsunami of ‘end-of-life’ battery scrap hit the market. End-of-life scrap is expected to reach 86% of waste supply by 2035.
| Reuse and recycling has the potential to relieve the pressure on primary supply requirements of metals and minerals… While resource extraction must increase to meet demands, by 2040 recycling and reuse of EV and storage batteries could reduce the primary supply requirement for critical minerals by an estimated 10%
| …and can also address geopolitical concerns about critical minerals supply chains. N.America and Europe want to develop an independent battery industry, but currently don’t have the domestic ore bodies or midstream refining to support that. A recent forecast by Bloomberg NEF suggests in 2027, China will still control over two-thirds of global battery-manufacturing capacity. Recycling can support self-sufficiency.
| For recycling and reuse to continue to scale, challenges must be addressed to ensure processes are consistently cost-competitive Vs mining of virgin metals… BCG analysis indicates that large-scale recyclers earn EBIT margins of 15% for certain types of batteries ($4/KWH) however, profitability remains highly exposed to volatility in battery metal prices. I.e. Nickel prices fell ~50% in 2023 which challenged profitability of some battery formats.
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| | | | | ♻️ How does Battery recycling work and what are the key challenges? | When an EV battery reaches the end of its life the greatest value – both in the financial sense and in the environmental sense – is to reuse or repurpose it for use cases that are less demanding: perhaps in a forklift truck or as a backup generator for a building. However, eventually batteries will enter the recycling value chain either (1) directly from a factory as processing scrap (2) or as an end-of life battery. | End-of-life batteries have geographically dispersed during their lifetime. Batteries do not reach end-of-life nicely piled up in a warehouse but rather at the hundreds of thousands of car dismantlers, e-waste companies, fleet owners, OEMs and battery producers around the world. E.g. There has been an uptick in second-hand EVs ending up in places like Ukraine that are willing to accept cars written off by western insurers. | Recyclers must then strike up partnerships and deals to procure these batteries. | Challenge 1: Securing access to feedstock at the right price The commercial viability of recycling is impacted by the ability to securing large-enough volume of battery waste, at the right cost, to generate meaningful short-term scale. By 2030, CES projects that there will be ~10m tonnes of recycling capacity vs ~1.9m tonnes of material available. For recyclers, this means that competitive advantage comes from an ability to access feedstocks and an ability to work with varied materials (i.e., different battery chemistries or even virgin material) |
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| Purchased batteries must then be shipped to recyclers - often across multiple markets and geographies each with their own alphabet soup of regulations to comply with. | Challenge 2: Transporting that feedstock to recycling facilities cost-effectively (Logistics & Compliance) - As a result of fragmentation, logistics represents the single-biggest cost line item in the recycling process, accounting for the 41% of the total cost of recycling. Transportation method and distance can also impact the environmental impacts of recycling. |
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| After collection, battery packs are tested, discharged and disassembled. The battery modules are then mechanically shredded to yield black mass. This ‘black gold’ is what it’s all about. It contains high value metals Ni, Co, Li as well as large amounts of lower value inorganics like Fe, Mn and graphitic carbon. | Challenge 3: Lack of standardisation in battery-pack designs adds complexity and cost. Batteries vary in size, electrode chemistry, and design. This lack of standardisation makes it challenging to implement efficient and automated recycling processes and increases cost. Up to 250 new EV models will be launched between 2020 - 2025, with up to 1500 EV battery models recorded in some databases. |
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| The next step is to extract the various metals from the black mass, typically through one of two processes (or some combination thereof): | Pyrometallurgical: Essentially smelting, which comprises high temperature processing to melt and separate metals. It requires a lot of heat energy and accordingly produces a great deal of emissions. This process has low recovery rates for Lithium Hydrometallurgical: Similar to leaching: chemical solutions are used to dissolve and extract target materials. Emissions footprint is smaller than (1) but chemical/wastewater footprint is more of an issue. Recovery rates of Lithium are higher.
| Challenge 4: Forecasting and tracking recycling economics is incredibly complex. Lack of standardisation in batteries leads to a follow on challenge for recyclers - profitability depends on trading and processing this varied feedstock intelligently. Without tracing material through their operations and understanding yields for specific types of feedstocks, recyclers will struggle to build scalable operations. |
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| With various metal salts extracted from batteries they can then be resold to end customers. By the time metals reach this point they will likely have changed hands many times - in Europe most individual value-chains steps are still carried out by separate companies (E.g. Shredder gives black mass to extractor). | Challenge 5: Trust between supply chain stakeholders and end customers: There is a trust challenge between these actors - validating that broken down components are of the correct quality, quantity and composition. End customers are also making their selection of product and suppliers based on demonstrated product quality, and environmental/social impacts. |
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| | | | | 🔍️ Who are the key players solving these challenges? | Challenge 1 and 2: Securing access to feedstock & cost-effective logistics | Increasing Information on battery to determine next best use: Facilitate access to accurate information about the battery's state of health (SOH) early on in the chain of custody. This can reduce the burden of transportation by ensuring batteries are sent to the appropriate facility (i.e. only batteries with high health are sent for reuse or repurposing) avoiding unnecessary shipments. Example players: RePurpose, ReJoule, Smartville Energy, and B2U Supply chain Optimisation: Optimise where infrastructure are sited and manage logistics processes to ensure batteries are transported to a facility that incurs the lowest cost, lowest environmental impact and maximum social benefit. Example players: Call2Recycle - GreenTraxEV Supply Aggregation & Marketplaces - Connect those creating used batteries (OEMs, producers, collectors, car dismantlers) and those buying used batteries (reusers, retrofitters, repurposers and recyclers) to access feedstock at scale. Also support with managing the complexities of logistics and compliance. Example players: Cling
| Challenge 3 and 4: Lack of standardisation in battery-packs & Forecasting and tracking recycling economics | Onsite operational software: Help recyclers move from spreadsheets and paper to digitalised processes to manage their operations. This enables battery materials to be traced through the recycling process to support a better understanding the profitability of different feedstocks, to optimise workflows and to manage compliance & logistics. Example players: Gaea
| Challenge 5: Trust between supply chain stakeholders and end customers | Battery passport providers: A digital ID for batteries containing data about the ESG performance, manufacturing history, and provenance. Supports efficient sharing of information between value chain players to build trust. Examples players: Circulor, Circularise and Everledger. Life cycle analysis softwares: Collect data from across recycling supply chains, to assess and validate environmental and social impact claims and to provide transparency that is increasingly demanded by end customers. Examples players: Minviro
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| | | | | 💭 By the numbers: | Deals: 19 Organisations; $997Mn capital invested, 98 deals, Capital invested -47% YoY Most active Investors: US Department of Energy & UK R&I (6 Awards) Volvo (3 deals); EIT Rawmaterials (3 deals) Top geographies: USA ( 7 Organisations); UK (5 organisations); Sweden (2 organisations)
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| | | | | 📈 Three Opportunities | Regulatory changes are creating conducive conditions for recyclers across China, the EU and US Limited economies of scale places focus on process efficiency: Excess capacity (Mentioned in Challenge 1) will limit cost advantages that recyclers obtain purely due to their scale of operation. The start-ups we’ve discussed can reduce the capital intensity of logistics/compliance/traceability without scale, critical to improve recyclers’ margins. Decarbonisation and ethical supply-chain targets set by automotive OEMs lead to a preference for recycled battery materials over newly mined battery materials (25% reduction in emissions per kWh according to forecasts). This is a tailwind for recyclers and start-ups helping measure and validate superior environmental performance.
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| | | | | 📉 Three Risks | Timing risk: Critical uncertainties remain about the pace and scale of battery recycling, the financial health of recyclers, and hence the concentration of potential customers of the start-ups discussed. Will EV’s first-life last longer than expected and limit scale? Will falling metal prices lead to a consolidation of recyclers? Defensibility: Several challenge spaces have incumbent players without battery-specific offerings. E.g. SAP is a market leader in onsite operational software but is not tailored to battery recyclers. Ebay is a generic marketplace currently used by car refurbishers. Start-ups must rapidly build competitive advantage in case large generics release battery-specific features. Distribution: While N.American and European markets can provide an early-customer base, the recycler market remains dominated by China and S.Korea - do start-ups have a route to market to support scale?
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| | | | | 💬 Hear it from the experts | | At Gaea, we are obsessed with delivering better data for recyclers to make decisions. Our facility application makes data collection simple, digitalises production workflows, and delivers advanced analytics to customers powered by AI. Our initial focus has been on battery recycling but our vision is to make the recovery process of all technology minerals data-led. We need a fourfold increase in these minerals by 2040 to power our economy and efficient recycling is a critical feedstock for these |
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| | This draft is part of a 4-piece series focusing on ClimateTech innovation inside of the Mining industry. The goal is to shed a light on the innovators in the space, and the headwinds and tailwinds they currently face. It will include — | Exploration Software Secondary Supply Technologies Mining and Mineral Processing Technologies Closure, Reclamation and Waste Valorisation Technologies
| Please reach out to take a deeper dive into any of the topics we discuss. | | Written by Colin and Ollie - Drop us a message! |
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