Solving the battery supply chain ’s structural deficit – Worley.
Although demand trajectories vary, experts agree that the global energy transition will be hindered by a structural shortage of critical minerals – particularly lithium, graphite, nickel, copper and cobalt – as early as 2025.
While theoretically there are sufficient mineral quantities in the ground, a structural deficit, which is particularly pronounced outside of Asia, exists along the entire battery supply chain. Further, as countries accelerate their efforts to achieve net zero, that deficit will only widen as a result of the increased mineral inputs required by fossil fuel alternatives such as electric vehicles, wind turbines and solar panels.
A typical electric car, for example, requires six times the mineral inputs of a conventional car and demand for battery electric vehicles is set to grow by 41 percent in 2023 alone – according to GlobalData – further increasing demand for critical minerals.
Researchers are rapidly innovating new technologies that reduce our dependence on certain minerals, for example SK On plans to bring a new lithium-iron-phosphate battery for electric vehicles to market by 2025, however these innovations alone will not solve the mineral shortage. As such, to keep the energy transition on track, we must also seek to address the battery supply chain’s structural deficit by expanding production.
What makes this ask particularly challenging for leading South Korean battery companies is the need to expand production outside of domestic markets to meet local content requirements in places like the US and Europe.
We don’t have time for bespoke design
There are several challenges to increasing mineral supply, but the most pressing is how to condense typical project timelines to bring new mining, processing and manufacturing capacity online more quickly while also translating eastern expertise for western markets.
Historically, we’ve been hooked on bespoke infrastructure design which can take a decade or more to deliver. For context, according to the IEA, between 2010 and 2019 it took an average of 16.5 years to take a mining project from discovery through to first production, with construction taking up to five years!
Similar constraints are evident at all stages in the battery supply chain with each production or processing facility requiring complex engineering, investment in the region of half a billion to a billion dollars, and several years to build.
Europe and the US are increasingly doubling down on their efforts to build domestic battery supply chains, which gives South Korean companies only a short window to maintain their competitiveness. To expand internationally while staying ahead of the competition, South Korean companies would benefit from rethinking the traditional bespoke approach to infrastructure delivery.
Design one, build many
Worley’s response to this is to innovate modular designs from which we can build multiple such facilities. Much like the trusty Lego block, while each modular block will be different, they will all share common interconnection points. This has the combined benefit of being quicker to construct but flexible enough so that new technologies and upgrades can be readily assimilated into the plant as they become available in the future.
This will also reduce the barriers for the industry when adopting new technologies to help address future market changes such as the declining quality of ore, increases in the use of recycled materials and heightened sustainability standards.
Ultimately, with far fewer bespoke requirements, modular designs are much easier to scale, replicate and disseminate around the world, ultimately fast tracking the industry’s response for more battery supply chain throughout.
This is not entirely new territory as it takes inspiration from the manufacturing mindset embodied by the likes of the automotive, telecommunications and aviation industries as well as our own. Boeing’s move towards standardization within its design and production, for example, illustrate what is possible even in the face of complex engineering.
While each aircraft can be customized and modified by the end customer to suit certain requirements, much of the core engineering remains the same – the frame, the windows, the wiring looms, etc. This has allowed Boeing to make production more predictable, repeatable and cost efficient while still being able to manufacture an aircraft from start to finish in nine days.
To make a similar approach feasible for the battery supply chain we need to reimagine the design approach to focus on utility, adaptability of standard designs and speed of delivery.
Partnerships and collaborations are critical to the vision
A large part of the success of this new design philosophy relies on collaboration from the battery supply chain who will ultimately deliver it; dozens of critical vendors for 4,000+ pieces of equipment. With the right information supported by a collaborative environment, vendors can support this vision of modularity and standardization in their own products.
By leveraging vendor’s expertise, we can streamline equipment supply by adapting designs to accommodate largely “off the shelf” equipment which eliminate the time spent designing and manufacturing custom pieces.
To bring it all together there is then the need for an experienced “system integrator” – an organization that takes accountability for the overall operating performance and process design, and crafts the participation by various vendors and other parties to align and maximize the contribution by each within their specific areas of expertise.
Such a party will be particularly valuable for those South Korean companies that have a limited footprint in growth markets such as Europe and the US by providing access to key stakeholders while also ensuring quality and compliance.
A simple example of this are the materials handling facilities needed at the receiving and dispatch ends of many such facilities.
There are particular requirements for battery materials processing relating to containment of toxic substances and protection from moisture ingress that, with close collaboration from typical vendors of this equipment, can be readily adapted and standardized for this industry – ultimately reducing the need for bespoke design efforts and shortening delivery lead times. More complex examples exist deeper into the plant process – along the same lines and with the same outcomes.
Delivering this new philosophy in practice must happen quickly if the industry is to keep pace with expected electric vehicle demand while maintaining market share and expanding from east to west. While we are in the midst of the 6th industrial revolution, it is increasingly clear that traditional methods of construction for chemical and mineral processing will not get us there in time.
As they have done before, South Korean battery companies must blaze their own trails if they are to continue to contribute at the scale needed to meet the world’s net zero ambitions and lessen the impact of climate change, at pace.
Driving innovation and leading the charge comes with risk, but with the right blend of creativity and expertise, there is always a way to solve even the most complex engineering problems.
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Solving the battery supply chain’s structural deficit, April 12, 2023
