Growth Analysis (Tillväxtanalys)
Critical metal value chains - Deep dive into barriers and policies for a battery value chain
This report is the second background report we did for our client Tillväxtanalys in their preparatory work for the report Innovation-critical metals & minerals from extraction to final product – how can the state support their development?
In our first background report, we found that value chains in special alloys and permanent magnets based on rare earth elements, and battery manufacturing based on graphite and lithium mining could possibly develop in Sweden by building on existing strongholds in mining, finance, energy, chemicals and motor vehicles. We also found, however, that a number of barriers that could hinder the value chains from developing on their own were present. In particular, we found that both green tech products intense in rare earths’ and lithium-batteries were characterised by extraordinary high risk that needed be addressed through innovation policy, coordination across stakeholders along the value chain, and through a stable regulatory regime.
The aim of this report is to dig a bit deeper into the barriers for a (graphite-) battery manufacturing value chain in Sweden and to suggest policies that could remedy them.
The main conclusions are:
- Technological risk is high because lithium-ion batteries are still evolving and no specific formulation is yet dominating the market. Competition with other battery technologies, such as nickel metal hydride batteries, is significant. Hence, companies involved in battery manufacturing and research are ‘betting on’ the dominant technology of tomorrow.
- The anticipated wave of electrification of modern society leads to estimates of high future demand, but the technological risk and uncertainty regarding future applications and uses of batteries, cause a high level of market risk. Still, economies of scale are believed to be significant as well, meaning that Europe can only host a limited number of battery factories. Hence, a window of opportunity for getting a vertically integrated (i.e. sourced with Swedish raw materials of grahite and lithium) battery industry off the ground exists now and for the next couple of years.
- We also find that institutional risk is quite high in Sweden. Several players along the value chain mention long lead times and in-transparency in permitting (following both the Mining Code and Environmental Code) as a major risk to practically all activities along the value chain.
- To reduce technology risk, we recommend to narrow and focus research and innovation calls, to fund test facilities to bring forward products closer to commercialisation to get ‘off the ground’ quicker, and for cluster policies and networks to have a stronger commercial focus.
- To reduce market risk and exploit Swedish comparative advantages, we suggest to introduce a certification scheme for clean and low-impact production of metals and minerals and their value added products (such as batteries). To get this successfully past the introduction period, we recommend a feed-in support scheme to go hand-in-hand with the certification scheme.
- To reduce the (increasing) level of institutional risk, we suggest to adopt protocols for dynamic and forward looking reporting for mining companies, develop a framework for incorporating the upsides of mining in the overall assessment of mining versus other existing, and potentially irreconcilable, interests and land uses along with mandatory plans for how to realise this potential. Finally, to increase transparency and predictability of permitting processes, especially for mining concessions, we recommend to introduce clear guidance on documentation requirements for applications and to enact timelines for approval.
The study is commissioned by Tillväxtanalys Download