Resource conservation: Lithium-ion batteries contain a large number of metal elements, such as nickel and graphite, which are relatively abundant in my country, but metal elements such as cobalt are scarce in my country; my country has a large absolute content of lithium, but mining is difficult and it is generally distributed in mines with harsh conditions such as Tibet, Qinghai, and Sichuan; lithium in salt lakes has a high magnesium ion content, making lithium extraction very difficult.
Profitable: The secondary use and resource recycling of lithium-ion batteries can still be commercialized because the automotive industry has shifted to electrification in recent years, increasing the demand for lithium-ion batteries and causing the prices of upstream precious metal materials to be very high. The price of cobalt is 600,000 yuan/ton, nickel is 100,000 yuan/ton, lithium carbonate is 170,000 yuan/ton, and lithium metal is 900,000 yuan/ton.
Market Trends
1. Policy support
As early as 2012, the State Council's "Development Plan for Energy-Saving and New Energy Vehicle Industry" mentioned "formulating management measures for the recycling and utilization of power lithium batteries...";
In 2014, the General Office of the State Council issued the "Guiding Opinions on Accelerating the Promotion and Application of New Energy Vehicles," and studied and formulated policies for the recycling and utilization of power lithium batteries;
In 2015, the Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, and the National Development and Reform Commission jointly issued a "Notice on Fiscal Support Policies for the Promotion and Application of New Energy Vehicles from 2016 to 2020," which stated that "electric vehicle and power lithium battery companies should be the main entities responsible for the recycling of waste batteries."
In 2016, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the State Environmental Protection Administration, the Ministry of Commerce, and the General Administration of Quality Supervision, Inspection and Quarantine jointly announced a series of policies. To date, there are more than 20 policies specifically targeting lithium-ion battery recycling.
In March 2018, seven ministries jointly issued the latest "Notice on Carrying Out Pilot Work on the Recycling and Utilization of Power Batteries for New Energy Vehicles".
These policies can be summarized into the following four points:
Various national ministries advocate for the tiered utilization of power lithium batteries before their resource recycling.
Implement the extended producer responsibility principle, namely, "whoever produces, is responsible."
Establish a recycling system for power lithium batteries, carry out some pilot projects, and establish a recycling network and information supervision.
Industry standards are constantly being improved, and the national requirements for company qualifications are becoming clearer.
2. Market size
Lithium-ion batteries can be broadly classified into three categories:
Consumer batteries: Batteries used in consumer electronics products such as mobile phones, iPads, and laptops, primarily lithium cobalt oxide batteries;
Power lithium batteries: Batteries used in new energy vehicles. Ternary lithium batteries are mainly used in passenger cars, while lithium iron phosphate batteries are mainly used in commercial vehicles.
Energy storage batteries: Batteries used in charging stations, thermal power plants, commercial energy storage, etc., with lithium iron phosphate batteries being the most important.
What is tiered utilization? For example, when batteries are used in new energy vehicles, a fully charged battery has 100% energy. After a period of use, the battery's capacity will decrease. When the capacity decreases to 80%, it can no longer be used in a car; this is the first stage of utilization. Batteries degraded from vehicles, with a capacity between 20% and 80%, can be used for tiered utilization, such as in low-speed vehicles, electric tricycles, electric motorcycles, energy storage in charging stations, peak shaving and valley filling in thermal power plants, and photovoltaic applications. Batteries with less than 20% capacity are considered to have completed their lifespan and can then be recycled. This divides battery usage into three parts based on capacity: automotive use, tiered utilization, and end-of-life recycling.
In 2017, my country's production and sales of new energy vehicles were around 800,000 units, while the global total was 1.3 million units. It is projected that by 2020, my country's new energy vehicle production will reach 3 million units, and the global total will reach 5 million units. Based on the sales figures for new energy vehicles, the demand for lithium-ion batteries will reach 250 GWh by 2020, and the degradation of these batteries will need to be gradually recycled and reused.
Based on recent demand estimates for lithium-ion batteries for new energy vehicles, the lifespan of passenger vehicle batteries is approximately 5 years when their capacity drops from 100% to 80%, and about 3 years for commercial vehicles. my country's large-scale use of new energy vehicles began in 2014. Extrapolating from this, it's estimated that lithium-ion batteries will enter a large-scale retirement phase around 2018. In other words, 2018 will mark the beginning of a new boom in lithium-ion battery recycling, representing the next growth point. According to calculations by Gaogong Lithium Battery and various securities firms, an estimated 11 GWh of batteries will be retired in 2018, corresponding to a market size of around 6 billion yuan; the market size is projected to reach 15 billion yuan in 2020 and 40 billion yuan in 2023, representing a compound annual growth rate of 50% from 2018 to 2023. Therefore, lithium-ion battery recycling is poised to become the next market boom.
Statistics show that in 2017, the recycling volume of lithium-ion batteries reached 80,000 tons, with a market size of approximately 3-4 billion yuan. Of this 80,000 tons, 95% was dismantled, with no batteries being reused. The main reasons for the unsatisfactory promotion of reuse in the market are as follows:
Battery safety issues were quite prominent a few years ago;
The amount of waste is relatively small, the level of standardization is not high, and it is difficult to match it for tiered utilization;
The energy storage market has not yet been fully released.
technical route
1. Technical Standards
my country's "Industry Standard Conditions for Comprehensive Utilization of Waste Power Batteries for New Energy Vehicles" requires that, under hydrometallurgical conditions, the comprehensive recycling rate of nickel, cobalt, and manganese should be no less than 98%, and under pyrometallurgical conditions, the recycling rate should be no less than 97%. Currently, leading domestic companies such as Bangpu have basically met the standards.
2. Lithium iron phosphate
Power lithium batteries are mainly divided into lithium iron phosphate (LFP) batteries, used in commercial vehicles, and ternary lithium batteries, used in passenger vehicles. Comparatively, LFP batteries are more suitable for secondary use. The performance of these two types of batteries differs; LFP batteries have a longer cycle life, capable of 2000-6000 cycles from 100% capacity reduction to 80% capacity.
CATL has conducted the above calculations, indicating that retired lithium iron phosphate (LFP) power batteries can be used as energy storage batteries for at least 5 years. If LFP batteries are directly scrapped, dismantled, and recycled, the returns are limited. The iron component is worthless, and the lithium content is very low. The economic benefit of recycling 1 ton of LFP is around 10,000, while the benefit of using it for secondary applications is around 30,000-40,000. Therefore, from these two perspectives, LFP is more suitable for secondary applications.
3. tiered utilization
The process of cascaded utilization of batteries can be divided into three steps: first, screening the recycled batteries; second, connecting the batteries in series and parallel; and third, managing the charging and discharging, adding a Battery Management System (BMS) to design the matching of capacity and power. Generally, the matching ratio of battery capacity to power is 8:1, and the discharge rate is 0.125C.
The key technologies for tiered utilization lie in two aspects:
Discrete integration technology: Different batteries use different pack technologies. After disassembly, the different individual cells need to be integrated according to the performance and lifespan of the battery module.
Full lifecycle traceability technology: estimation is performed using the SOC, SOH, and SOP technical indicators supplied by the BMS.
The state requires the construction of a national monitoring and traceability management platform for the recycling and utilization of new energy vehicles and power batteries. The platform uses the coding at the time of battery production as the information carrier to trace and record data throughout the entire life cycle of the battery until its death.
4. Resource recycling
Lithium iron phosphate batteries have a longer lifespan, while ternary lithium batteries have a shorter cycle life of around 800-2000 cycles. Ternary lithium batteries are also less safe than lithium iron ion batteries, with a lower ignition point, making them unsuitable for complex environments such as energy storage power stations and communication base stations.
Furthermore, the nickel, cobalt, and manganese contained in ternary lithium batteries are relatively expensive, making direct dismantling quite profitable. Therefore, ternary lithium batteries are more suitable for dismantling and recycling. The price for dismantling and recycling ternary lithium batteries is between 40,000 and 50,000 yuan per ton. If the dismantled nickel, cobalt, and manganese are then used as precursors for ternary materials, the price is even higher. For example, CATL's price is 80,000 yuan per ton.
Resource recycling is divided into two stages: the recycled batteries are first pre-treated, discharged, and the outer packaging is removed. They are then manually disassembled to obtain the battery cells; and then recycled.
Recycling technologies can be divided into three main categories:
Dry method (physical method):
Mechanical sorting method: mechanical crushing and screening, direct sorting.
High-temperature pyrolysis: High-temperature combustion, forming vapor that evaporates and condenses.
Dry thermal repair: After the dry process, the recovered crude product is further processed into materials.
Wet process (chemical method):
Hydrometallurgy: dissolving, separating, and leaching with chemical reagents.
Chemical extraction: separation using reagents
Ion exchange: achieving exchange using ions
Biological recycling technology: It mainly uses microbial leaching, which is still quite difficult at present, and the technical problems need to be overcome.
Currently, the industry generally uses the wet process for ternary lithium batteries and the dry process for lithium iron phosphate batteries, which is also the more recommended method. Comparatively, the wet process is more expensive, but the recycled materials are of higher purity; each has its advantages and disadvantages.
Operating Model
1. United States: Extended Producer Responsibility + Consumer Deposit System
For example, in 2015, TSLA announced pOWERWALL for the energy storage market, which is used for the secondary use of lithium-ion batteries.
2. Germany: Producers bear significant responsibility
For example, Bosch started recycling batteries in 2015, and the recycling rate is expected to be over 50% by 2018.
3. Japan: Legislation + subsidies for battery manufacturers
Japan has enacted national legislation to subsidize battery manufacturers for recycling. Toyota, a global leader in hybrid vehicles, is a prime example. Since 1998, it has been recycling used batteries, employing a three-step process: establishing a recycling network, conducting detailed assessments of the collected batteries to determine whether they should be repaired or reused, and dismantling and chemically treating batteries completely degraded. In 2015, Toyota used used Camry hybrid batteries for energy storage in Yellowstone National Park facilities, redesigning the battery management system. The 208 Camry batteries can store 85 kWh of energy, effectively doubling the battery's lifespan.
4. Lead-acid battery recycling
In 2016, my country's lead-acid battery production reached 4 million tons, with a lead content of 40 billion yuan. From a technical point of view, the recycling rate of lead-acid batteries in my country can reach 98%, but the actual recycling rate is only 30%. The important problem is that a large-scale network has not yet been established.
The recycling entities should implement the extended producer responsibility system, that is, automobile manufacturers, battery manufacturers, and third-party resource recycling and regeneration companies should be the main recycling entities, with automobile manufacturers being the key focus.
In terms of business model, the integration of establishing a recycling network and professional processing is already taking shape. The future competitive dynamics of the industry will also primarily focus on these two aspects:
Establishing a nationwide recycling network will create economies of scale, reducing costs and overcoming technological hurdles.
Currently, the number of batteries used for cascade utilization in my country in 2017 was very small, with a major issue being economic viability. According to data from the Battery Alliance, my country's energy storage primarily relies on pumped hydro storage, while thermal power plants mainly use lead-carbon batteries. The main reason why lithium iron phosphate batteries have not yet become the primary mode of cascade utilization is cost. As shown in the chart above, the cost of lead-carbon batteries and pumped hydro storage is around 0.4 yuan/kWh, while lithium-ion batteries cost around 0.7 yuan/kWh. Taking the Xuda Power lithium battery project in Liyang as an example, calculations show that the static investment payback period for energy storage projects is about 6 years, and to generate revenue, they need to operate for 10 years, resulting in an after-tax return of 10%. Although the economic viability of cascade utilization is not obvious at present, the market for cascade utilization will gradually explode in the future as battery costs decrease.
Investment and M&A
1. my country's iron towers
China Tower Corporation is a large-scale comprehensive telecommunications infrastructure service company jointly funded by my country Telecom, my country Mobile, and my country Unicom. It is mainly engaged in the construction, maintenance, and operation of communication towers and other base station supporting facilities and indoor distribution systems. In early January this year, China Tower Corporation joined forces with 17 companies, including Chongqing Chang'an, BYD, Yinlong New Energy, Wotema, Guoxuan High-tech, and Sandon New Energy, to recycle lithium iron phosphate. Currently, it has established more than 3,000 base stations in 12 provinces and cities across the country.
2. SAIC Ningde
SAIC is a leader in the automotive industry, and CATL is a leader in the power lithium battery industry. The two giants joined forces to secure a position in the recycling of power lithium batteries, and signed a strategic cooperation memorandum of understanding in March 2018.
CATL acquired BNP Paribas in 2013. Currently, the lithium-ion battery recycling business has become one of its three core businesses. In 2017, the recycling business generated 2.5 billion yuan in revenue, with a unit price of 80,000 yuan/ton, a gross profit margin of 27%, and accounted for 13% of the business.
3. Investment and Mergers and Acquisitions
From an industry perspective, CATL acquired BANGPU as early as 2013; Xiamen Tungsten acquired Ganzhou Haopeng in 2017; and there were even more acquisitions in 2018.
