In March this year, the Indian government announced four recipients for its Production Linked Incentive (PLI) scheme for advanced cell chemical batteries, which aims to establish 50 gigawatt hours (GWh) of domestic cell manufacturing capacity by 2030. It aims to enable accelerated development of emerging high-value sectors such as renewable energy and electric mobility, which are driving demand for batteries. India’s annual demand is projected to grow to levels between 105 GWh and 260 GWh by 2030. Establishment of domestic manufacturing capacity will be necessary to ensure supply chain and energy security.
However, rare materials used in lithium-ion battery chemistry, such as cobalt, nickel and graphite, pose a significant risk to India, which has extremely limited domestic reserves of these materials. The industry’s upstream supply chain is largely dominated by China, and markets have been volatile. Hence, a robust reuse and recycling program for batteries will enable India to reduce raw material exposure and help the country to set up sunrise industries that are climate-friendly.
Many international actors are taking steps to create the necessary recycling capacity as a response to the growing demand for batteries. In China, a suite of policies introduced in 2018 aimed at developing recycling centers near electric vehicle (EV) manufacturing centers. In the West, the European Union has begun the process of establishing policies requiring collection targets, with minimum local material requirements. In the US, the country’s Department of Energy provides grants to innovative recycling companies.
India has also taken steps to establish a domestic market for battery recycling, but more needs to be done. In February 2020, the Ministry of Environment, Forestry and Climate Change (MoEFCC) introduced draft rules on battery-waste management. These rules will establish an Extended Producer Responsibility (EPR) program.
Under an EPR framework, stakeholders in the domestic battery industry (including manufacturers, producers and importers) would be responsible for establishing a collection plan approved by regulators. The plan should enable the collection of 30% end-of-life batteries by weight after two years of implementation, and gradually increase this to 70% by the seventh year.
Under this policy, materials derived from recycled EV lithium batteries could provide 5% of our domestic manufacturing needs for minerals such as lithium, nickel, cobalt and graphite by 2030. If EV sales accelerate due to effective market development policies, recovered materials could account for more than 20% of domestic lithium battery manufacturing demand for some materials. The amount of recoverable material will only increase over time as the amount of EV batteries increases due to retirement.
The use of recovered minerals to meet the demand for lithium batteries within India will reduce greenhouse gas emissions by avoiding upstream emissions associated with extraction, processing and transportation. It is estimated that the implementation of the draft regulations could reduce emissions by 50,000 to 180,000 tonnes by 2030. Furthermore, as the Indian power grid becomes decarbonised, the lithium battery manufacturing process will also become less carbon intensive. Battery recycling will therefore reduce risks for the domestic battery-making industry, while meeting the national emissions reduction targets announced by India at the COP-26 summit held in Glasgow last November.
However, the draft rules could be improved. Currently, they have set only one battery collection target, but the policy can be used to strengthen the market for second life batteries.
The lithium battery used in EVs typically reaches the end of its useful life when its usable capacity reaches 70-80% of its nameplate capacity. Once the low capacity of such a lithium battery pack does not make it optimal for EV use, it can be reused for a variety of secondary applications. These include stationary storage, renewable energy integration, or backup for commercial or industrial purposes. In this context, whether the MoEFCC to set a modest reuse target for four wheeled passenger and commercial vehicles and e-buses, may provide between 1.2 GWh and 5.9 GWh of storage capacity by 2030. This is an opportunity that should not be missed.
The draft regulations include specific language on hazardous material transport and guidance for lithium batteries, formalizing second-life performance standards and warranties, and establishing a transparent methodology for identifying issues and steps for remediation and penalties. Attention should also be given. In the meantime, plans from battery industry stakeholders should take into account how EVs will affect market parity compared to conventional vehicles, and what mechanisms are used to encourage consumer adoption.
India is on a journey to become a major global player in the battery market. Implementation of the Reuse and Recycling Program will not only enhance the resource security of the country’s vehicle electrification and energy transition ambitions, but can also drive economic growth and job growth while ensuring improvements in public health and environmental safety. India is moving towards a sustainable future, the need of the hour is to enable this virtuous cyclical economy.
Jagbanta Ningthoujam and Benny Bertignini are the principals of RMI India and associates of RMI’s India team, respectively.