The battery industry – great potential and high voltage

Battery manufacturer Freyr expects transport to account for most of the demand for batteries over the next couple of decades. Significant storage capacity will also be needed if intermittent sources such as wind and solar power are to provide most of the energy supply.

Around 70 million passenger cars were sold worldwide in 2021. Sales have declined slightly since 2018, following decades of growth. In 2021, electric vehicles accounted for almost 10 per cent of newly registered cars, and this share increased throughout the year. According to the International Energy Agency (IEA), the share of electric vehicles doubled from 2020 to 2021.

No country has a higher share of electric cars than Norway, where they account for over 70 per cent of all new passenger cars. Sweden and the Netherlands come closest, accounting for 45 and 30 per cent respectively of all new passenger cars in 2021. Among the major car markets, Germany has the highest share of electric cars at 25 per cent, while the share in China was 20 per cent in December last year. In the US, electric cars accounted for almost 5 per cent in 2021. In lower-income countries such as Brazil, India and Indonesia, electric cars still account for less than 1 per cent of all new cars.

Electric vehicles still account for a small share of the global car fleet, as cars typically remain in use for 10–20 years. The IEA estimates that there are now around 16 million electric vehicles worldwide. This represents 1.5 per cent of all cars globally. However, the share almost doubled during 2021. Electric vehicles consumed a total of 30 TWh of electricity last year.

Most countries offer incentives for electric vehicles, but their share is still likely to rise sharply even without this support. This will drive strong growth in demand for batteries. While the engine is the particularly valuable component in combustion-engine cars, the battery is the valuable component in electric vehicles.

Global and European battery production capacity will increase sharply over the next couple of decades. It is impossible to say with any real certainty whether it will quadruple or increase twentyfold by 2030. Consultancy firm McKinsey estimates that European demand for battery capacity will reach 900 gigawatt-hours in 2030. If all this capacity were used for passenger cars, it would be enough for 9 million vehicles. Last year, Europe produced around 10 million passenger cars. IPCEI's estimate is lower, suggesting that European demand for battery capacity will reach between 400 and 800 GWh in 2030.

Battery capacity is measured in kilowatt-hours (kWh) and gigawatt-hours (GWh), with one GWh equal to one million kWh. According to the EU's IPCEI programme, global battery production has already reached around 250 GWh, of which Europe accounts for 35 GWh. The largest electric cars, such as the Tesla Model X and Audi e-tron, have batteries with a capacity of up to around 100 kWh. Ford plans to launch the F150 Lightning during the year. It will be an electric version of the F150 pickup, the world's best-selling vehicle model, with 800,000 sold last year. The largest versions will have 150 kWh batteries.

How many factories will be needed to produce this battery capacity? Let us assume that the average battery size in the future will be 100 kWh. Battery factories, also known as gigafactories, are now being built with an annual production capacity of 30–50 GWh. Freyr aims to produce 43 GWh annually in Mo by 2025. If European demand reaches, for example, 750 GWh, Europe could have 20–40 factories by 2030.

McKinsey believes Norway could capture 25 per cent of this market, which would generate NOK 40 billion in value creation and 20,000–30,000 full-time equivalent jobs in the factories. This would represent a significant share of Norway's industrial employment, which stood at 200,000 full-time equivalent jobs in 2021.