As the world transitions towards a more sustainable future, Electric Vehicles (EVs) have emerged as a key player in reducing emissions. Most of the EVs in the market today are powered by lithium-ion batteries which is a proven technology that has been in the market for decades in small consumer electronics.
Lithium-ion batteries are well-suited for use in EVs, as their high energy density allows for longer driving ranges and their long-life cycle ensures durability and cost-effectiveness. These features have increasingly enabled EVs to compete with internal combustion engine (ICE) vehicles in the market.
Extensive research and development (R&D) has also led to significant advancements in performance, safety, and affordability, further enhancing the appeal and competitiveness of EVs. There are, however, three key challenges associated with lithium-ion batteries:
- thermal management;
- limited availability of critical raw materials; and
- recycling and disposal.
Thermal Management
One of the biggest risks with lithium-ion batteries is the potential for the batteries to overheat, resulting in fires and explosions. While EV fires are rare when compared to ICE vehicles,1 they can be more dangerous and difficult to extinguish due to the size and high energy density of the battery.2 The fires can reach temperatures of 400 degrees Celsius in seconds, release toxic gases and if there is thermal run off, potentially reignite hours, or even days, later.3
Emergency responders often lack the knowledge and resources necessary to effectively manage EV fires, making it even more challenging to handle such incidents when they occur. Emergency responders need to know the make, model and year of the EV to determine the best course of action to extinguish a battery fire using regular water-based extinguishers as they have limited access to lithium-ion gel extinguishers.4
R&D is required to address the safety and risk knowledge gaps linked to lithium-ion batteries and to develop best practices and standards. There are “currently no national standards addressing fire safety in Australia for built environments” which is deeply problematic given the increase in EVs and EV infrastructure installed in apartment complexes and shopping centres.5 The recent EV fire at Sydney Airport where five cars were destroyed shows how quickly EV fires can spread in confined spaces and the resulting scale of damage compared to ICE vehicles.6
EV fire risk has been identified as a key consideration for state governments to address under the National Electric Vehicle Strategy (NEVS). Potential measures that have already been identified include prescribing safety requirements and introducing hazard prevention strategies.7 Initiatives like the ‘Modern, Cheaper-to-Run Cars’ campaign that raise consumer awareness about the benefits of EVs, should also be expanded to educate consumers about the risk of EV fires and the appropriate actions to take in case of a fire.8 However, battery safety is just one aspect of the challenge and must be addressed concurrently with developing strategies for managing the limited availability of critical minerals and battery recycling.
Limited availability of Critical Raw Materials
Lithium-ion batteries are comprised of finite resources such as lithium, cobalt, and nickel. The availability of such rare earth minerals poses a significant challenge for the production at scale of such batteries in the future. There is expected to be a six-fold increase in the adoption of EVs in Australia by 2030. Globally, the increase in passenger EV adoption is expected to lead to an eight-fold increase in the demand for lithium-ion batteries by 2050.9
The global acceleration in the adoption of EVs has been driven by decarbonisation strategies, the introduction of vehicle efficiency standards, and governments signalling they will be banning the sale of ICE vehicles by 2035. On 29 January 2024, Ethiopia became the first country to ban the import of ICE vehicles completely (effective immediately).10
While EVs are crucial for reducing carbon emissions, relying solely on them without addressing the limited availability of critical raw materials could lead to supply chain disruptions and present an energy security risk. The production and processing of critical minerals is currently concentrated in just a few countries. Notably, China holds 60 per cent of the world’s manufacturing capacity for renewable technologies, and up to 70 per cent of critical mineral processing.11
Establishing a domestic battery manufacturing industry will allow producers and regulators to have greater oversight over operations and supply chains. This, in turn, makes it easier to produce higher-quality batteries and address modern slavery risks in supply chains.
Modern Slavery
Currently, there is significant global scrutiny regarding the risk of modern slavery in the critical mineral processing sector. This scrutiny stems from several reports and investigations highlighting exploitative labour practices, particularly in regions with weak labour laws and enforcement. Concerns include child labour, forced labour, and unsafe working conditions in mines and processing facilities.
Major corporations and governments are increasingly pressured to ensure their supply chains are free from such abuses. Regulatory measures, such as the Modern Slavery Act 2018 (Cth), requires companies to report on the actions they are taking to eliminate modern slavery from their supply chains.
By developing a robust domestic battery manufacturing industry, Australia can set high standards for ethical sourcing and processing, thereby mitigating the risk of modern slavery. This approach not only enhances the quality and reputation of Australian-made batteries but also aligns with global efforts to promote sustainable and ethical production practices in the critical minerals industry.
Recycling
Even with strategies to manage critical resources, it is evident that global demand will exceed supply and batteries will need to be recycled for their critical minerals.12 According to the recent CSIRO and FBICRC report, only 10% (of a potential 95%) of lithium-ion batteries were recycled in Australia in 2021.13 The report also highlights that inadequate recycling could lead to a loss of value between $603 million to $3.1 billion by 2035.14
Australia does not currently have the technical capability to recycle lithium-ion batteries.15 The Federal government introduced a battery stewardship scheme in 2022 to create a national collection network, however only a small percentage of batteries collected under this scheme were exported for offshore processing, with the vast majority stored in warehouses or scrap yards which pose a fire and environmental contamination risk.16
Relying on offshore battery recycling also poses risks similar to those experienced when countries imposed bans on plastic waste exports to protect the environment and manage waste more sustainably. Nations with advanced battery recycling capabilities may restrict imports to prioritise their own environmental and economic needs. These restrictions can lead to supply shortages and increased costs for countries dependent on external recycling services.
For example, when China banned plastic waste imports in 2018, it disrupted global recycling markets and forced many countries to reevaluate their waste management strategies. Similarly, potential export bans on recycled battery materials could severely impact Australia’s ability to access essential resources for battery production.
Scalability is already a key challenge in setting up a recycling industry in Australia due to a lack of feedstock. Further challenges include determining who should bear the cost of transport and navigating different transportation policies (which often have policy gaps for transporting defective and damaged batteries) that exists across jurisdictions. This has created apprehension in the industry about transporting batteries and added to the logistical and economic challenges.
However, in the short-term it will still be easier to set up a recycling industry compared to building a manufacturing industry as it can take 5 – 10 years to build a primary industry sector (especially if this includes exploration).17
Policies and Regulations
This again underscores the need for the Federal government to make strategic decisions about supporting a battery industry in Australia and determining whether that includes battery recycling. To this end, the Federal government released the Critical Mineral Strategy 2023-2030 in June last year, which aims to establish diverse and resilient supply chains, enhance domestic critical minerals processing, leverage these minerals to boost Australia’s renewable energy capabilities, and generate economic opportunities for regional and First Nations communities.
Additionally, in the 2024-25 Federal budget, the government committed $7.1 billion to support the refining and processing of critical minerals and allocated $549 million to develop a battery manufacturing industry under the ‘Future Made in Australia’ package. The Federal government has also committed funding to explore and create detailed maps of critical mineral deposits.
The National Battery Strategy released in May 2024, outlines how the Federal government will support the domestic battery industry as it grows and recognises the need to create a circular economy.
In relation to safety and recycling, regulations need to be harmonised across Australia to make it easier for stakeholders (including original equipment manufacturers (OEMs), emergency responders and transport operators) to follow best practices and make compliance and logistics easier.
Establishing clear policies and providing subsidies will be crucial to encourage new recycling operators to enter the market. Additionally, investing in ongoing R&D efforts will be important as it could lead to further efficiencies and cost improvements, enhancing the economic viability of recycling operators in the future.
Industry bodies like the Association for the Battery Recycling Industry (ABRI) also have an important role to play in bringing together various stakeholders, including “OEMs, battery repurposing companies, waste sector entities, government bodies, research institutions, and environmental groups, to promote the collection, recycling and safe disposal of all batteries.”18 This collaborative approach is expected to drive innovation and investment and will be crucial for addressing any challenges that may arise.
While challenges remain, the growth in demand for EVs and lithium-ion batteries present a unique opportunity for Australia to further enhance its position in the global renewable energy supply chains.
The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.
1Adam S. Best et Al, ‘Lithium-ion battery safety; A report for the Australian Competition and Consumer Commission (ACCC), Australia’s National Science Agency (Report, May 2023) 25.
2Neil Martin, ‘Seven things you need to know about lithium-ion battery safety’ University of New South Wales (Web page, 20 March 2023) <https://www.unsw.edu.au/newsroom/news/2023/03/seven-things-you-need-to-know-about-lithium-ion-battery-safety>.
3Ibid.
4Ibid.
5Australian Government, ‘National Electric Vehicle Strategy; Increasing the uptake of EVs to reduce our emission and improve the wellbeing of Australians’, (Report, 19 April 2023) 29.
6Maryanne Taouk, ‘Electric vehicle battery causes fire at Sydney Airport, destroys five cars’ ABC News (Webpage, 12 September 2023) <https://www.abc.net.au/news/2023-09-12/sydney-airport-lithium-ion-battery-causes-fire/102846146>
7Ibid 11.
8Department of Infrastructure, Transport, Regional Development, Communications and the Arts, Modern, Cheaper-to-run Cars Awareness Campaign (Web Page, 2004) < https://www.infrastructure.gov.au/infrastructure-transport-vehicles/vehicles/new-vehicle-efficiency-standard/modern-cheaper-to-run-cars-awareness-campaign>
9Laura Hubbard, ‘Energising the future: Battery Recycling Market Outlook and Opportunities (August 2023), Australian Battery Recycling & Manufacturing Summit
10HKTDC Research, ETHIOPIA: Immediate Ban on Non-Electric Vehicles Imports (Web Page, 23 February 2024)<https://research.hktdc.com/en/article/MTYxNzc4NzU5NQ#:~:text=Ethiopia%20has%20banned%20the%20import,confirmed%20on%2029%20January%202024.>
11Australian Government, Annual Climate change Statement 2023 (Report, 30 November 2023) 14.
12Ibid 5.
13Yanyan Zhao et al, ‘Australian landscape for lithium-ion battery recycling and reuse in 2020: Current Status, gap analysis and industry perspectives’ CSIRO Energy, Future Battery Industries CRC (Report, 2020).
14Ibid 18.
15Ibid n 12.
16Ibid n 12.
17Ibid n 6.
18Association for the Battery Recycling Industry, The Association for the Battery Recycling Industry (ABRI) is the peak body for the battery recycling industry in Australia (Webpage) <https://www.batteryrecycling.org.au/about-us>