Close co-operation between India, US important for battery supply chain: IESA

It is crucial for India and the US to collaborate closely on the battery supply chain, particularly for demand-intensive critical minerals such as cobalt, graphite, lithium, manganese, and nickel, industry body India Energy Storage Alliance (IESA) said.

As leaders of the G20 nations, including the US, are scheduled to meet in Delhi over the coming weekend, it is pertinent that the countries hold discussions on developing a robust diversified supply chain, which is not dependent on one country or a group of nations. “For battery manufacturing and supply chain, it is important that there is closer co-operation between India and the US. We expect that US President Joe Biden’s visit to India for the G20 summit will be a key milestone,” IESA Founder & Executive Director Rahul Walawalkar told businessline.

He emphasised that there is a need to build an alternative battery supply chain, which is free of Chinese influences.

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China’s influence

International Energy Agency (IEA) in a 2021 report said that with regard to lithium, cobalt and rare earth elements (REEs), the world’s top three producing nations control well over three-quarters of global output. In some cases, a single country is responsible for around half of the worldwide production.

For instance, Congo and China were responsible for around 70 per cent and 60 per cent of global production of cobalt and rare earth elements, respectively in 2019. The level of concentration is even higher for processing operations, where China has a strong presence across the board. China’s share of refining is around 35 per cent for nickel, 50-70 per cent for lithium and cobalt, and nearly 90 per cent for REE. Chinese companies have also made substantial investment in overseas assets in Australia, Chile, Congo and Indonesia.

“Post-Covid generally there is awareness that China has, depending on what you are looking at in the supply chain, somewhere between 80-95 per cent market captured on complete supply chain of advanced cell manufacturing,” Walawalkar pointed out.

Now, the US and Europe are trying to develop domestic manufacturing of batteries, similar to what India is doing and they are putting a lot more money on the table only for the domestic market, he added. “Inflation Reduction Act (IRA) has changed the game. Before this, the EU was ahead of the US, and it was expected that Europe would be the major hub for advanced battery manufacturing outside China. But, now the US has overtaken others because a lot of investments planned for Europe have shifted there as they are offering a lot more money. For instance, India is offering ₹2,000 (around $15) per kilowatt hour for battery, while the US is offering $35,” he said.

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Evolving scenario

“Now what is happening is that although cell manufacturing and giga factories will happen in the US, it is not easy to set up a complete supply chain. So, the US as part of IRA has specified that beyond 2025-26, they want to completely eliminate dependence on China. So, if you are getting government incentives, then the supply chain has to be from friendly countries. That eliminates China and Russia. Although it is not specified in as many words,” Walawalkar explained.

So, if one wants to attract investments from the US, then the supply chain cannot be in China and Russia. India can logically become a part of that, he said. “Right now, technically Indian companies cannot tap the US market for supply chain. The Prime Minister on his recent US visit signed the Minerals Security Partnership (MSP) and that is the first step. It is a welcome step, but that is not sufficient,” he pointed out.

IESA is working on strengthening the India-US agreements. Last year, the US-India Joint Energy Storage Task-force was set up. And IESA has been officially asked to become the secretariat for that, Walawalkar noted. “One of the bilateral things we are looking at is also to ensure that India gets involved with the supply chain for IRA manufacturing in the US. Recently, the UK has signed an agreement with the US where its companies can become a part of the IRA funding,” he said.

In June 2023, the US and the UK announced the Atlantic Declaration. Under this, UK companies can be covered by the subsidies under the IRA for five critical minerals used in EVs. Both countries intend to begin negotiations on a targeted critical minerals agreement covering cobalt, graphite, lithium, manganese, and nickel.

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