Experts: Mimic China to Revitalize Europe’s Energy Storage Technology Value Chain

Securing and revitalizing the energy storage technology value chain in Europe requires a new mindset and incorporating similar policies and strategies that China has used to gain primacy in the market. Participants on the European Energy Storage Technology Value Chain panel at the recent TDK Ventures and Climate Investment’s Energy Week 2023 agreed that China’s support of nascent electric mobility and industrial solutions — most of which ironically were developed in the West — helped it overtake the United States and Europe in the production of electric vehicles and green energy storage.

“Everyone is scared about the Chinese coming, but they were here 20 years ago, inside the (EV) product with their batteries,” said Gianfranco Pizzuto, the first investor in Fisker Automotive and now the founder of Automobili Estrema, a boutique high-end electric vehicle manufacturer based in Modena, Italy. Fisker was one of the earliest EV innovators at the same time with Tesla, however failed due to the battery supplier A123’s bankruptcy. “Chinese company Geely acquired the Fisker technology first, learning how to make a car move with a battery pack. Then, they very intelligently acquired Volvo, to understand how to build quality cars. Now, they’re on the level of Audi, Mercedes, and BMW.”

While China subsidized innovation and courted investment in the early 2000s to take advantage of its low labor costs and lax environmental standards, explained Henry Sanderson, executive editor of Benchmark Mineral Intelligence whose book Volt Rush: The Winners and Losers in the Race to Go Green was named one of the best science and environment books of 2022, “Beijing’s most important contribution to its alternative energy industry was in market creation.” As the financial crisis of 2007 to 2009 subsided, both China and the US tabbed green industries as pathways to economic prosperity.

“Unfortunately, there wasn’t really a market for the companies that President Obama helped support,” Sanderson said. “It was too early. But China created the market through government procurement and making local (jurisdictions) buy electric buses. As the market grew, they introduced the protectionist rule requiring the exclusive use of Chinese batteries to quality for subsidies.”

He said that maneuver spearheaded CATL’s and BYD’s ascent to the top of the battery supply chain. Both were founded to manufacture batteries for mobile phones and have moved up to high value-added manufacturing and clean energy dominance in EV batteries.

Chief Strategy Officer at Our Next Energy (ONE) Deeana Ahmed said her company was founded to apply the scalability and sustainability strategies that have proven successful in China to battery manufacturing in the US and Europe.

“The United States is trying to catch up and have resilience,” she said. “Europe is driving toward a similar strategy. There’s a requirement to have independence of supply chain and resiliency in technologies that are so critical to decarbonization.”

ONE seeks to meet the market where it is. To fully electrify the American mobility market, where there remains an appetite for pickup trucks and SUVs and a desire for long-range capabilities, you have to push the envelope, she said.

“We want to do that with technology that is commercializable and manufacturable today,” Ahmed said. “We’re doing that with…our dual-chemistry battery, LFP traction paired with a range extender. We’ve split the battery requirements in half, so you can reach the targets that help you electrify some larger platforms.”

Europe needs a reset and a new strategy if it hopes to compete, Pizzuto insisted. A germanocentricity throughout the early part of this century set the continent on its heels. He said German engineers were working on ever-tighter tolerances between vehicle panels.

“Ninety-nine percent of the population doesn’t care if the gap is three millimeters or two,” Pizzuto mused. “But the Germans do, because they are very precise. Germany and Europe in general, totally lost focus. While Tesla was doing a car which is a technology on wheels and China was producing batteries, we were here waiting for the blueTEC and clean diesel to happen. It didn’t come, and we are in the middle. Refocus and restart, otherwise, we will be filled with products coming from outside Europe.”

Ahmed said that strategy refocus should include government incentives to develop green energy production and storage solutions that are not yet competitive with China or marketable in the West. She highlighted her own company’s participation in the Inflation Reduction Act (IRA), which among other benefits, gives tax incentives to domestic battery manufacturers.

“We’re benefiting from the production tax credit, which is a substantial leveler in the ability to be competitive,” she said. “Now, we have to work to be competitive in a free market. We have to collaborate across industries. Within the West in particular there’s an opportunity for us to benefit across the value chain. There is an opportunity for the United States to supply cells to Europe and for investments from Europe to come to the US and benefit from the incentives. Tax credits for some gigafactories are several billion dollars a year.”

But she noted that the US and other countries do not incentivize every link in the value chain, forfeiting the opportunity to mitigate some of the cost-competitive challenges upstream.

Sanderson believes that is a problem in Europe as well. Though he conceded that “we cannot compete with China for everything by tomorrow. We need to be strategic in deciding which (industries) to support. The problem in our system is that if you throw a lot of subsidies and there are failures such as there were under Obama the blowback can be quite severe.”

While government investment, procurement, and market support would be welcome, Pizzuto said less bureaucracy would also pave the way for further innovation.

“I think the solution is being competitive and collaborative between companies rather than between governments,” he said. “If I have the best cell, I don’t care if it’s made in China or the US or England. My country is so far behind that there is no need to put up a gigafactory in Italy. Why should we spend billions and billions for a gigafactory when CATL already has one in Hungary? I’m going concentrate on making efficient battery packs using the best cell for the product I need. If I’m doing a car or an excavator, I will need different chemistries. We need less government, less bureaucracy, and more collaboration to be efficient and turn a profit.”

Sanderson agreed that government may not be the best arbiter of how to address climate tech.

“Much of the investment is going to battery gigafactories in Europe and the US, which in the short-term will only increase our reliance on China,” he explained. “Not much is going to the mining side because mining is not very sexy and (entails) big projects that require lots of capital.”

He said that unlike the IRA in the US, Europe’s incentives do not hinge on a certain percentage of critical minerals being sourced from EU members or free-trade agreement countries.

“So, cheap Chinese graphite and other materials can flow in unimpeded,” Sanderson said. “So far, the market has incentivized the worst possible routes for producing materials for your electric vehicle battery: Lithium from Australia processed in China; graphite produced by heating materials to 2,000- or 3,000-degrees using coal-fired power. But automakers are reluctant to pay more for sustainable products. We need to change the incentives.”

Ahmed said ONE is working on solutions from a number of angles, from the world’s largest solar-plus-storage microgrid, to applications that will expand batteries’ influence in the decarbonization of industry.

“This is the moment for capital to be directed to energy transition and capitalize on public investments that can be paired with private capital to de-risk (innovation), so companies like ONE can emerge as large manufacturers,” she said.

Pizzuto agreed that the time is now and that he longs for the day his vision from the Fisker days is realized. He said Europe’s landscape is a far cry from 2007.

“There were no public chargers, no infrastructure,” he remembered. “It makes me laugh when I come to London and see electric taxis. When I came to London for the first time in the late 80s, everything was running on diesel, this is already an achievement.”

He said making an electric car company in the land of Maserati, Lambourgini, and Ferrari is an uphill battle.

“For 100 years, we did very well with 12 cylinders,” he said. “We can do very well over the next 100 years with electrification.” Noting that Alessandro Volta — an Italian — invented the battery, he continued, “Imagine a renaissance of Italian scientific culture bringing the battery back where it belongs.”

TDK Ventures and Climate Investment hosted Energy Week 2023 at London’s Goldsmiths’ Centre to highlight the efforts of industry entrepreneurs, investors, and the scientific community in solving the world’s energy challenges and finding sustainable paths to decarbonization.

Energy Week 2023 featured industry leaders, experts, and visionaries, who are shaping the future of the energy landscape to help explore the latest advancements, challenges, and opportunities in sustainable energy solutions.

TDK Ventures Inc. invests in startups to bolster innovation in materials science, energy/power and related areas typically underrepresented in venture capital portfolios. Established in 2019 as a wholly owned subsidiary of TDK Corporation, the corporate venture company’s vision is to propel the digital and energy transformations of segments such as health and wellness, next-generation transportation, robotics and industrial, mixed reality and the wider IoT/IIoT markets.

Climate Investment is an independent organization founded by members of the Oil and Gas Climate Initiative, specializing in accelerating capital-efficient decarbonization in high-emission sectors. Since 2017, they have curated a portfolio of over 30 innovative technologies and business models, resulting in a cumulative reduction of 57 MT CO2e in greenhouse gas emissions from 2019 to 2022.