Why India Needs To Secure Lithium Supplies As Renewable Energy And EV Industry Make Rapid Strides

In a recent inter-ministerial meeting, R K Singh, the Union Minister of Power, highlighted the need to meet India’s growing lithium demand. India lags behind in terms of lithium reserves, hence, securing sources of lithium for burgeoning demand is necessary. According to the minister, India would require 120 gigawatt hours of battery storage in order to meet its renewable capacity addition. Apart from storage, India needs lithium for running automobiles as well, making a stable lithium source necessary to lower the carbon emissions and dependence on imported oil.

Why Is The Demand For Lithium Rising?

As India shifts to renewable power, with several major corporates entering the business, the country would require storage capacities to balance the grid. Electricity is consumed as soon as it is generated. The output of renewable energy sources is highly dependent on the climate, weather, and other factors that are unpredictable. As a result, they might generate more electricity during period where actual demand is low, while supplying less when the demand is much higher. Thus, for a consistent output, large energy storage systems must be deployed to make renewables reliable.

Electric vehicles, especially in the two-wheeler and three-wheeler space, have seen rapid adoption with the right policy push and increasing prices of conventional fuels. The total cost of operation is lower than internal combustion engine (ICE) powered vehicles in certain cases. In the past few months, dealer level data has shown that despite a gloomy sales climate, electric vehicles sales have grown a whopping seven to eight fold for some companies.

For instance, Hero Electric recorded sales of 7,021 two-wheelers in November 2021. During the same period last year, the company had sold 1,169 two-wheelers in the market. Similarly, Ather Energy saw a 7x rise as the number of vehicles sold rose from 360 in the previous year to 2,198 in the current year. The sales growth rate is in sharp contrast to the fall in sales witnessed by operators of petrol vehicles.

Is Lithium Ion Technology Our Best Bet?

While there are several battery technologies available for the automotive sector, none of them are as mature as the lithium ion battery. According to a report by Avendus, it is unlikely that lithium ion batteries would see any replacement over the next five years in the automobile sector. While newer technologies continue evolving, the industry appears to be in favour of lithium ion batteries with several large investments made into mass-manufacturing of these batteries.

Since 2010, around $10 billion have been put into Li-ion battery manufacturing. In addition, there are 115 giga-factories in line, betting on increasing production. The charging infrastructure providers have been building stations keeping in mind this particular technology, possibly cementing it even further. As a result, India would have to secure lithium or would have to look for alternate technologies if it is unable to secure the rare metal.

China's Growing Clout Over The Lithium Supply Chain

Currently, most of the batteries are imported from China. The country has secured large lithium supplies through acquisition of mines in areas rich with the rare metal. For India, a dependence on Chinese lithium could prove to be problematic in the future, given the past relationships between the two countries.

Argentina, Chile and Bolivia have seen the Chinese take over several lithium and cobalt mines — both the minerals are critical to EV battery manufacturing. While India has set up a company for acquisition of critical mineral mines — Khanij Bidesh India Limited, so far, there hasn’t been much progress on that front yet. China and India have huge populations whose energy demands must be satisfied. Between 2018 and half of 2021, China led lithium-related merger and acquisition deals paid up $4 billion, followed by the United States at $1.4 billion according to a Standard and Poor’s report.

The country’s holdings are estimated at 50,500 tonnes of lithium carbonate equivalent — approximately 12 per cent of the supply in 2020. Apart from these, the reserves of lithium have continually increased as well. China alone acquired 6.4 million tonnes of reserves in 2021. In 2020, the total acquisitions in the space had been 6.8 billion. In addition, there have been large investments made into new battery manufacturing complexes as well. The country’s investment frenzy in lithium could increase supply chain risks for other countries. So far, tightening supply has been pushing lithium prices upwards, near historic highs.

Growing Opposition To Mining

Another issue with India’s dependency on imported lithium is the growing resource nationalism, environmentalism, and other factors. Several governments have focused on re-nationalising mines or have increased royalty rates in recent years. Citizens too have been opposed to mining as it can have a detrimental impact on the environment. Serbia, for instance, has seen anti-mining protests as the citizens oppose mining of lithium as the process could destroy nature.

How Can India Establish Itself In The Supply Chain?

A NITI Aaayog report in 2017 estimated that India’s EV battery market alone could be worth $300 billion from 2017 to 2030 if India could rapidly transition to EVs. According to the report, the growth in EV adoption would bring social and economic benefits as dependence on imports reduces, public health improves, and renewables are integrated on the grid. The report highlights India’s lack of lithium reserves, but offers a solution to the issue.

“India will have the opportunity to produce both battery cells and packs, while importing only the cathode or its raw materials from mineral-rich regions. In this scenario, India stands to capture nearly 80 percent of the total economic opportunity,” says the report.

Hence, a focus on battery manufacturing could allow India to capitalise on the EV boom. The report also believes that the imports of some of the battery components would be more than offset by the lower imports of oils, allowing the country to reduce imports. According to the report, India could also scale its operations and become an exporter of batteries as well.

Further, as countries such as Bolivia focus on ramping up lithium production, we could see relatively more stable supply in the future. In addition, newer technologies are being worked on to make EV manufacturing more cost effective, and less reliant on rare elements.

But till then, India must take steps to prevent lithium from becoming a weakness for the country.