Introduction
Nearshoring the lithium-ion battery supply chain requires substantial policy efforts at every stage. Upstream inputs, such as critical minerals sourcing and processing, are concentrated in a few nations. Although many more countries engage in midstream and downstream processing of critical resources, access to this end of the supply chain is becoming less secure for U.S. manufacturers because of uncertainty in the domestic and geopolitical spheres.
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Commensurate to the breadth of the challenges is the importance of overcoming them. An adequate, predictable supply of lithium-ion batteries, as well as the supply chain and raw materials, is essential to reaching green transition goals in the United States. These batteries power key products that enable a sustainable, large-scale switch away from fossil fuels essential to long-term environmental goals.
Calls to accelerate the shift to renewables are accompanied by other goals and legislation that have a significant impact on the direction of U.S. economic and trade policy. Recognizing China&#;s dominance over the supply of several goods critical to U.S. prosperity and security, policymakers say they intend to spur de-risking of these supply chains by diversifying import sources away from the People&#;s Republic of China (PRC), as well as creating redundancies to protect against potential unforeseen shocks such as pandemics. Policymakers&#; de-risking agenda goes hand in hand with government measures designed to bring production of critical goods back to the United States. They perceive renewing U.S. domestic manufacturing capabilities as a geostrategic shield as well as the pathway to creating more profitable and equitable opportunities for workers.
Congress and the administration under President Joe Biden have thus undertaken several policies to simultaneously tackle three objectives that will transform the landscape of U.S. lithium-ion battery production, among other sectors. These policies aim to drastically quicken the pace of the U.S. green transition, reshore production capabilities in critical sectors, and diversify away from the PRC&#;s dominance in these key areas. While these three goals may all be critical to U.S. economic security in the long term, actions that enable the latter two could hamper achievement of the first. Unfortunately, measures aimed at securing the lithium-ion battery supply chain through industrial policy packages that emphasize reshoring threaten to hinder U.S. consumers&#; access to this technology.
This brief, the second in a series of three, builds upon the first&#;s findings on refining and processing and examines the production of active materials&#;the next step of the lithium-ion battery supply chain. The paper first outlines the technical steps necessary for active materials production&#;namely, mixing, coating, calendaring, and slitting, as well as production of the separator and electrolytes. It then describes current U.S. capabilities at this stage of the supply chain relative to the global market, considering the country&#;s nearshoring and onshoring ambitions.
In addition, the brief addresses the Biden administration&#;s incentives, such as tax credits included in the Inflation Reduction Act of (IRA) and grants programs enabled by the Infrastructure Investment and Jobs Act (IIJA). It continues with an examination of different regulations and their potential impact on the ability of lithium-ion battery input manufacturers to scale up their capabilities in the face of growing demand. Lastly, the report unpacks recent policy recommendations from Congress relevant to lithium-ion battery nearshoring considerations.
Manufacturing a Battery Cell
Active Materials Production
Technical steps. After mining or extracting the raw minerals and materials&#;typically, lithium, cobalt, manganese, nickel, and graphite&#;processors and refiners purify them. The materials are then used to create cathode and anode active battery materials, which are commonly referred to as the midstream portion of the lithium-ion battery supply chain. Noteworthily, the active material production stage requires complex processes and advanced technologies and chemistries, meaning there are few producers and significant technical barriers to entry.
As mentioned in the first paper of this series, a lithium-ion battery usually includes multiple lithium-ion cells, which function as interconnected building blocks. A lithium-ion cell is chiefly made up of an anode, a cathode, a separator, and an electrolyte. The anode is the negative electrode in a cell, whereas the positive side is the cathode. During charging, the lithium ions move from the cathode, through the separator, to the anode.
The cathode component of the lithium-ion battery may comprise various formulations, chemistries, and crystalline structures. Metal oxides like cobalt, nickel, manganese, aluminum, iron, and phosphate, among others, make up the formulations and chemistries known as the cathode active materials (CAMs). Binders and cognitive additives such as polyvinylidene fluoride (PVDF) are also critical to the battery&#;s performance, especially for safer and longer-range applications. As mentioned in the first paper of this series, graphite is paramount to anodes, though industry is searching for ways to use alternative materials such as silicon or lithium given that they present opportunities for higher energy density and power.
The process of converting a set of refined and purified critical minerals into functional components of electrodes&#;namely, a positively charged cathode and a negatively charged anode&#;may be divided into five key steps. These are mixing, coating, calendaring, slitting, and electrode making.
Mixing. The active materials of the cathode, lithium, nickel, manganese, and cobalt, are dry blended in a planetary vacuum mixer. The active material of the anode is blended to ensure it approaches a viscous consistency. The anode and cathode materials are blended separately to ensure they do not react with one another. A solvent is added to both mixes to increase viscosity, which is critical as the viscosity, density, and solid content of the slurry affect battery longevity and performance. An additional key concern in the mixing process is air quality: controls on moisture level can limit air particles or impurities that contaminate the electrode slurry, but if moisture is not controlled, then the nickel is likely to corrode. Adding phosphoric acid or another solvent can also prevent corrosion.
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Coating. Coating broadly describes the process of applying the separate aluminum-cathode and copper-anode slurries onto metal foils. Once poured, the slurries are dried via an internal heater that operates between 70°C and 150°C. While warmer temperatures lead to lower production costs, there is a negative effect on the performance and overall longevity of the battery. Coating and drying are achieved via a slot die coater, which disperses the slurry through gaps onto moving metal foil. Once the slurry is dispersed, air flotation drying is used to evaporate any added solvents and provoke the sedimentation of particles, which is critical to battery performance. The newfound metal coating successfully protects the slurry from corrosion and damage. Both drying temperature and the speed at which drying occurs affect the distribution of slurry in each electrode. Generally, drying at room temperature, while slower, creates a more uniform dried slurry, thereby increasing the quality and longevity of the electrode.
Calendaring. Calendaring occurs through compression of the coated electrodes onto collector metal foils. This improves the energy density of the battery and further controls for dust and humidity within the electrode. This compression to a point of even thickness and density of the dried slurry increases performance. A roller calendar is used during this stage. Generally, higher calendaring pressure increases the energy density of a given battery, thereby increasing battery life.
Slitting and electrode making. A roller slitting machine then cuts the coated electrode into several slices. An electrode-making machine welds and cuts the electrode, and the anode, cathode, and separator are either stacked or wound into a spiral, depending on the type of battery. The machine clearly marks each side as &#;+ve&#; or &#;&#;ve,&#; and the electrolyte fluid (a lithium salt solution) is injected into the battery cylinder or pouch. The battery cell is then sealed and thus ready for use.
Separator production. Separators may be manufactured via a dry or wet process. Regardless, they are made of either polypropylene or polyethylene (types of plastic). In the dry process, either plastic type is pushed through a machine to create a thin sheet. The sheet is then heated until the plastic melts. This step controls the size and alignment of the tiny crystal structures within the sheet that allow lithium ions to pass through once the battery is functional. The sheet is then stretched again to create a set of additional slit-like holes. The stretching occurs until the sheet has a porosity of roughly 40 percent. The wet process, in contrast, involves mixing softening agents that can turn polymers into plastics once heat is applied. The heated mixture is pushed out of a machine to form a sheet, which is stretched until a network of pores is present. The softening agent is then washed out, leaving a porous surface that allows lithium ions through.
Electrolyte solution production. Electrolytes enable the conductivity of lithium-ion batteries by allowing for the movement of ions from the cathode to the anode when the battery is charging and from the anode to the cathode when the battery is in use. Electrolyte solutions are made up of soluble salts, acids, and other bases in a liquid format. When these solutions are mixed with various carbonates, such as vinylene carbonate, conductivity can increase, leading to improved battery performance.
Current U.S. Capabilities
As it stands, China dominates the active materials production portion of the lithium battery supply chain. In addition, South Korea and Japan have significant capacity. The United States finds itself a distant fourth, a position where it is likely to remain for 10 years despite significant investment. As of , China produced roughly 90 percent of anodes and lithium electrolyte solutions.
China also produces 70 percent of cathodes, 74 percent of separators, 82 percent of electrolytes, and 85 percent of anodes. Japan, a secondary player in the industry, produces 14 percent of cathodes, 11 percent of anodes, 31 percent of separators, and 19 percent of electrode solutions. South Korea manufactures 15 percent of the world&#;s cathodes and 3 percent of anodes. The United States occupies a far more modest role in the supply chain than its peers in East Asia, responsible for roughly 7 percent of battery production. It imports most components, such as cathodes and anodes, from abroad.
One factor that hampers onshoring efforts in the United States is the high cost of production. Whereas the average lithium ferrophosphate cell factory in China costs $650 million to build, it costs roughly $865 million to build a similar facility in the United States or Europe due to differences in labor costs and supporting facilities. This difference in cost has created a global status quo that has favored, and will continue to favor, Chinese hegemony over the midstream. While the United States is predicted to see battery production increase to roughly 1.2 terawatt-hours (TWh) by , corresponding increases in Chinese production will ensure most global battery production continues to occur in China. By the United States is set to produce 0.8 million metric tons of cathodes per annum, though demand will stand at 1.3 million metric tons. Domestic anode supply will also stand at roughly 500,000 metric tons per annum, with demand hovering at 700,000 metric tons. These shortfalls will therefore drive the importation of cell components, such as cathodes and anodes, for locally produced batteries. Nonetheless, domestic demand for battery cells in the s will likely outstrip the supply of battery active materials despite increases in domestic manufacturing.
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