Due to the key role of batteries, especially in the automotive industry, many companies are striving to start production in Europe. The announced production capacities by 2030 exceed two terawatt-hours annually. However, a forecast by the Fraunhofer Institute for Systems and Innovation Research (ISI) indicates that these capacities surpass the actual demand.
Previous years have shown that the realization of all announced projects is very unlikely, leading the Institute to develop a methodology for assessing the probability of battery production announcements and evaluating the risks associated with these projects.
The growing demand for batteries, primarily from the mobility sector (e.g., electric vehicles), has led to a significant increase in the required production volumes. Europe, mainly due to its developed automotive industry, is facing a major expansion of its battery production capacities. Currently, its share of global production capacity is only about 10 percent, while European battery demand accounts for as much as 25 percent of global demand. Therefore, the European market remains heavily dependent on imports of battery cells, especially from China.
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Withdrawal from Plans
Given the estimated European demand, which could reach between 800 and 1,300 GWh by 2030, the announced two terawatt-hours of production capacity would represent a significant surplus.
“One of the reasons is that the electromobility market is developing more slowly than expected. In addition, the growing overcapacity in Asia is leading to a further decline in battery cell prices. The initial difficulties of the first European production plants have further undermined optimism, resulting in many announced projects being already withdrawn,” ISI reports.
They emphasize that despite numerous challenges, Europe can remain competitive thanks to political initiatives such as the new Battery Regulation (which includes requirements for carbon footprint disclosure and battery recycling regulations).
Currently, postponed or completely failed battery cell production projects in Europe are estimated to total more than 700 GWh of capacity. In Germany alone, these projects amount to around 240 GWh. In Sweden, about 110 GWh of capacity has been canceled or questioned. In Romania, Norway, and the United Kingdom, projects totaling up to 30 GW have been canceled, mostly due to weak financial support or underdeveloped markets. Canceled projects have also been reported in Slovakia and Finland.
The study notes that European battery production will most likely significantly lag behind announcements. Results show that only between 54 percent and 75 percent of the announced capacities are likely to materialize, which would amount to between 1.2 and 1.7 TWh annually by 2030.
When expected construction delays, lower production yields due to manufacturing waste, and limited capacity utilization are taken into account, the realistic factory output by 2030 is estimated at only 0.8 to 1.1 TWh annually. Despite numerous challenges, the study indicates a reduction in Europe’s dependence on imported battery cells.
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