Some of the current market prices for lithium-ion batteries are below cost and will not last forever but Europe still needs to be more cost-competitive, the CEO of one of Europe’s first LFP manufacturing facilities told Energy-Storage.news.
In the following, remarkably frank interview, ElevenEs CEO Nemanja Mikac discussed the dynamics of the current global lithium-ion battery market and falling prices from China – the dominant player – Europe’s place in the market, and the firm’s own gigafactory ramp-up in Serbia.
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China’s suppliers ‘selling below cost’
Alleged ‘dumping’ of solar PV modules from China into Europe has been covered regularly by our colleagues at PV Tech, but the term is less commonly used for its sale of lithium-ion batteries into the continent.
“China is probably selling US$10-15 per kWh below what it would like to be selling at in a ‘healthy market’, in order to maintain its volumes. It’s not normal, but I don’t know how long it will last. When they increase the average price by US$10-15 per kWh, then we’ll be talking about healthy market prices,” Mikac said.
He adds that European buyers of lithium-ion batteries are ready to pay US$5-10 more per kWh “but not more than that,” a figure which tallies with what others have told Energy-Storage.news. “That difference is not a lot, but it’s hard,” he said.
“I’ve heard stories of prices as low as US$55 per kWh from China, I haven’t seen it first-hand though. In Europe, you don’t really talk below US$100 per kWh, though we are getting there. Cell prices in the global market are US$55-75 kWh right now but I think we’ll find a middle point, and a healthy annual decrease thereafter will be around 3%.”
Europe’s gigafactory cost challenges and buyer appetite
Europe is investing billions in building up its own lithium-ion battery ecosystem, including battery and battery component production as well as recycling and some raw material projects, although most agree there is not enough focus on that last area.
However, the cost falls from China as well as the US’ generous tax credit incentives for battery (and other clean energy technology) manufacturing have put the European sector’s potential to be cost-competitive under threat. More recently the US slapped huge new tariffs on battery products from China, our coverage of which included some of Mikac’s comments.
“Europe talks a lot about sustainability but still buys on price. The EV and industrial space are very public about looking to decouple from China but are still reliant on it quite significantly. The energy storage system (ESS) space doesn’t have such public statements and continues to buy from China, though is exploring options,” Mikac said.
He explained why Europe’s battery products will, at least at first, have a fairly substantial cost premium to China.
“Raw material costs are higher here, we need to import everything and the volumes aren’t big yet. It’s a huge factory,” Mikac said.
“On top of that, it simply costs more to build these projects in Europe. Gigafactory capex averages around US$45 million per gWh in China while in Europe its more like US$100 million per GWh, that’s a crazy difference. We at ElevenEs are at around US$60 million and targeting US$50 million.”
“On top of those things you have the price of energy, infrastructure and labour laws which also add something but to a smaller extent.”
ElevenEs’ gigafactory ramp-up
The company opened its first lithium iron phosphate (LFP) facility last year with a pilot line capable of producing 100 battery cells a day, for potential customers to use in small and pilot projects for validation, Mikac said.
It is targeting the EV, industrial and ESS markets, the latter of which could eventually become 50% of its sales. LFP is increasingly the dominant chemistry of choice for ESS, while most European gigafactories are opting for nickel manganese cobalt (NMC) chemistry, more suitable for EVs and also allowing for a quicker decoupling from Chinese supply chains (China is more dominant in LFP than NMC).
The company plans to have its first large-scale facility operational with a 1GWh annual production capacity by the second half of next year. It will then build a large facility reapplying that model across larger facilities, one 8GWh and two of 20GWh, meaning a total 49GWh annual manufacturing capacity by 2030.
The firm has developed its own intellectual property (IP) and LFP manufacturing with no licensing from a larger established firm. Though, the company does source most of its materials and components including cathode material from China, with long-term plans to localise that production which will “definitely” happen by 2030, most likely in 2026/2027 according to the CEO.
How market segments differ
ElevenEs plans to build cells, modules and racks but has no plans to integrate further than the rack level – with the level beyond the rack being full containerised BESS comprising multiple (around 10) racks.
“Where to stop in the vertical value chain depends on how deeply the system integrators want to buy – cells, modules racks or full BESS – by the time your capacity is online, and that’s something of an estimation game,” Mikac said.
The EV, industrial (machinery and heavy vehicles) and ESS market segments differ greatly in the sales cycles, Mikac explained, though all involve long development timelines.
“EV buyers don’t buy anything for ages and then they buy loads. Industrial players are somewhere in the middle, development cycle is a bit less long and the ramp-up is somewhere between,” Mikac said.
“ESS meanwhile has many, more players coming in so the demand is pretty spread out. We’re selling to people who will integrate our cells and modules into full systems. We’ve designed our product to go into a 20-foot 5MWh container. The potential customers are system integrators big and small, none of them publicly named yet.”
Financing challenges
In an interview about the European gigafactory space in February, lawyer Thomas Herman told Energy-Storage.news that financing projects was one of the biggest challenges, something Mikac also touched on.
“Financing these gigafactories is more risky than solar, this is a bit of an unknown territory and people are still learning. A lot of companies and investors are trying to find their way. There have been good and bad investments, it’s been a bit hit and miss.”
“There are some projects that don’t have much substance behind them and that makes the whole industry look weaker than it actually is. A few projects are super huge already and are investing billions a year and still looking to turn a profit, which I obviously hope they do.”
He said the firm has its own investors and capital mainly from the “growth capital” space – not quite institutional investors because of the higher risk of the investment but not venture capital (VC) either, something in between.
“It’s hard to explain to investors that the first few years of the project will have barely any revenue. The returns are further into the future, which turns away lots of kinds of investors. Further market education and showcase projects will really help this.”
ElevenEs will be in a position to launch the project and make a final investment decision (FID) in a few months time, around Q3 2024, so it’s quite advanced with existing investors: “but there is always room for new investors.”
