The United States is home to the two greatest energy revolutions of the 21st century. George Mitchell’s innovations in fracking unlocked the oil and gas reserves that turned us into an energy powerhouse. Nobel laureate John Goodenough’s lithium-ion research created the batteries that power modern technology.
Yet, while the U.S. embraced the fracking revolution that made our nation an energy leader, we are at risk of conceding battery technology leadership to China — and at a critical moment in global energy markets.
While recent energy outlooks published by oil majors, OPEC and the International Energy Agency differ in many details, a common conclusion stands out: Oil demand will soon peak if it hasn’t already reached that tipping point.
They also know why. The COVID-19 recovery plans of many rich economies prioritize greater energy efficiencies through renewable energy generation and battery storage and diversification of transportation fuels away from gasoline. Battery technology has therefore emerged as one of the key industries of the 21st century — from the auto industry to the military, electric power sector, and beyond.
It is central to the worldwide electric vehicle transition that has already begun. Batteries and their powertrains represent more than half of an electronic vehicle’s total cost.
Battery storage also holds the potential to make power grids more resilient, clean, and secure — particularly critical as renewable energy generation is predicted to rise sharply, and we become ever more reliant on technology and electricity in our digital economy.
The battery arms race is underway, and China has seized the early initiative. Backed by Beijing, companies like CATL, which did not exist a decade ago, and BYD are among the biggest battery manufacturers in the world.
However, the U.S. is barely in the running at all.
Beijing has worked hard to control the battery supply chain, developing the largest minerals processing industry in the world. Chinese companies manufacture 83% and 61%, respectively, of the anodes and cathodes that go into batteries, and China is home to more than 70% of global EV battery manufacturing capacity. The U.S. holds less than 10%.
Of the 142 lithium-ion battery factories already built or under construction worldwide, China is home to 107 of them. Just nine will be in the U.S.
China holds significant influence over approximately 70% of the world’s lithium supply, and in the Democratic Republic of Congo, which controls more than two-thirds of global cobalt production, eight of the 14 largest mines are Chinese-owned.
In contrast, the U.S. is wholly reliant on imports of cobalt and graphite and is 92% and 59% reliant on imports of lithium and nickel respectively.
Competing with China is a difficult prospect. Beijing’s backing of chosen champion companies means American and other foreign companies are competing against the Chinese state, rather than Chinese private enterprise alone.
And as with semiconductors, 5G, and pharmaceuticals, our excessive dependence on China for critical products poses pressing economic and security problems.
Without concerted, comprehensive action, we could wake up 10 years from now and discover that we lost a race we didn’t compete in because we didn’t appreciate its importance. Therefore, we must develop a minerals-to-markets solution.
The U.S. must increase domestic mineral production and diversify minerals processing away from China. More money must be invested in battery research and development and recycling while providing greater assistance to the domestic market.
Large-scale battery production, in particular, can be fostered and accelerated by greater commercial demand. This requires scaling up our EV market, particularly in the medium- and heavy-duty sectors.
A stronger market would also provide subsequent tangible benefits to our defense sector, such as reduced costs, greater efficiency, and cutting-edge battery chemistries.
Our proud history of technological innovation, coupled with our entrepreneurial spirit, made our nation the preeminent global power of the 20th century. Retaining that prominence in the 21st century requires leadership in the next generation of high-tech industries and a comprehensive approach to battery industry leadership in particular.
Jonathan Greenert, a member of the Energy Security Leadership Council, is a retired admiral who served as U.S. chief of naval operations from 2009 to 2011. Paul Segal is CEO of LS Power and also a member of the ESLC.
