Electric-vehicle demand is accelerating rapidly and so is the need for EV batteries. As these batteries reach end-of-life, significant growth opportunities in the recycling space are emerging.
As electric mobility increases globally, so does the need for electric-vehicle (EV) batteries. This demand has led to considerable growth in battery production, with over five terawatt hours (TWh) per year of gigafactory capacity expected globally by 2030. There is also considerable growth in EV battery volumes as they approach end-of-life, with over 100 million vehicle batteries expected to be retired in the next decade.1 Moving from fossil-fuel based to electric mobility is a clear positive for the environment and for many consumers’ pocketbooks, but overhauling our transportation system requires new supply chains to be designed and scaled. With this challenge comes an opportunity—to scale a supply chain that is more stable, more resilient, more efficient, and more sustainable than that of the fossil-fuel and internal combustion engine (ICE) vehicle industry. Battery recycling is the key to pursuing that opportunity (see sidebar, “Batteries’ second lives: An additional revenue stream”).
In China, Europe, and the United States, which are all undergoing a large EV transition, most of the battery material suitable for recycling still comes from consumer electronics cells, such as those in laptops and other household items, and cell manufacturing scrap generated from faulty batteries that don’t pass quality control. With cell manufacturing scrap being as high as 30 percent when a new battery factory launches, a significant source of volume for recycling evolves in markets where EV battery manufacturing is kicking into high gear. In markets where EV adoption has been pervasive for some time, such as China, end-of-life EV batteries represent a greater volume. Yet, globally, production scrap will likely remain the primary source of battery materials for recycling until 2030, when end-of-life EV battery volumes will have grown to the point of overtaking (Exhibit 1).
Exhibit 1
In this article, we examine the market context that has led to growth in battery recycling, common technology pathways and business models, and success factors in this sector. While our research is tightly focused on battery recycling, we find that understanding the potential scope of the circular economy for batteries sheds light on a supply chain approach that could be adopted by other industries, within and beyond energy and transportation, to drive sustainable growth.
Factors driving EV battery recycling
Numerous levers are fueling growth in the battery-recycling industry:
Technological progress as processes scale and mature is enabling higher recovery rates, lowering greenhouse-gas footprints, and improving economics. In addition, research and innovation project grants from governments are promoting recycling technology advancement, such as the EU’s European Battery Alliance and the United States’ National Science Foundation Phase II Small Business Innovation Research grants.2
Supply-chain stability considerations are being prioritized by various automotive OEMs and cell producers who are looking to secure local (recycled) raw material volumes at stable prices. For instance, VW has entered into a partnership with Redwood Materials in the US, and GM with Li-Cycle and Cirba Solutions.3
Decarbonization and ethical supply-chain targets set by automotive OEMs lead to a preference for recycled battery materials over newly mined battery materials, given the former is characterized by about four times lower carbon emissions, resulting in a more than 25 percent lower carbon-emissions footprint per kilowatt-hour (kWh) of battery cell capacity produced (Exhibit 2). Furthermore, sourcing from recyclers domestically avoids creating primary demand for raw materials sourced from conflict regions or extracted using child labor, or both. Our own research indicates that recyclers may even be able to access “green raw material premiums” as a result.
Exhibit 2
Regulatory incentives are creating conducive conditions for local recycling, such as the US Inflation Reduction Act 2022 that allows recycled battery materials (for example, lithium, cobalt, and nickel) to qualify for significant tax credits available through the domestic materials clause, even if those materials were not originally mined in the United States or in countries with which the United States has free-trade agreements.
Regulatory pressure is further encouraging organizations to recycle. The EU, for example, has instituted its End-of-Life Vehicles Directive that mandates automotive OEMs to take back vehicle owners’ end-of-life batteries. The EU’s Fit for 55 package has further promoted OEM interest in recycling by requiring the publication of battery carbon footprints, as well as by setting collection and recycling targets including minimum recycled content requirements for newly built batteries.4 In the United States, regulatory initiatives in California (Lithium-ion Car Battery Recycling Advisory Group) and Texas (EV Battery Reuse and Recycling Advisory Group) have recently provided recommendations that are expected to influence regulatory measures further toward battery recycling.
Battery recycling technology is well known, but innovation is on the horizon
There are two battery recycling technology pathways that are most commonly used, and further innovative recycling methods that are undergoing research and development.
Once end-of-life batteries have been collected and received at the recycling facilities, they are initially tested, discharged, and disassembled (Exhibit 3). At this point, disassembled batteries go through a process called “shredding.” This typically consists of a thermal treatment of batteries before or after crushing to remove impurities such as the organic fraction (for example, plastic), optimize the separation of electrode active material and current collector foil, and change the phase of valuable metal to a reduced form for optimized efficiency in hydrometallurgical processing. After various screening and sorting steps leveraging physical properties of battery components such as size, shape, magnetism, density, and conductivity, the process yields multiple material fractions, which includes “black mass,” a powder containing valuable material such as nickel, cobalt, lithium, and graphite. Alternatively, mechanical pre-treatment can be performed without the use of heat, usually yielding a more complex black mass composition with more impurities.
Exhibit 3
Once the black mass is generated, one of the two following processing methods is typically used:
Hydrometallurgical processing: The screened black mass is extensively treated with acids where the metals are dissolved. A series of so-called “solvent extraction,” “crystallization,” and “precipitation” steps separates the different metal ions, which can then be used to produce battery-ready materials such as nickel sulfate or lithium carbonate. Thermally treated black mass is the preferred feedstock for this process, mainly due to the absence of organics (such as solvents, binders). Mechanical pretreatment combined with hydrometallurgical processing presents a complex, though viable process, which requires more reagents to achieve high material recovery rates and battery-grade quality products.
Pyrometallurgical processing: Pyrometallurgical recycling can use black mass as a feedstock but, unlike hydrometallurgical processing, doesn’t necessarily require it. Usually, batteries are directly smelted in a furnace to recover cobalt, nickel, and copper, in the form of an alloy, while other components mostly end up as slag (such as lithium, aluminum, and silicon). Subsequently, the produced alloy is further processed in a comparatively simpler hydrometallurgical refining method to extract the raw materials and produce battery metal salts ready for battery-precursor production. Pyrometallurgical processing typically can be operated as a robust process with very high nickel, cobalt, and copper recovery rates, yet it yields lower total material recoveries compared to mechanical pretreatment in combination with hydrometallurgical processing, as many materials are burned or lost in the slag. Further, the process requires sophisticated gas cleaning systems.
More innovative recycling processes: Various recycling methods, such as direct recycling or hydro-to-cathode-active-material recycling, are currently in the research, development, and commercialization stages. These new recycling pathways aim to increase material recovery rates, decrease energy and reagent consumption, and decrease emissions and wastewater. For example, research projects in Europe and the United States both propose froth flotation, a metal concentration method typically used in the mining industry, as an effective method to recover graphite that is currently burned or sent to landfill during or after the recycling process. Recovering graphite, a component that represents around 15 to 25 percent of a battery’s weight, may become a requirement under the recently proposed EU regulation that mandates a 65 percent and 70 percent material recovery by 2025 and 2030, respectively.
Profitability is in sight
Across the battery recycling value chain, from collection to metal recovery, revenues are expected to grow to more than $95 billion a year by 2040 globally, predominantly driven by the price of the recovered metals, expected battery cell chemistry adoption, regionalization of supply chains, etcetera. The monetary value generated per ton of battery material could approach approximately $600 by as early as 2025 (Exhibit 4). Going forward, we expect the value creation potential to grow to similar levels to the primary metals industry, which is around 30 percent depending on price developments