With China cornering a bulk of the global lithium market, is India’s mobility transition in peril?
The world’s four biggest mining firms—Albemarle, SQM, Tianqi and FMC—currently control 77% of the global lithium market. This has set off a race between India and China
NEW DELHI :
For several months now, an unremarkable patch of earth in Karnataka’s Mandya district, located a mere 100 kilometres away from Bengaluru, has sent several arms of the Indian government into a tizzy. The reason: the ancient igneous rock deposits in the region (a by-product of large scale volcanic activity in the Deccan plateau millions of years ago) holds the first traces of Lithium ever to be discovered in India.
The preliminary find is relatively small: a mere 1,600 tonnes of lithium deposits. Chile, on the other hand, has an estimated 9.2 million tonnes. The presence of the rare silver-white metal in Mandya’s rocks is also mere inference at this point, with mining and extraction many months away. But the degree of importance that has already been ascribed to the site at the highest levels of government shows the amount of effort and investment that lithium is likely to garner in the years ahead.
Goldman Sachs recently predicted that the international benchmark price of crude oil is likely to touch $90 per barrel by the end of the year. The pain that many Indians feel at the fuel pump is a direct consequence of India’s lost battles to become energy secure. If oil powered the world in the 20th century, that role is up for grabs in the 21st century. And lithium is the leading candidate. Naturally, even a small find commands great importance.
The great energy transition that is set to unfold is already evident in some sectors. “For instance, electrification of personal mobility is not in future but here and now," said Awadhesh Kumar Jha, executive director at Fortum Charge & Drive India. Jha heads Finland’s state-controlled power utility Fortum Oyj’s green mobility play in India. At the heart of the transition from an internal combustion engine (ICE) vehicle to an electric vehicle is the battery, which accounts for at least 30% of the vehicle’s cost. And the key to the battery pack is lithium, at least for many years to come.
“By 2030, nearly three-fourth of Indian two-wheelers and all new cars are expected to be EVs (electric vehicles)," said Gaurav Moda, partner and India energy leader at consulting firm EY. “This adds up to a sizeable EV base. While a bulk of them may be powered by lithium-based (battery packs) in the near term, other technologies will (also) increasingly gain investments from Indian majors and achieve maturity in parallel," Moda added.
The government expects that the ₹10,000-crore Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India or Fame (India) scheme, created to curb vehicular emissions and reduce dependence on fossil fuels, will help trigger this transition. The scheme is designed to support the electrification of public and shared transport and to help create charging infrastructure. The only hiccup: access to lithium. Almost all EVs in the country run on imported batteries, mostly from China. Between 2016 and 2019, the amount of foreign exchange spent on importing lithium batteries tripled, according to the Union science and technology ministry. Essentially, India finds itself staring at a new form of energy dependence. That is, until something changes fast.
Research and experiments are already underway to discover alternatives to lithium, based on materials that are more abundantly available. Solid-state batteries are a promising option due to their high energy density and wide operating temperature. They are expected to become commercially viable within the next 5-10 years. Also in the race are aluminium–air batteries (Al–air batteries) and sodium-ion batteries. But lithium-ion technology has the advantage of an early start and according to experts, it will be the workhorse of electric batteries for at least the next three decades. Clearly, India has its task cut out.
India recently unveiled its playbook for developing a battery storage ecosystem, which involves setting up at least 50-gigawatt hour manufacturing capacity for advanced chemistry cell batteries. Battery makers are also seeking to take advantage of the ₹18,100-crore production-linked incentive (PLI) scheme to manufacture lithium-ion cells within the country. In such a scenario, securing lithium supplies will play a critical role in the pivot towards a greener economy.
The world’s four biggest mining firms—Albemarle, SQM, Tianqi and FMC—currently control 77% of the global lithium market. This has set off a race between India and China. In some ways, it’s a repeat of the contestation that played out between the two nations when they went looking for overseas oil and gas fields, resulting in a resource race in geographies such as Africa. In this backdrop, Indian strategic experts believe that India and China are locked in an inevitable geopolitical race to sew up as much of the world’s next-generation natural resources.
Cognizant of the issue, the ruling National Democratic Alliance (NDA) regime is working on a two-pronged approach that involves both domestic and global efforts. While the state-run Khanij Bidesh India Ltd (KABIL)— a joint venture comprising National Aluminium Co. Ltd, Hindustan Copper Ltd and Mineral Exploration Co. Ltd—is looking to acquire cobalt and lithium mines overseas, India is also trying to sew government-to-government (G2G) deals. KABIL is also exploring the direct purchase of cobalt and lithium.
“Chile, Australia, Argentina, Bolivia and China have almost all the lithium reserves which have been explored so far globally," said Fortum’s Jha. “Out of this, Chile and Australia produced close to 75% of the total lithium in 2018. KABIL teams had undertaken mine visits in South American countries in 2019. This needs to be followed up with G2G agreement for sourcing these minerals," he added.
A recent case in point is India’s bilateral agreement with Argentina for securing strategic minerals, which will be operationalized via KABIL’s contract with three state-owned organizations in Argentina—JEMSE, YPF and CAMYEN. India and the US are also looking at setting up an alternative supply chain for lithium. However, some experts believe that India has had a slow start, while China has raced ahead. “India is again late in acquiring lithium mines in Africa or South America. Instead of running after lithium mines (overseas), we should intensify exploration within India as well and exploit the opportunity to re-purpose and recycle used lithium-ion batteries," said Reji Kumar Pillai, president, India Smart Grid Forum, a public-private partnership by the power ministry.
Even as India attempts to catch up, there are several concerns about the terms of the mining concessions that China’s state-owned entities have managed to secure in countries such as Argentina, Bolivia, and Chile—the so-called lithium triangle. These concerns are not unfounded since India’s quest for energy security could be easily derailed by a hostile neighbour, with which border disputes are yet to be resolved. “China is known to house large lithium reserves and has also secured many lithium mines across multiple countries (in order) to ensure steady sources of supply for both lithium and cobalt," said Pratik Kamdar, co-founder of Neuron Energy, a startup that supplies lithium-ion and lead acid batteries to the Indian EV sector. “India, on the other hand, has set up public sector undertakings to collaborate and partner with mineral-rich countries such as Australia and many in South America."
With China steadily expanding its naval reach in the Indian ocean, India doesn’t want to gift its Asian rival a lever to engineer a variant of the “Malacca dilemma". India set up its only tri-service command in Andaman and Nicobar Islands at the entrance to the Malacca Strait, the world’s busiest shipping route and a potential choke point for Chinese energy supplies. “India is trying to avoid the mineral (lithium) becoming its Achilles heel, as has been the case for China with regards to its energy supplies, which have to be transported via the high seas," said a senior government official requesting anonymity.
The domestic push
Apart from the discovery in Karnataka’s Mandya district, the Geological Survey of India has taken up seven other lithium exploration projects in Arunachal Pradesh, Andhra Pradesh, Chhattisgarh, Jharkhand, Jammu and Kashmir and Rajasthan. The Atomic Minerals Directorate for Exploration and Research under the department of atomic energy has also undertaken lithium exploration in Karnataka and Rajasthan.
“Since there was no demand for lithium on a large scale in the country, not much exploration has been done (until now). With the government’s PLI scheme, demand for lithium is bound to increase and it opens new opportunities for domestic exploration," said Fortum’s Jha.
Besides, several automobile majors are planning to jointly develop a manufacturing facility in Gujarat, which could eventually morph into a global export hub for lithium-ion cells. This comes in the backdrop of the government’s Atma Nirbhar Bharat push to attract global manufacturers who may be exploring a China+1 strategy for production. “With adequate support from the government, India is on an upward path towards being on par with global counterparts with regard to lithium technology," said Kamdar of Neuron Energy.
While lithium-ion battery cell prices have fallen to $90–140 per kilowatt-hour (kWh), prices are expected to fall further to $73 per kWh by 2030, according to IHS Markit. This can come down more by adding large volumes of battery storage. India is taking the lead on this front and is working on the world’s largest grid-scale battery storage programme, which includes a 13 gigawatt-hour (GWh) facility in Ladakh and a 14 GWh system in Kutch.
Large battery storage that can store and reconvert electricity can help India’s electricity grids as well, given the intermittent nature of power from clean energy sources such as solar and wind. According to the Central Electricity Authority, the country will need 27 GW of grid-scale battery energy storage systems by 2030. However, this will require massive amounts of lithium.
A section of experts and policymakers believe that one way to avoid a lithium conundrum and a possible Chinese trap is to concentrate on other advanced battery technologies. Speaking at Mint’s annual conclave on energy Energyscape last month, Union power and new and renewable energy minister Raj Kumar Singh said, “Because the stocks of lithium are limited in the world, we will have to depend not only on lithium ion. There has to be other additional chemistry cells."
As China dominates the space of lithium-ion cell manufacturing, India has been consciously taking steps to avoid a repeat of how things played out with solar equipment manufacturing, where China leveraged its first-mover advantage to capture the market. This, in turn, has heightened the focus on alternatives such as aluminium-based battery technology.
“From a resource point of view, aluminium-based battery technology holds great promise," said Fortum’s Jha. “India has huge bauxite reserves, which gives it access to aluminium at a cheap price. This technology, as and when it matures commercially, will insulate India from (its) dependency on global import."
“India will be an early adopter of other battery technologies such as hydrogen fuel cells and solid-state batteries as well," said Neuron Energy’s Kamdar. “Solid-state batteries are being explored using metals such as aluminium. India holds an upper hand with respect to (the) availability of different materials. Thus, the country may witness faster adoption of (these) alternate technologies as compared to lithium," he added.
In the run-up to the UN Climate Change Conference (COP-26) in Glasgow, such new technologies and their swift adoption plans are expected to add heft to India’s clean energy credentials. Technologies such as lithium-ion batteries are slated to play a key role in India’s plan to reduce its carbon footprint by 33-35% from its 2005 levels by 2030, as part of its climate change mitigation commitments. India has already reached an emission reduction of 28%. While new technologies will inevitably change the playing field in due course, some experts believe that the lithium-ion-based battery will continue to remain at the core of the electrification of transportation vehicles for several decades.
“Several battery chemistries including solid-state batteries are under development. But none of them are expected to commercially compete with lithium-ion batteries till 2030 at least," said India Smart Grid Forum’s Pillai. “Price competitiveness and performance parameters of lithium-ion batteries are constantly improving and other technologies may not be attractive for mobility applications." Thus, how India navigates the tricky decade up ahead may make all the difference.
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