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EVs to become main driver of battery storage deployment over next decade, says Fitch Solutions

5th December 2018 BY: Simone Liedtke

The electric vehicle (EV) market is set to become the main driver of surging battery storage deployment over the next decade, following increasing ambitions by developed and emerging markets to decarbonise their transport sectors, and will have a substantial disruptive effect on how energy is generated and consumed, while becoming a vast source of demand for metals.

This is according to analysis and consultancy company Fitch Solutions, which, on Tuesday, held a webinar focused on discussing the quantifying impact of EVs across sectors.


As a result of policy and government support, China will remain the biggest market in the world over the course of the next decade, says Fitch Solutions’ Anne-Marie Raisden.

China is forecast to record a yearly growth rate of 19% over this period, with growth slowing towards the latter part of the decade.


While Chinese policies are promoting the use of manganese, nickel and cobalt for EV batteries, Raisden highlighted the US’s use of the Tesla brand, which uses cobalt and aluminium.

Compared with Europe, which is much more varied in its battery chemistry type, Raisden believes there are several different areas of demand over the course of the next ten years.

Fitch Solutions mining and metals analyst Diego Oliva-Velez explained during the webinar that the main chemistry types that are currently being used by EV manufacturers in batteries comprise nickel, manganese and cobalt (NMV); nickel, cobalt and aluminium (NMC); and lithium, iron and phosphate (LFP).

Of these, Oliva-Velez believes NMC will be the most widely adopted owing to its low self-feeding rate, which he said improves the reliability of a battery while maintaining a good energy density.

Based on a forecast comprising 53 countries’ data, he highlighted that NMC cathodes currently account for about 28% of global EV sales and is expected to grow to 53% by 2027.

However, one key downside to this is that the NMC chemistry has a relatively high cobalt content, which Oliva-Velez said exposes manufacturers to significant price risks and challenges relating to sustainable sourcing.

Battery manufacturers are working towards reducing this, he stated.

LFP will also retain a significant presence, owing to its use by Chinese manufacturers and its lower cost, long-cycle life and thermal stability.

“Considering that we’re forecasting Chinese EV sales to average as the second highest annual growth rate globally over the next ten years, buoyed by strong government support, global LFP sales will continue to account for a significant portion of the total cathode sales in 2027,” Oliva-Velez stated.

Nevertheless, slowly but surely, sales of NMC batteries will eventually overtake the sale of LFP batteries in China.

Considering Fitch Solutions’ views that nickel-heavy NMC batteries will dominate the EV market over the coming years, the company forecast that nickel will witness the largest demand impact over the next decade.

“Demand for nickel will be particularly boosted by the fact that NMC battery producers are in the process of increasing the already-high share of nickel cathode from about 60% currently to 80%,” Oliva-Velez said.

A shift is expected from the commonly-known NMC 622 – comprising a ratio of six parts nickel, two parts manganese and two parts cobalt – to NMC 811, which comprises eight parts nickel, one part manganese and one part cobalt.

This shift, Oliva-Velez explained, will mainly be driven by EV and battery manufacturers’ objectives to reduce their exposure to cobalt, which is prone to price volatility and sustainability concerns.

This move, he averred, will mean that the demand for cobalt will not be as strong as envisioned by analysts a few months ago.

Fitch Solutions forecasts the demand for cobalt from EV batteries to grow to about 122 000 t, which is considerably less than the demand for nickel, lithium, iron and manganese.

Iron is also expected to attract a considerable demand side impact as a result of the widespread use of LFP batteries in China.

Fitch believes LFP batteries will still continue to account for around 27% of new EV sales in China by 2027. As a result, the company forecast a cumulative demand for iron from EV batteries over the next decade to amount to about 259 000 t, second only to nickel.

New EV sales in China are forecast to reach over two-million units by 2027, in comparison to 1.2-million units in Europe and 403 000 unit sales in the US during the same period.

However, in the US, a significant presence of Tesla’s NCA batteries in a domestic EV market will largely define the country’s demand trend, Oliva-Velez said.

According to estimates by Fitch Solutions, Tesla’s NCA batteries currently account for 65% of new battery sales this year in the US and will continue to account for about 30% of new sales in that country by 2027.


Meanwhile, Fitch Solutions oil and gas analyst Richard Taylor said the penetration of EVs into the traditional transport sector will be a key disruptor to the oil and gas industry over the longer term, as the erosion of conventional fuel demand entails a number of risks.

Over the next decade, a gradual structural decline for refined fuel consumption in several developed markets can be expected.

This, Taylor explained, will be predominantly driven by improved fuel efficiencies of conventional internal combustion engines (ICEs). However, the penetration of EVs and the demand that these exploit from the market will also add to this trend, he said.

Fitch Solutions estimates the global cumulative fuel demand to be displaced from the sale of new EVs to be around 447 000 bbl/d by 2027, which Taylor said suggests a minor drag on global refined fuel demand rates. This slows the cumulative figure from 4.2-million barrels to just under 3.8-million barrels in 2027.

However, despite a loss in demand being relatively small, the growth of EVs represents a significant set change for the downstream sector and changing the way that transport fuel is accessed and consumed, Taylor pointed out.

The displacement trend itself will be a longer-term dynamic for the market in line with the growth in EV users.

China, as expected, will dominate global EV sales. Subsequently, the company expects the greatest displacement of fuels to be seen in this country, with a cumulative total of 211 000 bbl/d in fuel demand displaced by EV sales in 2027.

Europe will see the second highest displacement, although with much lower volumes than China, registering a cumulative total of 61 000 bbl/d of displaced fuel from new EV sales by 2027.

“It’s also important to note that EVs sold in China in 2027 will likely displace more fuel than an EV sold in Europe, and it will be replacing a less efficient ICE vehicle,” Taylor noted.

The importance of this, he added, is that while the headline volumes of fuel demand displaced by EV sales in Europe may seem to be much lower, this is partly owing to the assumption that the conventional fleet will be consuming less fuel by the end of the decade.

However, the impact on the downstream players and the transformation of the traditional downstream business model will still remain in play.


Fitch Solutions power and renewables senior analyst Daniel Brenden, meanwhile, believes the batteries from the communitive EV fleet will eventually act as a grid balancer by absorbing renewable power generation’s surpluses, and shifting this supply to a period where renewable supply deficits exist.

“This could, in turn, help us to better integrate intermittent wind and solar power into the power grid,” he averred.

Combining the company’s forecast for plug-in hybrid and battery EV, Brenden noted that total battery storage capacity from the EV segment will reach about 2 000 GWh by 2027.

“In comparison, one of the biggest stationary batteries under development to date is only about 800 MW in size in China. This highlights the huge impact EV and battery storage could have as a grid balancer,” he stated.

EV battery fleet integration, he stressed, is required to make intermittent wind and solar power more reliable so that more of it can be used.

According to Fitch Solutions’ current power mix forecast, the company expects wind and solar to make up only about 7% of the total global power generation in 2027.

In comparison, coal is forecast to make up about 38% of the power mix in 2027, and gas about 23%.

In effect, Brenden explained that would mean that decarbonisation efforts in the power sector over the next ten years, as things stand, will have a relatively limited impact. However, using the rapidly expanding EV fleet to support renewables integration will be key to changing this narrative.

Vehicle-to-grid (V2G) technology, the company believes, will help to support this over the next decade, and unlock a two-way flow of electricity between the EV battery and the grid.

“That will mean that the EV will help absorb renewable energy surpluses and then send the electricity back into the grid when there’s a deficit.”

China, in this regard, is still expected to be the largest renewables and EV market ten years from now.

While it is believed that there will be a focus on rolling V2G capabilities out in China, its access to substantial conventional power supply will take away some of that urgency to use EVs to reduce how much renewable energy is wasted, Brenden noted.

With this in mind, he said Fitch sees Western Europe as a likely hotspot for a V2G technology roll-out. “To put it simply, we believe the region will face pressures from having a heavy renewables power mix first.”

The European power mix, meanwhile, is becoming more intermittent, with EV storage capacity expected to grow exponentially over this period.

“That leads us to believe that Europe will be the market where V2G will really gain a foothold first, and that’s because of the importance of balancing a power mix that is increasingly relying on renewable energy,” Brenden stated.

The scenario is not without its concerns, he added, warning that the EV only charges from the grid and in the evening, which could add to peak demand.

What V2G technology will set out to accomplish, however, is that EVs will, when not on the road, be connected to a charger that enables two-way electricity. The EV will then absorb the renewable energy’s excesses and then send this back into the grid when there is a peak demand, Brenden explained.

As a result, renewables will become more reliable and fossil fuels will be needed less.

This scenario, however, requires the roll-out of grid infrastructure and smart charging software at a scale that will be unlikely over the next few years, Brenden noted, meaning that the global power mix will likely fall somewhere in between in the next decade. 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
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