How a President Biden could boost the USA’s lithium ion supply chain

Following days of uncertainty and while the total numbers remain to be fully confirmed, Joe Biden is set to be the next president of the United States of America. With Biden and Trump diametrically opposed on so many topics, what does a President Biden mean for the lithium ion battery supply chain?

In an obvious boost for new energy industries, the Biden has already announced that he intends for the USA to re-join the Paris Agreement, which the country only formally withdrew from on 4 November.

In his election campaign, Biden also outlined his climate plan which the battery supply chain – particular for the downstream stages — will benefit from.

In his plan, Biden has detailed his intention for the USA to achieve 100% clean energy economy (net zero emissions) by 2050 and for the country to become a “clean energy superpower”.

To achieve this, he has promised unprecedented federal spending of $1.7 trillion over the next ten years to support the buildout of the USA’s clean energy infrastructure.

Vehicle emissions will be at the core of this and Biden also announced he wants to use the Federal government procurement system, which spends $500 billion per year, to support the drive towards clean energy and zero-emission vehicles, which can only serve as a boost for the US battery supply chain.

We would not expect Biden to neglect the upstream either – at the end of October the Biden campaign made it clear that it supported boosting domestic mining to support the electric vehicles and other renewables critical to Biden’s climate plan.

But how a Biden administration will seek to support a buildout of the supply chain remains unclear and a more detailed strategy has yet to be set out.

It’s also worth nothing that while the Democrats look to have taken the House of Representatives, the race for the US Senate remains open and Republican success would be a limiting factor on many of Team Biden’s climate policies.

Battery powered upward trajectory 

Regardless of policy and politics, as costs fall, the adoption of renewable energy technology and the battery supply chain is on an upward trajectory.

Solar energy is now cheaper than many fossil fuels, battery prices have fallen ten-fold in 10 years, the oil sector has been devastated by the coronavirus demand destruction while electric vehicles have shown much less fragility as a nascent industry entering a growth spurt.

Industry is already pivoting to take advantage of and drive these economic trends.

“However big the political divide, the USA’s wheels are turning on building a lithium ion economy, and with it, electric vehicle and energy stories industries,” Benchmark’s Managing Director, Simon Moores explained.

“Whether this is the GOP view of creating new, hi-tech manufacturing jobs, the Democrat’s view to push forward green energy agendas or the cross-party view to compete with China and build in the USA.

Building a domestic lithium ion economy is a true bipartisan issue, and one of the biggest industrial challenges of our times.

“And it is entirely necessary for the USA to take action to compete with China, a country that has led the way in both building mass-scale battery megafactories and electric vehicle industries.

“The election outcome has only impacted the rate of change, which is expected to now increase, but not the upward direction of our industry.” Moores added.

Nonetheless, additional government support will only accelerate these trends and that has already become clear in the battery supply chain.

This is why China —the country providing the most support to the supply chain— has 130 megafactories in the pipeline or in operation, Europe has 16 and the USA currently has 10.

To date, China’s supply chain buildout has been heavily supported by government policy and subsidies, Europe’s recent plans have been supported by European Commission funding and policy, whereas the USA’s buildout has been led by Tesla.

Neither the USA nor Europe has significant raw material or downstream processing capacity, neither does it have sufficient capacity in the pipeline to support their domestic battery supply chains. Both regions have made efforts in expanding their downstream lithium ion capacity, however, as things stand, the raw materials to feed this will still largely be coming from China.

Subsidising EVs has been central to China’s battery supply chain strategy, if the US wants to catch up with its rival, then perhaps it should consider supporting its domestic industry in a similar way. The USA has a chance to change this, and while the market will go some way to achieve these things eventually, the helping hand of Uncle Sam would go a long way.

This is a Benchmark Membership article.

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