In the US, the lead-acid battery manufacturing sector reckons its lobbying battles have seen off some of the toughest regulations. The lithium sector has some trepidation over the (temporary) slowdown, but energy storage is a boom market. Andrew Draper reports on the fighting and the boom of the US.
In his regulatory and advocacy update to the 2024 BCI convention, BCI president Roger Miksad said his association’s efforts to convince regulators in the state of California to compromise on proposed occupational health and safety rules governing lead had paid off. Work has been ongoing since 2010, he said.
What happens in California generally spreads to the rest of the US, he said. “But we also have a significant employment place in California, we’ve been working very hard to convince the California regulators that this industry knows what it’s doing. It does protect its workers and we know how to do it without the draconian changes that they’re really pushing.”
The industry has seen some success, he said. “Not as much as we would like, to be candid, but we think we’ve gotten this rule in a fairly good place for the California industry to be able to comply in a rational and reasonable way. It’s not going to be fun. It’s going to be painful for them, don’t get me wrong. But we think it is in a place where our members in California are comfortable with what is coming down the pike and the way that it will impact them.”
Particularly painful requirements
Two requirements will be particularly painful, he said. The first is a ‘dramatic decrease’ in the allowable particulate in air inside factories. “The one that’s going to drive the most pain for the most people is the second one of PEL (permissible exposure limit, ed.). Taking the PEL from today’s 50 microgram/m3 down to 10 micrograms/m3 is going to require for the areas that are subject to that a significant capital investment in those facilities to make sure that they’re complying with those new air lead limits.
“Absolutely, when we look at the data, we don’t think those are necessary changes. Today our people are operating in environments under the 50 rule, but … really they have been unwilling to listen to science or reason for the last 10 years, and they have stuck to their guns on this number being what they want.”
The second area is on blood levels (BLLs). Miksad said it would hurt other industries more, as the battery industry was already complying with lead monitoring programmes. The BCI lobbied and got the Californian regulators to back down on PELs, which Miksad called “a big win”. He said they were unobtainable and so severe and costly they would have forced lead-acid battery manufacturers out of business.
Another area of successful campaigning was over drinking water in California. Federal rules ban the application of cosmetics and eating in plants where there is high lead exposure. The BCI secured an exception for drinking water, so employees working in factories with temperatures of 49°C (120°F) could drink from, for example, pedal-operated fountains without having to leave the factory every 15 minutes for a cup of water.
Minnesota, Washington, Montana and Oregon are also at various stages of updating lead rules, he said.
Tax credits
Inflation Reduction Act (IRA) tax rules on battery manufacturing are not limited by chemistry, which the BCI was pleased about. Miksad said Congress originally estimated this tax credit at about $2.5 billion dollars per year for 2024. He referred to external economic analysis that the domestic battery industry over the next 10 years is set to receive $40–196 billion in direct tax incentives to manufacturers to lower the cost of production and prices to end consumers.
It will allow companies to reinvest in manufacturing capacity and help incentivise what congress wanted – domestic battery manufacturing.
“So we’re very happy with the tax credits. We think those are in a very good place. If you’re making batteries in the US and you haven’t talked to your tax attorneys about that, I hope you’re running for the exits right now because that is cash on the table,” he said.
Miksad said the BCI continues to work to get legislation amended that removes taxes on input materials used in domestic battery manufacturing, but which do not apply if used in manufacturing outside the US. The body will continue to lobby on Capitol Hill on this, he said, noting the fraught nature of US politics in this election year.
Sceptical about concessions
A representative of a major research body, who did not wish to be named, told BEST he was sceptical of the regulatory concessions gained by BCI. He was involved in the zinc industry in the 2010s, when agreements made in the 1990s with regulators were totally disregarded.
“They won some concessions in the 1990s, then some numpty at the regulator disregarded it all. It was the way the analysis was written.” He thinks it would be interesting to see how BCI’s concessions will turn out in 10 years’ time.
Tariffs on China
In May, the White House announced tariffs on a range of products from China to protect US jobs. The tariff on lithium-ion EV batteries will increase from 7.5% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. Battery part tariffs will go up from 7.5% to 25% in 2024.
The tariff rate on natural graphite and permanent magnets will increase from 0% to 25% in 2026, while for certain other critical minerals tariffs will be hiked from 0% to 25% in 2024.
The tariff rate on electric vehicles will increase from 25% to 100% in 2024. President Joe Biden noted China’s exports of EVs grew 70% from 2022 to 2023 and a 100% tariff on EVs from China will “protect American manufacturers from China’s unfair trade practices.”
The tariffs on Chinese EVs and batteries is giving the lithium battery sector some welcome breathing space, said Jim Greenberger, Naatbatt International director.
He told BEST the tariffs on Chinese imports would give some time to US manufacturers to make their offerings more attractive. Range and cost are top challenges for lithium battery manufacturers, he said.
Naatbatt counts some 385 members from across the battery value chain, from critical minerals and battery materials to academics and scientists, manufacturing and recycling. It focuses mainly on lithium and advanced materials, but has a few members in zinc, sodium and flow batteries.
With regard to manufacturers, Greenberger said: “I’m hopeful they’re getting the message, not only about bringing down the price of batteries, but also bringing down the cost of building the vehicles. There’s a lot you can do to reduce the cost of the vehicles outside the battery… I’m told that’s what the Chinese seem to be so successful at doing. I think in the American market, we have bought ourselves a couple of years with the new tariffs. But they won’t provide long-term protection.”
Some trepidation
Greenberger admits to feeling some trepidation over current market conditions in North America. “The rate of growth appears not to be what we had perhaps hoped it would be a couple of years ago. It’s not contracting, but is growing more slowly. I think there are a couple of influential things which may take it into a higher gear.”
These include the rapidly declining cost of EVs and the range. He expects to see “substantial progress” in this regard in the next 12–24 months on the American market. “Obviously, price is the first challenge, and complicated by tariffs on Chinese imports.”
LFP the rising star
Greenberger said, of all the chemistries covered by his members, lithium iron phosphate (LFP) “seems to be the star of the day.” He said people are seeing it as an increasingly viable option for reducing price while at the same time still meeting requirements. Time will tell if it helps bring down the cost of batteries, he added. Nickel miners are not so overjoyed at the rise of LFP though, he said.
Energy storage records
The energy storage market in the US continues to break records, despite tariffs and interconnection issues in the supply chain, according to Wood Mackenzie.
Allison Weis, global head of storage, said she is expecting 2024 to set records. Writing in June, she said Wood Mackenzie is forecasting 45% growth in 2024 after 100% growth from 2022 to 2023.
Seasonal fluctuations slowed first quarter installations, she said, but noted the strong pipeline. Annual storage installations are growing faster than wind and solar and the storage market is also supported by falling module costs and IRA tax incentives.
The tariffs on imported lithium-ion batteries from China announced by Biden in May will increase pricing and may dampen growth, she said, but added the longer timeline of the changes and some shift to domestic manufacturing will mitigate impact on total demand. She noted there is a risk of further impact if tariffs are increased by the next president of the US following elections in November.
Developers are struggling to get interconnection for planned projects, she said. Interconnection queues are bloated with submissions that are no longer active. There are also unpredictable delays, and these make projects risky in terms of costs and timelines, she added.
Grid-scale dominates
Grid-scale storage continues to dominate the US market, according to Wood Mackenzie. California and Texas alone make up half of all grid-scale installations in the next five years. New contracting options and counter parties are developing as project owners are looking for guarantee revenues.
State policies elsewhere in support of renewable energy and energy storage are driving growth, Weis said. The desert southwest is expected to grow 14-fold in installed storage capacity by 2033 to 30GW. New York and Massachusetts are seeing storage being built, although it is unlikely to meet the states’ mandated timelines, she said.
Chemistry
The Wood Mackenzie report said the vast majority of projects will be lithium-ion throughout the next decade. However, longer duration systems will start to play a critical role in smoothing out renewable generation across seasons and wind droughts.
Early pilot schemes are in place using iron air technology with 100 hours’ duration, while there are others in the 8–12 hour range using compressed air and flow batteries. These combined make up nearly 10% of the project pipeline by megawatt hour (just 1% of the power though, according to Weis).
“Overall, there is an immense opportunity for energy storage to meet the needs of an evolving grid, and it is well-positioned to do so with the existing tax credits and its declining cost curve,” she said.
“The more the industry can do to accelerate interconnection processes and allow a mix of supply sources, the faster it can work towards ambitious carbon reduction goals.”
The US Energy Information Administration announced in June that at the end of 2023, electricity utilities in the US reported operating 575 batteries with a collective capacity of 15,814MW. It expects US battery capacity to more than triple over the next five years – adding 35,953MW by the end of 2028 based on plans reported to it by utilities.
It said the utilities increasingly report they are using batteries for arbitrage trading, where they buy and store electricity during low-cost periods and then sell it when electricity prices increase.
Support for fire safety
The American Clean Power Association (ACP) announced in June it was pushing an energy storage model policy framework for states and local governments to adopt. It includes recommendations, including requirements and guidance established by the National Fire Protection Association safety standard for energy storage, NFPA 855. (See BEST Spring 2024 for more on this).
East Penn Manufacturing is a family-owned company in Philadelphia. It claims to operate the largest single-site, lead battery manufacturing facility in the world.
COO Norbert Maleschitz told BEST labour shortages are a worry. He said the company has a steady 30% market share in all sectors and a 20:80 ratio between OEM and aftermarket sales.
Like other battery manufacturers, East Penn is exploring various chemistries. As the economy slows, customers look at cost savings. “The whole business case for lithium doesn’t look as nice anymore,” he said. “And they’re (customers, ed.) not looking that much in the total cost of ownership calculation long term. They’re looking into what is my capex, what is my spending the next two or three years?”
In warehouse environments, uneven flooring, forklift trucks with poor suspension and bumps can be detrimental to lithium batteries which have delicate electronics, connectors and wiring. This was a learning curve for East Penn, which improved its lithium forklift batteries and fixed these problems, he said.
The biggest warranty issues it sees include software, BMS and wire harness electronics, Maleschitz said. “We don’t think lithium goes away. I think lithium is here to stay, but certainly not that 25% or 30% market share some people projected six years ago, we don’t see that happening. It’s more like 5–10%.
Unable to recruit all the labour it needs, East Penn has started laying on English language classes as it hires people with language needs. The Hispanics are fantastic, motivated workers who “work their butts off”, he said. But the language classes are still not enough and productivity improvement is its biggest challenge. And that is where it is working with automation and robotics to boost output.
Although lead batteries remain core, East Penn is in the early stages of looking at sodium-ion and lithium-sulphur battery technology.
At Enersys, CEO Dave Shaffer told BEST one of his key roles as CEO was to facilitate culture in his group, which originally comprised some 30 companies. Each market is unique, and that includes language and governance issues, he said. “We have to have local leaders that understand local issues,” he said. It is ultimately judged by personnel turnover rates, which he said were low.
