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03 Feb China’s NEV Battery Recycling: Two Main Methods and Current Problems
The recycling of batteries becomes an increasing topic amid the boom of China’s new energy vehicle (NEV) industry. The service life of automobile traction batteries is five to eight years, while these batteries cannot continue being used for cars when the energy capacity decays to 70%-80%. Consequently, it is estimated that from 2020 to 2023, the retirement of NEV batteries in the country will amount to 90.5GWh in total, surpassing the production output in 2020 at 83.4GWh.
Chinese regulators, including State Council, Ministry of Industry and Information Technology (MIIT), Ministry of Ecology and Environment (MEE), and Ministry of Commerce (MOFCOM), have published a series of guidelines for the domestic battery recycling industry in the past several years. Specifically, as the main regulatory body, MIIT released interim rules for recycling NEV batteries, guidance for building up battery recycling outlets, and whitelists of battery recycling enterprises. Nevertheless, the industry is still waiting for a formal, comprehensive regulation, while an insider revealed that it might take a long time for the legislation by MIIT, according to Caixin.
Cascade utilization vs. Dismantling recycle
The two main methods for NEV battery recycling are cascade utilization and dismantling recycle. Cascade utilization refers to conducting technical inspection and screening of used batteries and allocating them to sectors that require lower battery capacity and quality than NEVs, such as energy storage and low-speed electric cars. This method is suitable for lithium iron phosphate (LFP) batteries, which have a longer service life than ternary lithium batteries. LFP batteries can be charged for over 2,000 times and used for seven to eight years, while the theoretical charging times of ternary lithium batteries are around 800. [For a detailed comparison of LFP batteries and ternary lithium batteries, please read A Look at China’s NEV Battery Industry: Two Main Battery Types and Their Leading Producers.]
Dismantling recycle is to extract precious metals like nickel, cobalt, and lithium from used batteries, which could be used to produce new batteries. This fits ternary lithium batteries that contain these metals while LFP batteries do not. Besides, batteries with a capacity declining to below 40% are also subject to this method, as they cannot be applied to cascade utilization.
Compared to dismantling recycle, cascade utilization is an important trend for NEV battery recycling. Most recently, MIIT issued the draft administration measures for the cascade utilization of NEV traction batteries in October 2020, in order to solicit public and expert opinions. The new rules encourage cascade utilization enterprises to collaborate with NEV makers, battery producers, and automobile dismantling companies, on sharing information and enhancing the battery recycling efficiency; to promote business models that are conducive to battery cascade utilization, such as rental and scale utilization; and to develop and produce cascade products suitable for base stations’ power backup, energy storage, battery charging and swaps, etc.
Main obstacles of recycling
Both methods can increase resource utilization efficiency while facing operational difficulties at present. The domestic battery recycling market has not formed an efficient and stable commercialization model, implying high recycling costs and resource waste. The first problem is there are many unqualified small-sized or individual recycling operators. These illegal operators have much lower costs than licensed companies, such as research and development expenses and environmental protection expenditures. They can offer higher recycling prices to purchase used batteries from some NEV firms. Insiders disclosed that a large number of retired batteries have been illegally dismantled or conducted cascade utilization with shoddy products, resulting in low utilization rate and severe environmental pollution. As an effort to solve the problem, Chinese regulators have specified a battery responsibility system and battery tracking measures, aiming at a transparent recycling routine for batteries.
Another major issue is recycling technologies. Currently, the various specifications, sizes, and quality of batteries increase the handling costs of recycling enterprises, further hindering the formulation of a scale, automatic, and intelligent disposal process of used batteries. For cascade utilization, it is hard for recycling companies to obtain battery details from carmakers or battery producers, so they cannot evaluate the remaining capacity and service life of batteries. The dismantling recycle of ternary lithium batteries has high-level safety requirements on enterprises, including the assessment of whether retired batteries are safe for dismantling, harmless treatment, safe storage spaces, and more. As for these problems, the solutions include conducting battery pretreatment and considering recycling factors when designing batteries.
According to global market research agency ReportLinker’s estimation, the global battery recycling market is expected to grow by USD5.77bn (RMB40.4bn) from 2020 to 2024, at a 9% CAGR. As one of the major NEV markets worldwide, China will also become a large market for battery recycling. According to MEE, it is expected that by 2025, China will decommission more than 730,000 tons of NEV batteries, 70% of which can be applied to cascade utilization, with a market size of more than RMB20bn. Currently, in addition to battery recycling enterprises, battery producers and battery material suppliers, including CATL [300750:CH], BYD [1211:HK], Guoxuan High-Tech [002074:CH], and GEM [002340:CH], are also deploying in the battery recycling industry.