Energy storage: Total supply chain

Long chain considerations

The need to consider the breadth and depth of impact that business activity has on environmental and social situations is now firmly established across Europe. e EU’s Corporate Sustainability Reporting Directive (CSRD) and the upcoming EU Corporate Sustainability Due Diligence Directive (CSDDD) (still in legislative proceedings) codify the demand from many classes of internal and external stakeholders for companies to disclose their social and environmental impact – both directly and through their value chains.

For businesses with complex chains, from extraction of materials, through to consumption and potential recycling or regeneration, this demand requires detailed investigative work and committed leadership to do the right thing. Within this, one of the main consequences of full disclosure of environmental and social impacts is the impetus to make corrections and improvements in procurement, business processes, and other
forms of sustainability management.

When it comes to energy storage, as with other green economy initiatives, the responsible value chain issue is heightened. The generation, storage and distribution of energy from renewable sources need to leave a lower carbon footprint and better social consequences than the fossil-fuel equivalent, and therefore all aspects of asset manufacture, installation, operation and decommissioning must be rigorously examined.

Key issues

The manufacture of the components required for storage assets places demands on resources that are both scarce, and obtained in ways that themselves have both environmental and social consequences. For now, the path to creating a greener energy economy remains heavily dependent on lithium to power vehicles and to store energy from renewable sources. The lithium market was worth $7.49bn in 2022, with the key supplying nations Australia, Chile, China, Argentina and Brazil producing around 90% of the world’s needs.

The race toward net-zero emissions depends heavily on lithium extraction and processing, to power electric vehicles, and to store wind and solar power. This creates a paradox that is understood but temporarily unavoidable. In the longer term, there will be alternatives to Li-ion batteries, but in the immediate term, the aim is for those involved in the development, installation, and operation of battery-based assets to act as responsibly as possible in value chain management. That responsibility includes:

• lowering the carbon footprint, water usage, energy usage, toxic waste production and air pollution;
• reducing the impact on biodiversity and natural resources more widely;
• consideration of the health and societal issues associated with lithium production and, indeed, any of the materials sourced for battery manufacture; and
• careful assessment of the ethics of obtaining lithium from nation states with questionable attitudes to human rights and working conditions.

End-of-life-care

Manufacturing batteries is only one element of the supply chain for such energy storage systems, and the full life cycle of batteries is perhaps the next important consideration. With current battery technologies, there are several possible destinations for whole batteries and their components at the end of their life.

The most harmful approach would be disposal, but thankfully there remains strong economic value in reusing, remanufacturing, and recycling batteries in novel ways, and these means can be supported by legislation to further encourage better circularity of batteries and battery parts.

There is a precedent for this in the development of digital passports for goods, and how this thinking can be applied to Li-ion batteries within the EU’s Circular Economy Action Plan. This would mean that the design and manufacture of batteries would pay greater attention to the end-life use of these assets, and a digital passporting regime would require accounting for the materials used to bring the asset into its useable state – and the mining and manufacturing processes involved along the way.

The path ahead

Improved eco-design with reuse in mind, and the use of digital passporting, are two of the most essential improvements towards more sustainable battery production and installation – but there are others. Given the huge material cost of bringing batteries and other energy storage assets into use, it clearly makes sense to focus on ways to extend the usable lives of these assets wherever possible.

Beyond design, there is also the potential to reuse batteries from other sources – in particular, those used for powering vehicles. The power characteristics of batteries for vehicle use are significantly different to those typically used for energy storage; batteries that don’t make the grade for vehicle re-use may still have a life in the energy storage market, provided they can be refurbished, coupled and harnessed to do so.

The combination of improved technologies, enforced regulation, and innovative practices should enable the total environmental and social footprint for energy storage to be managed and improved over time.

Our teams can help clients across all industries respond to the various supply chain considerations that arise in relation to energy storage assets. To discuss any of the themes raised above please contact Dieuwertje Ewalts.