Addressing The Battery Market's Elephant In The Room

The pressure to decarbonise power networks means that market value will grow many times over in the coming years and, according to research from McKinsey, could hit US$150 billion before the end of the decade. Driving this rapid expansion are major policy plays designed to boost the deployment of renewable energy projects, such as the US Government’s Inflation Reduction Act.

If intermittent renewable energy sources are to be successfully deployed and integrated, without risking the reliability of supply that is now expected, then power grids will need to adopt BESS technology en masse. To put it in context, the International Energy Agency (IEA) expects that 10 000 GWh of BESS technology will be required worldwide by 2040 – roughly 50 times the size of the current market.

However, there is a big risk for utilities that are building out large-scale energy storage projects and for the financiers directly investing in such initiatives, a risk that is often swept under the carpet. The mining of cobalt, the main element in lithium-ion batteries, is shrouded in controversy and the BESS supply chain remains murky. Even a perceived link to environmental damage or workforce exploitation is enough to erode social licence to operate, a project’s value, and shareholder confidence.

A grim reality: Understanding the risk landscape

In early November 2023, the Congressional-Executive Commission on China (CECC), a US bipartisan congressional committee, held a hearing on the dominance of Chinese companies in the cobalt supply chain. The hearing is the most recent of the discourse on cobalt supply chains in recent years, which is dominated by two key facts and one claim.

• Fact 1: The Democratic Republic of the Congo (DRC) produces around 70% of the global cobalt supply and possesses the world’s highest-grade cobalt (as high as 20%).
• Fact 2: Cobalt extraction in the DRC promotes abhorrent practices such as child labour, sub-human working conditions, unfair wages, and environmental pollution that bear maiming, birth defects, and deaths. Additionally, the mining sites have documented instances of sexual violence and little to no safety for the population engaged in or living around the sites.
• Claim: The cobalt supply chain is too complex to render itself to full traceability. Traceability is the ability to track a mineral from cradle to grave or cradle to cradle (in the case of recycling).

In short, this means that almost every cobalt mining and refining company, cobalt commodity trader, battery manufacturer, and consumer electronics manufacturer is enabling, promoting, or contributing to the irresponsible sourcing of cobalt in the DRC. This shadowy and complex supply chain, combined with increased consumer demand, offers a convenient shield to abdicate accountability and hide complicity.

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