Volkswagen’s battery plans a ‘game changer’ for Australian minerals: government

Angus Taylor may have been too busy dreaming about carbon capture and storage to have watched Volkswagen’s Power Day this year, but it seems analysts in his federal government department did tune in – and they saw something to be excited about.

What caught their attention was the German automaker’s plan to mass produce a “unified cell” battery for all its vehicles at half the price of current batteries. This, the analysts said, has potential not just to drive a truly mass market for electric vehicles, but to turn EV’s into miniature power plants, with enough charge to power an average home for five days.

That in turn will drive up demand for Australian minerals – particularly lithium and nickel – and send exports shooting upwards indefinitely.

The comments came in the June edition of the Resources and Energy Quarterly, published by the Department of Industry, Science, Energy and Resources (DISER) – the super-ministry that houses Angus Taylor’s “energy and emissions reduction” sub-department.

The document contained a whole section on Volkswagen’s aggressive push into EVs. It said Volkswagen’s plan to mass produce “unified cell” batteries at 50 per cent of the current cost could significantly increase demand for raw and refined lithium products – which Australia produces in bucketloads – as well as nickel.

“What may be a game changer for Volkswagen is morphing from an automotive manufacturer into a power company,” the documents says.

It says Volkswagen’s ID.3 electric vehicle, which the carmaker hopes will become one of the world’s earliest truly mass market EVs, has huge potential as a mini power plant. DISER said the car’s 77 kilowatt hour battery has the capacity to power a home for five days.

“The bidirectional charging to and from the car will facilitate power usage in the house – all app/cloud controlled to optimise performance. In Europe in 2020, 6500 GW of renewable power was lost due to curtailment which could have been reduced with more energy storage,” the report said.

“The implementation of a cheap ‘unified cell’ via the ID.3 and other vehicles could be a significant development for Europe in terms of energy storage, utilisation and emissions reduction. It could also be a game changer for Australia in terms of raw and refined battery-materials demand.”

Volkswagen is quickly emerging as one of the leading encumbent carmakers in the EV transition. It has both aggressive targets – it announced this week it would stop selling combustion engine vehicles in Europe by 2035 – and, unlike many carmakers, is already making the necessary investments to achieve this goal.

As the chart below shows, DISER expects EV sales to rocket from 3 million today to 26 million by 2030.

A report by Transport & Environment released in June named Volkswagen and Volvo as far and away leading the race among encumbents in Europe to make a successful transition to electric.

At Volkswagen’s Power Day in March (a clear aping of Tesla’s “Battery Day”) the company said, by 2030, it would have built six gigafactories, with a total battery production capacity of 240 GWh. It also said it would start including bidirectional charging capabilities in all its EVs from 2020 – allowing owners to use their cars to power their homes or feed into the grid.

Volkswagen’s plans were not the only EV trends that caught DISER’s attention. It also mentioned US President Joe Biden’s green programs, as well as advances in rapid charging technology, among others.

Australia’s lithium exports take two forms: unprocessed lithium ore – known as spodumene – and refined lithium hydroxide. In the financial year just gone (2020-21) DISER estimates Australian exports of spodumene amounted to 0.9 billion. This year (2021-22) they expect that to rise to $2 billion, and increase steadily from there.

Australia’s lithium hydroxide industry is in its early stages. While it has 26 per cent of the world’s refining capacity, it has yet to actually export any. However, DISER forecast that by 2022-23, it could be exporting $2.5 billion worth a year. DISER beleives Australia lithium production will rise steadily over the next decade as EV production increases. Australia currently produces more than half of the world’s lithium.

As for nickel – which is also used in battery production – DISER expects it to have brought in $3.6 billion in the 2020-21 financial, rising to $4.6 billion the following year. By 2030, it expects Australia to be producing 25 per cent of the world’s mined nickel.

While these figures may be encouraging, they are dwarfed by Australia’s more traditional export commodities. Iron ore exports are now expected to have brought in a whopping $149 billion in the 2021-22 financial year.

As for fossil fuels, metallurgical coal is expected to have brought in $22 billion for financial year just gone, thermal coal $20 billion, and liquefied natural gas $32 billion.

If lithium exports increase at the same rate as EV sales over the next decade, then by 2030 Australia may be making more than $30 billion a year from lithium exports.