Introduction
The LiFePO4 battery technology, which boasts fewer shortcomings, is gradually “eroding” the European market. This article delves into the reasons behind this phenomenon, examining the trends, challenges, and opportunities presented by the surge of LiFePO4 batteries in Europe.
The Emergence of LiFePO4 Batteries in Europe
On July 8th, local time, Envision AESC officially commenced construction on its battery gigafactory in Navalmoral de la Mata, Spain. This factory will develop and manufacture the latest generation of LiFePO4 (LFP) battery products, with an anticipated production commencement in 2026. This will become Europe’s first LFP battery gigafactory and serves as the latest evidence of the rise of LFP batteries in Europe.
Amidst robust demand for LFP batteries in electric vehicles (EVs) and energy storage systems (ESS) from end-user automakers and energy storage stations, the European battery industry is poised to undergo significant transformation. European battery enterprises are also showing a shift towards LFP batteries. For instance, ACC, a joint venture between Mercedes-Benz and Stellantis, announced the suspension of its battery factory projects in Germany and Italy due to a slowdown in EV sales in Europe, contemplating a shift from Nickel Cobalt Manganese (NCM) battery technology to LFP battery technology. Similarly, French battery startup Verkor has hinted at considering a transition to the lower-priced LFP battery solution.
The Battle Between NCM and LFP Batteries
In the realm of lithium-ion batteries, NCM and LFP technologies have been vying for dominance for over a decade. For a long time, NCM technology,依托其 higher energy density, has reigned supreme in the battery industry. However, in recent years, led by Chinese enterprises, the economics, high safety, and long-cycle advantages of LFP batteries have become increasingly prominent, demonstrating a strong resurgence.
NCM technology has traditionally held sway in Europe. According to observations by Energy magazine, ACC’s switch to LFP technology is not an isolated case. Driven by multiple factors, the LFP technology trend is quietly emerging in Europe.
The Rise of LFP Batteries
In 2009, policies such as the “Ten Cities, Thousand Vehicles” initiative ushered in a period of rapid development for the domestic new-energy vehicle industry. At that time, national subsidy policies primarily considered the energy density of power batteries. Limited by technical reasons, most LFP batteries struggled to meet the subsidy criteria. Conversely, NCM batteries could achieve 120Wh/kg, qualifying for a 1.1x subsidy. Consequently, NCM technology swiftly became the market mainstream. At its peak, NCM batteries accounted for over 80% of the Chinese power battery market, while LFP batteries’ market share plummeted to 12.8%. CATL also surpassed BYD to become the global power battery leader, leveraging NCM batteries.
NCM technology similarly dominated the international market, with Korean giants like SK and LG pursuing CATL with NCM as their primary technology route.
However, advancements in battery chemistry and packaging technology, coupled with the advent of CTP 1.0 and 2.0 eras, have significantly boosted battery energy density. Starting in 2020, with the advent of blade batteries, LFP batteries began to rise again.
CATL launched its godspeed battery PLUS (LFP), achieving a system energy density of 205Wh/kg, enabling a driving range exceeding 1,000km and supporting 4C fast charging. Meanwhile, BYD’s second-generation blade batteries, rumored to reach an energy density of 190Wh/kg, are set for release.
As LFP batteries’ energy density climbed, the persistently high prices of nickel and cobalt, crucial components in NCM technology, significantly impacted the market. As of June 25th this year, the average price of automotive LFP batteries in the domestic market was 380 yuan/kWh, while that of high-nickel NCM batteries was 550 yuan/kWh. This translated to a price difference of nearly RMB 30,000 for EVs with the same battery capacity. Cost reduction in LFP batteries is crucial in the intensifying price war.
Against this backdrop, several automakers switched to LFP batteries. In 2021, Tesla announced the widespread adoption of LFP technology batteries, particularly in its newly commissioned Shanghai factory. Among American automakers, Ford, Rivian, Fisker, and General Motors announced the adoption of LFP battery technology between 2021 and 2023.
Similarly, the domestic market also underwent a “regime change” around 2021. In April of that year, BYD’s full line of pure electric vehicles began using BYD’s blade batteries, marking the beginning of domestic automakers’ shift to LFP batteries. After July 2021, LFP battery installations surpassed those of NCM batteries. By May 2024, LFP batteries’ installed capacity market share in China exceeded 70%, while NCM batteries’ share shrunk to below 30%.
This year, the LFP battery trend in Europe has accelerated. In July, Renault officially placed a 39GWh LFP battery order for application in 590,000 EVs. Earlier, several European automakers, including Stellantis, General Motors, Hyundai, and Volkswagen, announced plans to introduce LFP batteries. Meanwhile, the growth rate of large-scale energy storage installations in Europe has accelerated. Driven by this, European local battery projects like ACC and Verkor are reconsidering plans to shift towards LFP batteries.
Market Potential
As one of the world’s most crucial automobile and energy storage markets, Europe is firmly advancing electrification and energy transformation, demanding vast and increasingly urgent needs for EV and energy storage batteries. Coupled with the rising demand for LFP batteries, the competitive landscape of the European battery industry could be reshaped.
In the EV sector, the industry expects EV sales in Europe to reach 9.5 million units by 2030, with an EV penetration rate of 60%.
Beyond the EV sector, LFP technology holds even greater potential in the booming energy storage market.
Market research firm SNE Research reports that global shipments of lithium-ion batteries (LiB) for energy storage systems (ESS) increased by 53% year-on-year in 2023, reaching 185 gigawatt-hours (GWh). Notably, Chinese LFP battery enterprises saw remarkable growth, occupying the top five spots in shipments and market share, collectively accounting for 78% of the market.
Safety and Cost in the Energy Storage Market
Similar to the EV market, NCM and LFP technologies directly compete in the energy storage market. However, the primary distinction lies in safety and cost.
On May 15th, a fire broke out at the Gateway lithium-ion battery energy storage system in California, once the world’s largest. The fire, which was extinguished and reignited several times, lasted six days.
The Gateway project, operated by LS Power, integrated by NEC ES of Japan, and supplied with NCM batteries by LG Chem of Korea, was commissioned in 2020. At that time, technology was relatively lagging, and NCM batteries were prone to thermal runaway. The temperature range of NCM batteries differs significantly from that of LFP batteries.
The largest fire risk in lithium batteries is thermal runaway, a chain reaction of heat release causing rapid changes in battery self-heating rates, leading to overheating, ignition, and explosion. The thermal runaway temperature of NCM batteries typically ranges between 120-140°C, while LFP batteries’ thermal runaway temperature is between 250-300°C. Moreover, after thermal runaway, NCM batteries produce hydrogen, oxygen, and other flammable gases, leading to intense combustion once ignited. In contrast, LFP batteries do not produce oxygen after thermal runaway, allowing for the fire to be extinguished by isolating the air supply.
The booming European energy storage market will also drive increased demand for LFP batteries. In 2024, the European large-scale energy storage market continues to heat up, becoming a new growth driver for the residential energy storage market, supporting sustained growth in European energy storage installations.
Since the energy crisis in 2021, the European energy storage market has developed rapidly. According to Ember, a think tank, renewable electricity accounted for 44% of the EU’s electricity mix in 2023. Wind and solar power were the main drivers of the substantial increase in EU renewable electricity, with generation increasing by 90TWh, accounting for about 27% of total generation, and installed capacity increasing by 73GW.
As the proportion of fluctuating renewable energy generation installed capacity increases, the power system requires more flexible balancing resources. Without considering carbon peaking and neutrality, this role could be fulfilled by coal-fired and gas-fired power plants. However, achieving complete decarbonization of the power system necessitates a higher proportion of energy storage.
As energy storage becomes ubiquitous in everyday life, safety will undoubtedly become a crucial factor. And LFP batteries’ opportunities in Europe largely hinge on this.