From mobile phones and laptops to homes and automobiles, the world is about to be powered by batteries. As governments everywhere accelerate the transition to renewable energy production to reduce greenhouse gas (GHG) emissions, the need for and use of batteries is set for phenomenal growth. By 2035, more than 50% of global power generation is projected to come from renewable sources, and battery storage is the centrepiece to harnessing those renewables as clean energy production and end-user demand rarely align. In other words, we need a means to store the energy produced when the sun shines, the wind blows and the water flows so it can be used when consumers, businesses and industries need it. And coming out of COVID, consumers around the world support a green economic recovery, which will further accelerate the shift to renewables.

Complicating the GHG reduction challenge, worldwide demand for power is actually expected to increase (doubling between 2020 and 2050) because global wealth continues to rise, making new and expanded battery storage solutions even more critical to reducing energy production’s carbon footprint. Given our world’s finite supply of fossil fuels coupled with the expanding global thirst for energy, batteries are the most likely solution to capture the clean energy production required to achieve climate change and sustainability goals. Other electricity production technologies — fuel cells included ¾ could become viable solutions, but none are as seemingly possible today as the renewables/batteries combination.

Shortening that earlier 30-year projection to a slightly less tenuous 11, McKinsey, the management consulting firm, estimates a 17-fold increase in demand for batteries between 2019 and 2030, from 219 to 3,612 GWh (a watt is a measure of power and 1 GWh = 1 billion watts, equivalent to the maximum output of more than 2,600 Corvette Stingrays for an hour or enough energy to power 300,000 homes). E-mobility, which includes all forms of electronic transportation, easily comprises the largest proportion — 85%+ — of future demand while energy storage, which will mostly see utilities deploy large-scale battery systems to collect solar, wind and hydro electricity production, accounts for a further 12%. That represents more than 97% of projected demand for batteries in sectors that, today, are largely undeveloped (or at least underdeveloped relative to future demand). Other estimates are even more bullish: BloombergNEF, for example, is forecasting close to 2,000 GWh of battery demand in the U.S. alone by 2030 compared to McKinsey’s more conservative 733 GWh. Clearly, something must give.

Is it supply? Not in terms of OEM plans. While electric vehicles (EVs) represented about 3% of 2020 global passenger new vehicle sales (3.24M units), that share is expected to dramatically climb, driven partly by price parity — BloombergNEF projects similarly equipped EVs will cost the same as internal combustion vehicles by 2025 —when EVs will have 10% share of global new passenger vehicle sales. EV adoption will continue to increase, potentially reaching 28% of new vehicle sales in 2030 and 58% by 2040.

Many OEMs support (actively or passively, depending on one’s perspective and the automaker in question) the transition to EVs as major brands such as General Motors, Ford and Volkswagen are investing heavily. GM has announced plans to phase out internal combustion engines (ICE) by 2035, Ford has pledged an additional $22B to EV development through 2025 and VW is set to be the world’s largest maker of EVs. Other automakers such as BMW and Toyota appear to be hedging their bets with regards to electrification. While Mini, a BMW-owned brand, is set to be 100% electric by 2030, BMW is transitioning from its first generation of EV models to a market-specific approach to future EV introductions (higher numbers in Europe, for example, where emissions targets are more aggressive). It will also continue to develop fuel cells and expects plug-in hybrids (which still require batteries, albeit smaller capacity than fully battery-electric vehicles) to continue to play a role for many years to come. Nonetheless, BMW’s commitment to producing 2 million BEVs, including the new i4 and iX, by the end of 2025 underscores the importance of electrification to its product mix.

Overall, the industry is clearly chasing Tesla, which has delivered over 380,000 EVs through the end of Q2 2021 (putting it on track for a substantial increase from just under 500,000 deliveries through all of 2020), by committing $225B in total to building more EVs by 2023. The table below details many of those investments, but does not include dollars already in the market from all-electric players like Tesla or other upstarts such as Rivian, Lucid or Polestar, let alone Chinese market successes, including BYD, GAC and SAIC.

While OEMs are quickly adapting to evolving consumer preferences and more stringent government emissions policies, another area of supply could derail, or at least delay, the move to e-mobility. SNE Research, which specializes in rechargeable batteries and renewable energy data, has generated a battery demand scenario more conservative than McKinsey’s and points to a global battery supply shortage starting in 2023 and lasting beyond 2030. To combat that shortage, McKinsey estimates as many as 120 additional Gigafactories (Gigafactory, a term popularized by Tesla, is a giant battery production facility that manufactures gigawatts — typically between 6 and 24 GWh — of batteries each year) must be operational by 2030. That response will, in turn, drive deficits further up the supply chain as mining and processing industries scramble to build the facilities to extract and process raw material inputs required in battery production. Raw materials themselves could become scarce as demand for chemical elements essential in lithium-ion batteries, such as lithium, nickel and cobalt, skyrocket

With the world needing to shift to cleaner energy and consumers generally willing to facilitate that transition in e-mobility as automakers fill the funnel with exciting EV models over the next two to three years and beyond, we are on the cusp of serious mobility transformation. And we haven’t even touched on commercial transport, electric motorcycles, e-bikes or electric aviation, where Tesla is trying to disrupt the trucking industry with its pending Semi, Harley-Davidson has been selling LiveWire electric motorcycles since 2019 and plans an e-bike lineup that’s causing a stir, and Rolls-Royce, the venerable aerospace company, just completed its first flight with an all-electric airplane. The sticking point, however, looks to be supply as battery production and mining infrastructure development will trail real demand by years. Chances are supply will leapfrog demand as too much production capacity is built in response to forecast shortages, ultimately driving battery prices down further and making batteries and battery-powered products more affordable, but that scenario isn’t likely until the latter half of this decade, if not the early ’30s. While the future sure looks to be powered by batteries, that future is down the road.