The Electric Quarterly: Should the West Subsidize LFP Production?

Save the date: In the battery industry, attention is tightly fixed on nickel, manganese and iron as the basis for batteries, but now a very different material has pushed to the surface: Prussian blue, a material usually associated with famous paintings. To discuss this much-ignored electrode, I'm thrilled to host Colin Wessells, CEO of Natron Energy, on Live Chat With The Electric. Register here to join us July 21 at noon ET. If you'd like to invite a guest, email me: [email protected]. 

In a special edition of The Electric Quarterly, we dive into an electric vehicle and battery industry imperative: creating iron-based cathode production capacity outside China. As of now, the industry is largely ignoring China's near monopoly in the production of iron-based batteries, which will probably power most EVs later this decade. So should the U.S. and European governments step in with support as an economic security priority? Read on. 

For almost two years, players in the electric vehicle and battery industries have known a big, awkward truth: The batteries they intend to manufacture in 43 existing and planned gigafactories in Europe and the U.S. during the 2020s are the wrong kind. Not entirely wrong, but wrong enough. That is, almost all the plants will manufacture nickel-based batteries, which is fine as far as they go, since such batteries are definitely needed. But there appear to be almost no plants to manufacture iron-based batteries, which isn’t so fine. For a number of reasons, including a forecast decadelong shortage of metals like nickel, ample and cheap lithium-iron-phosphate is likely to become the primary EV cathode later this decade and beyond, displacing nickel-manganese-cobalt. So the industry will need a lot of iron-based LFP batteries.

Today, Chinese companies produce virtually all the world’s LFP cathodes. Most non-Chinese companies think they can’t possibly compete with the Chinese firms on cost, dooming any effort to move into LFP production. The battery industry is among the most secretive on the planet, and companies won’t talk about details such as processing and wholesale costs. But as an indicator of the comparative economics, I looked at LFP’s retail cost: On Alibaba, a kilogram of LFP powder costs as little as $10. In the U.S., the same powder costs as much as $360. I’m told the U.S. price is much less in large volumes, but you get the point—there’s reason for the battery and auto makers to believe LFP is too expensive to make outside China.