17. Circular economy and the energy transition – potential of a Flemish circularity hub for EV Li-ion batteries
This short-term assignment aims to illustrate the insights that policy makers can obtain from applying a “strategic stock management” perspective to the problem of assessing the potential of circular strategies to address the challenge of critical raw materials risks and impacts at regional macro-economic level. The future economic and environmental potential of a Flemish Circularity Hub for li-ion batteries from electric vehicles is explored as a case study with high policy relevance.
First, a qualitative analysis of the value chains of electric vehicles (EV) and stationary energy storage (SES) li-ion batteries (LIB) shows the limited role of Flanders in the supply chain of these products at present, with some notable exceptions in the battery material production and EV LIB assembly activities. Here, Flemish industrial activity takes up key roles in the further development of circular EV LIB value chains. The main strategic strength for Flanders, however, lies in the collection, dismantling, remanufacturing and recycling parts of the value chain. However, the Flemish value chain is firmly embedded in a broader European and even global context. For this reason, building on this strength requires the creation of the right conditions for companies to choose to invest in materials production and recycling in Flanders instead of in other European regions. These conditions are linked to the further evolution of battery legislation, innovation support for remanufacturing and recycling, and the positioning of EV Original Equipment Manufacturers (OEMs) in terms of control over EV batteries after their first life. Making use of quantitative future scenario analysis, different possible future developments for the supply of EV LIB towards remanufacturing or recycling as well as for demand for stationary energy storage in Flanders are explored. The results of this first scenario analysis indicate that the differences in the rate of growth of the EV market and SES market will be crucial to determine the potential for EV LIB remanufacturing in Flanders. If the SES market demand booms too soon, the more slowly developing inflow of EV LIB for remanufacturing will lead to the SES market being saturated with virgin SES LIB. These LIB need to be imported and create relatively low local added value. However, if this is how the future develops, then a focus on stimulating recycling activities for EV (and SES) LIB in Flanders will be the best way to keep as much of the material value embedded in Flemish LIB stocks in the local economy.
In a second step, two Circularity Hub scenarios are developed: one in which EV LIB are recycled, and another one in which EV LIB are remanufactured to satisfy SES demand. These scenarios are applied to the potential future in which the SES market does not develop too fast in Flanders, and EV LIB supplies grow at a fast pace. The analysis shows that in such a future, developing local remanufacturing capacity for EV LIB would bring clear economic and environmental benefits. Economically, remanufacturing creates local added value whereas virgin SES LIB are produced elsewhere. Also, remanufactured EV LIB have a much higher value than the residual material value in LIB going to recycling.
While remanufacturing would delay the inflow of EV LIB to recycling in time, the material composition of remanufactured EV LIB would be more beneficial for the recycling business case than that of virgin SES LIB. Furthermore, a Remanufacturing Hub has significant potential to create net environmental benefits compared to recycling alone, due to the avoided production of virgin SES LIB.
Finally, the report reflects on the limitations of the static approach of the analysis used and makes the case for adopting strategic monitoring capability for (selected) product and material stock developments in Flanders. Such capability consists of (semi-)continuous data gathering, consistent and robust stock-flow modeling and trend analysis, and policy supportive reporting. Especially in the context of circular economy, in which continuously evolving customer demands need to be met based on equally continuously evolving resource supplies from stocks built in the past, strategic resource monitoring would provide much stronger policy support than isolated, one-off static analyses.