Powering up the construction industry to accelerate EV transition
The global rise in electric and hybrid vehicle sales has accelerated demand for batteries powering this evolving technology. Associate Director Guillermo Martinez explains why building the factories to meet this demand requires a step change in delivery models.
The world is witnessing a boom in demand for the batteries needed to underpin rapid growth in the electric vehicle (EV) and stationary storage markets. EV uptake is set to accelerate dramatically over the next decade, in the wake of government policies designed to move away from the internal combustion engine and limit carbon emissions.
This market transformation is already exerting tremendous pressure on both battery cell and battery materials availability.
Competition is driving price escalation, with materials such as lithium carbonate inflating 437 percent in cost over the past year. Forecasts indicate that in 2022, prices for battery cells will increase for the first time in a decade.
Technological and research efforts into optimising battery chemistry and processes have resulted in a year-on-year cost reduction. But this is now being outstripped by raw and battery material cost increases, as demand surpasses supply for some key materials.
Without significant capital investment in vital battery material processing and assembly factories, cost pressures are only set to increase further. With a current estimated global capacity of 800GWh, an additional 2TWh of new global storage capacity will be needed over the next ten years.
Reaching this target will require an estimated 60-80 new factories to be built in Europe and around 150-200 across the world.
New markets for next generation factories
China and Korea currently lead the battery market, accounting for around 70-80 percent of the global manufacturing capacity and processing of 60-65 percent of the lithium and cobalt, along with other rare-earth elements needed for battery manufacture.
While Asia will remain a dominant part of the global supply chain, the USA and Europe are set to catch up by developing their own regulations, creating their own technology and battery material supply. With a current combined market capacity of circa 15 percent, Europe and the USA aim to increase production capacity to reach a combined 45 percent market output by 2030.
Simply ramping-up production effort over the next decade will not be sufficient. The challenge for Western battery manufacturers is to drive down battery costs and increase energy density while reducing the carbon footprint of battery assembly, and improving the environmental credentials of the industry.
The next generation of battery factories will also need to integrate a net-zero approach from day one and must be able to flex to meet the needs of a rapidly evolving industry.
That means designing the facilities with the technical requirements for next-generation batteries in mind, to avoid costly early obsolescence both in capital expenditure and environmental impact.
Building flexible factories through a holistic approach
Next-generation battery factories must be designed to be more than just assembly halls equipped with expensive clean and dry rooms. Benchmarks and reference projects in Europe and the USA are scarce, and the technology required is changing fast.
Replicating a project from the APAC region in Western markets is a challenge - due to regulatory differences, along with differences in the capabilities and culture of the construction industry.
The game changer for construction project managers is creating an environment to think holistically about the whole process of battery assembly and how the factory underpins this. Our role is to help our clients to build in flexibility.
Speed may be of the essence to deliver such facilities but taking the time at the early project planning stages to integrate the operational needs is essential.
Battery assembly and operation are based on complex and often dangerous chemical reactions. To be successful, efficient, and safe, factory processes must be clean and free from contamination.
Some parts of the process are required to be ultra-dry, other areas require precise temperature and humidity controls with a limit on human access - the main sources of moisture and contamination.
These factors make a battery gigafactory a complex facility to design, plan and construct. The process is more akin to constructing a pharmaceutical laboratory than a car assembly plant. A comprehensive understanding of the assembly process is required so that design can be optimised and costs reduced.
Navigating market risks
There are inherent risks that make these projects challenging; from technical complexity, to size, project duration, and net-zero targets. And while construction costs matter, speed to market often matters more in this competitive environment.
The success of a battery factory therefore goes far beyond optimising the construction process and operation. Ensuring the chemistry, technology and processes are correct is critical along with the choice of location.
The reality is that there is not always a single clear factor that helps a client to make the right decision regarding the best place to invest.
Many factors will influence the plan: the available skills base, the existing supply chain and potential partners, clean and cheap power availability, environmental permits, or simply political support and the extent of subsidies offered by local governments.
Our global footprint allows us to provide a wide perspective for clients, asking the right questions to find the right partners from the local supply chain - and understanding their capacity to assist.
Being present in those markets means that we can quickly carry out the economic, market, supply chain and construction analysis, and advise our clients on the best routes to take to meet the project’s objectives.
While a successful construction project will not in itself reduce the cost of electric vehicles to the price of the internal combustion engine equivalent, getting the construction set-up wrong may delay a project by 6-12 months.
This is precious time that the battery is not on the market generating revenue and data that could trigger further optimisation. Understanding what the client needs and getting the brief right is therefore a critical step.
Innovative delivery models to match an innovative industry
The players in this growing industry are often newly created start-ups, established battery players or original equipment manufacturers, battling to embrace the disruption that threatens their existing business models.
An immature industry fosters a diversity of approaches to construction projects, increasing the risk of project failure. Those involved often lack an extensive track record of building those assets and underestimate the demands that the construction process brings.
With a limited pool of contractors capable of undertaking such large projects, and speciality contractors being unable to cope with demand, traditional delivery models such as engineering procurement construction and engineering procurement and construction management become obsolete.
Innovative delivery models can be explored with the right partner panel, allowing clients to maximise gains from the options on offer.
Driving industry transformation
We work with a wide spectrum of industrial clients who are making major investments in the battery sector. One example is our recent appointment by Envision AESC as project and cost manager on the build of its battery gigafactory in north-east England.
Our experience delivering world-class battery gigafactories across Europe, Asia and the Americas has built our understanding of the complexity of the battery gigafactory construction process.
Compared to traditional industrial manufacturing bases, such factories require different skills and issues to manage. Our cross-industry expertise has been key to our success in this area, enabling us to incorporate lessons learned from more mature industries.
As always, business revolves around managing risk. While effective construction programme management is only one key driver in reducing EV battery costs, it ensures projects are delivered as planned, making a next-generation battery factory less of a risk and more of a vital enabler.