EU might turn to China for batteries, post-Russia energy

A report for EU leaders cautions that by 2030, the European Union could rely on China for lithium-ion batteries and fuel cells, akin to its past dependence on Russia for energy. The document, obtained by Reuters, will be the focal point for discussions on Europe’s economic security during an upcoming meeting of EU leaders in Granada, Spain, scheduled for October 5. Worried about China’s growing global influence and economic prowess, leaders will discuss the European Commission’s proposals to mitigate the risk of overdependence on China and emphasize the need to diversify toward Africa and Latin America.

To meet its goal of achieving net-zero carbon dioxide emissions by 2050, Europe needs to address the intermittent nature of renewable energy sources like solar and wind by implementing energy storage solutions. The paper, prepared by the Spanish presidency of the EU, highlights the necessity for a significant surge in demand for lithium-ion batteries, fuel cells, and electrolysers. Projections suggest that demand could increase anywhere from 10 to 30 times in the near future.

While the EU maintains a strong presence in the intermediate and assembly stages of electrolyser production, with a global market share exceeding 50%, it faces significant reliance on China for crucial components like fuel cells and lithium-ion batteries, particularly vital for electric vehicles.

The document cautioned that without the adoption of effective measures, the European energy system might cultivate a kind of reliance on China by 2030, which, though distinct in nature, could be just as significant as the dependence it had on Russia before the Ukraine invasion.

In 2021, prior to the Russian invasion of Ukraine, European Union data indicated that Russia supplied over 40% of the EU’s total gas consumption, 27% of its oil imports, and 46% of its coal imports.

The choice to halt the majority of energy acquisitions from Russia had a profound effect on the EU, leading to an energy price shock and a notable surge in consumer inflation. This compelled the European Central Bank to enact a substantial interest rate hike, which has constrained economic growth.

The susceptibility of the European Union was not limited to lithium-ion batteries and fuel cells, as emphasized in the paper from the Spanish presidency. The document highlighted that a comparable risk could emerge in the field of digital technology. Projections indicate a significant rise in demand for digital devices like sensors, drones, data servers, storage equipment, and data transmission networks throughout this decade.

While the EU has a relatively strong position in the latter aspect, it displays significant vulnerabilities in the remaining domains.

By 2030, this dependence on external sources may present a significant challenge to realizing the crucial productivity improvements required in the European industry and service sectors. Moreover, it could impede the essential modernization of agricultural systems, crucial for addressing climate change.