The aim is to establish a shared source for mutual battery energy storage, particularly as both countries seek alternatives for sourcing batteries for electric vehicles and renewable energy needs.
07 Oct 2024 | 4526 Views | By Amit Vijay M
India's Commerce and Energy Minister, Piyush Goyal, has suggested that India and the United States explore the potential of collaborating with resource-rich third countries, such as Chile in Latin America or specific African nations, to establish a shared supply source for mutual battery energy storage needs.
This proposal comes ...
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India's Commerce and Energy Minister, Piyush Goyal, has suggested that India and the United States explore the potential of collaborating with resource-rich third countries, such as Chile in Latin America or specific African nations, to establish a shared supply source for mutual battery energy storage needs.
This proposal comes as both nations seek alternatives for sourcing batteries for electric vehicles and renewable energy solutions, aiming to reduce dependence on existing supply chains and enhance energy security.
Chile, known for its significant lithium reserves, has been identified as a potential hub for processing these critical minerals. Speaking at a televised event titled "India's Evolving Manufacturing Landscape" in Washington, D.C., Goyal stressed the importance of collaboration in mineral sourcing, as well as the need for advancements in technology and capital investment. This aligns with his earlier proposal for India and the U.S. to work with third-party nations to meet their battery storage and renewable energy requirements.
Goyal highlighted that both Indian and U.S. firms are actively engaged in developing batteries and various energy storage systems. Through the Memorandum of Understanding (MOU), these companies will not only collaborate on mineral sourcing but also on the necessary technology and capital investment to attract future investors from both nations. He noted, “Chile has good lithium reserves that could be used for processing,” underlining its potential role in this strategic partnership.
When asked about the need for a third-party country to serve as the mutual sourcing ground for such a partnership, Goyal explained, "There is a need for India and the United States to include other countries in the partnership, particularly those that are already mineral-rich, such as in Africa and South America."
The India-U.S. MOU for natural mineral supply chains is a strategic response to recent restrictions imposed by China. Both India and the U.S. are seeking to decrease their reliance on China for critical minerals, particularly as the neighboring country implements regulations affecting the clean technology supply chain. This includes the procurement of essential materials such as lithium, cobalt, and other minerals crucial for the production of electric vehicles and renewable energy solutions.
The US has also agreed to the MOU, acknowledging that it and its partner countries may not be able to produce sufficient minerals quickly enough to fully replace imports from China. The US government recognises that China's threat to ban critical mineral exports is credible, and conducting mineral exploration and funding mine development in collaboration with India offers a potential solution.
The MOU was signed by US Secretary of Commerce Gina Raimondo, who co-chaired the 6th India-US Commercial Dialogue in Washington, D.C., as part of the Commerce Ministers' upcoming visit to the US.
The US Commerce Department responded to the signing of the MOU by stating that both countries would facilitate mutually beneficial commercial development of critical minerals, including exploration, extraction, processing, refining, recycling, and recovery.
Regarding lithium, India is entirely dependent on imports from China, which supplies 70-80% of India's lithium and lithium-ion imports. China also supplies 60% of India's natural graphite, used in EV batteries. India imports 93-100% of its cobalt, nickel, and copper requirements from abroad.
Why is the MOU critical for the expansion of Battery Energy Storage systems in India?
"Keeping supply chains open entails more than just material movement; it also involves advancing technology, integrating capital investment, and ensuring investors in both countries seize opportunities to promote electric vehicles, green hydrogen, green ammonia, and green manufacturing. It is a multidimensional partnership with the United States, and we reset it every few months to expand its scope," Goyal explained.
Why is India's J&K lithium reserves exploration story a long shot?
Experts say India's discovery of 5.9 million tonnes of lithium-bearing minerals in Jammu and Kashmir will take time to develop, as the mining and refining process is lengthy. For now, India needs to reduce its reliance on China.
Ritabrata Ghosh, Vice President, Corporate Ratings & Sector Head at ICRA, has highlighted India's uphill battle in lithium mining and exploration, noting that China currently controls the majority of the lithium processing/refining industry, where India lacks a foothold.
India's reliance on imports for critical minerals such as lithium, cobalt, and nickel threatens its green technology transition and energy security, according to a recent report from rating agency ICRA. The report adds that despite efforts to increase domestic production through auctions, the commercialisation of exploration blocks may not yield tangible benefits until after 2030. This delay may expose India's downstream manufacturing sector to potential supply disruptions in the interim.
Despite the auction of 38 mineral blocks to boost domestic production, the benefits are unlikely to be realised this decade, leaving India vulnerable to supply shocks.
Why might the India-US MOU work?
The Indian government's MOU with the US will foster deeper partnerships on open supply chains and support the free flow of critical minerals between India and the United States.
Discussing India's rapidly growing market for electric vehicles, Goyal pointed out that, unlike the United States, where electric vehicle (EV) penetration is already high, "India has the advantage that more than 95% of vehicles will be sold to first-time four-wheeler owners, so they can easily leapfrog into electric vehicles."
In the United States, where internal combustion engine (ICE) vehicle penetration is high, battery-electric vehicles accounted for 20% of all luxury models and 7% of non-luxury models in 2023. Battery-electric vehicles made up 32% of total luxury sales and slightly over 1% of non-luxury sales.
By comparison, India's EV penetration for passenger cars stands at just 1% in 2024, according to the latest estimate by Goldman Sachs, and is expected to rise to 7.1% by 2040.
Piyush Goyal also highlighted India's rapidly expanding electric vehicle market, which presents a unique opportunity to boost demand for EV batteries due to the high percentage of first-time vehicle owners. Compared to the US, where internal combustion engine vehicles dominate, India has the potential for rapid adoption of electric vehicles, Goyal said.
India's Budget for 2024-25 exempted 25 minerals from import duties, including lithium, gallium, germanium, copper, cobalt, and nickel. The recent Economic Survey also emphasised the need to address the challenges posed by India's reliance on foreign countries for these critical minerals.