Incentives Fuel A Factory Building Boom In The Battery Recycling Industry

As the race to lower electric vehicle costs and increase driving range with advancements in battery technology continues, another race is brewing up in the background, one that involves recycling EV batteries.

A new report suggests that the United States is positioned to capitalize on the EV boom and become a leader in battery recycling, thanks to a clause in the Inflations Reduction Act (IRA).

The IRA includes an Advanced Energy Project Credit, under which companies that re-equip, expand, or establish an industrial or manufacturing facility to produce or recycle advanced energy projects, qualify for subsidies.

There’s also the critical minerals clause under the clean vehicle credit, wherein EVs with batteries consisting of minerals processed, refined, or recycled in North America, or in nations with whom the US has a free trade agreement, qualify for tax breaks.

The battery recyclability on US soil, combined with government incentives, is creating a factory building boom, according to Reuters. Even if automakers source critical minerals – primarily consisting of lithium, nickel, and cobalt – from other countries, recycling them locally could reap great dividends.

On average, the minerals are worth 2,000 euros ($1,123) per car, said BMW sustainability chief Thomas Becker. If automakers face a supply crunch in the future, those materials can be recycled infinitely and not lose power, said Louie Diaz, vice president of Canadian battery recycling firm Li-Cycle.

The company has obtained a $375 million loan from the US government to build a recycling plant in New York.

The IRA treats materials recovered from dead batteries as “urban mined,” as per JB Straubel, CEO of Redwood Materials, which obtained a $2B US government loan to build a battery recycling facility in Nevada.

Ascend Elements, which already has a recycling factory in Georgia, with plans for another in Kentucky, received a nearly $500M grant from the US Department of Energy.

Several such companies have received grants worth hundreds of millions of dollars from the US government under the Bi-partisan Infrastructure Law that took effect last year.

As a result, US battery recycling investments skyrocketed in 2022, amounting to $78 billion. However, China still leads the battery recycling space, and its government promised increased research support for recyclers last month, as per the report.

Thanks to the incentives, the US is racing ahead of Europe in battery recycling. As of now, the US has little recycling capability, while Europe virtually has none, stated Reuters. 

The European Union’s recent announcement on battery recycling focuses on mandatory minimum levels of recycled content, with a target of recovering 80 percent of battery waste by 2031.