18 Sep 2023 3 min read

What role will batteries and lithium play in the energy transition?

By Michael Stewart , Elisa Piscopiello

In a summary of a new LGIM whitepaper, we explore the role of lithium and other key minerals in the rise of electric vehicles (EVs) and the wider energy transition.


How fast has the EV market been growing?

Batteries are at the centre of a structural and foundational shift that is impacting many aspects of our lives, most visibly in the secular shift from internal combustion engine (ICE) vehicles to EVs.

The mass adoption of ICE vehicles that began around a century ago provides a guide to the scale of this shift. In the US, for example, 14 out of every 100 people owned a car a century ago. Today, 90 out of 100 people own a car.1

We can expect something similar to happen with EVs, as a combination of technological innovation, lower battery pack prices, higher consumer demand, growing awareness of the threat posed by climate change and supportive government policies leads to rapid growth of the market.


In the US, EV penetration has now surpassed the 5% mark (at 6.6%).2 According to FastMarkets, this milestone may be just the start of a much bigger trend, boosted not only by the Inflation Reduction Act but also by the new Environmental Protection Agency standards, requiring a minimum of 60% original equipment manufacturer vehicle production from EVs. The US plans to achieve 50% EV auto sales by 2030.

Support for continued EV growth is also evident in Europe, where the European Commission aims to end the sale of CO2-emitting cars by 2035, while the UK has vowed to ban petrol car sales by 2030.

Globally, there were 26 million electric cars on the road in 2022, up 60% on 2021 and more than five times the 2018 level.3 But this growth phase seems only to have just begun. According to Bloomberg NEF’s Economic Transition Scenario, there could be 335 million electric cars on the road in 2032 (over than 10 times more than today) and 730 million by 2040 (over than 28 times more than today).4

How has EV growth shaped demand for certain minerals?

The high-growth opportunity presented by EVs has in turn made certain minerals highly sought after. While EVs are much more efficient than petrol or diesel vehicles in terms of turning fuel into forward motion,5 building them requires significant mineral inputs:


Among the inputs shown above, lithium stands out for several reasons. One factor that makes lithium a particularly important part of the EV story is its near universality in the underlying chemistries of the battery cells that power these vehicles. This is a result of its combination of low weight (lithium is the lightest of the metal elements) and high electrochemical potential.

Partly as a result of a surge in EV production and the complexity of extracting lithium, the metal saw rapid price escalation between 2017 and 2022, with the price rising 6.7 times according to the International Energy Agency (IAE), compared with 3.1 times for nickel and 1.5 times for copper.6

What’s the longer-term outlook?

According to the International Energy Agency, in a scenario in which we are on track to meet the goals of the Paris Agreement, sectors contributing to the green energy transition will be responsible for over 45% of total copper demand, 61% of nickel demand, 69% of cobalt demand and a staggering 92% of lithium demand by 2040.7

In the next part of this blog series, we will answer some questions on the supply side of lithium. To learn more, read our whitepaper: The battery value-chain: how batteries and lithium are powering the energy transition.


1. Source: https://www.energy.gov/eere/vehicles/fact-841-october-6-2014-vehicles-thousand-people-us-vs-other-world-regions 

2. Source: https://www.fastmarkets.com/insights/ev-and-ess-demand-what-this-signals-for-2023-and-beyond 

3. Source: https://www.iea.org/reports/global-ev-outlook-2023/trends-in-electric-light-duty-vehicles 

4. Source: Bloomberg NEF 2023. Long-Term Electric Vehicle Outlook 2023.

5. Source: Where the Energy Goes: Electric Cars (fueleconomy.gov)

6. Source: Critical Minerals Market Review 2023 (windows.net)

7. Source: https://www.weforum.org/agenda/2023/01/minerals-metals-energy-transition-davos2023/

Michael Stewart

Head of Pooled Index Strategy

Michael focuses on the creation and ongoing support of investment strategies for LGIM's ETFs as well as the strategic role for ETFs within the business. Before joining us in 2019, Michael worked in ETF product development at Invesco, developing and supporting a wide range of ETFs across all asset classes. He holds an MBA from Bayes Business School (formerly Cass), University of London, and is a CFA Charterholder. When he’s not studying investment strategies, Michael likes running, vegan cooking and European train travel. 

Michael Stewart

Elisa Piscopiello

Senior ETF Analyst

Elisa joined LGIM as ETF Analyst in June 2021. She contributes towards the development and analysis of investment strategies, whilst also supporting ETF distribution and marketing efforts. Prior to that, Elisa worked as Multi Asset Investment Support Executive at Liontrust, and as Investment Dealing Assistant at Architas. In 2016 she graduated from the University of Kent with a First Class degree in Financial Economics with Econometrics. She holds the Diploma in Investment Management (ESG) and is a CFA charterholder.

Elisa Piscopiello