ADELAIDE, Australia—Ivan Williams reckons he can help to break China’s dominance of a key ingredient of electric-vehicle batteries. To do so, he has been collecting wood chips from sawmills around the world.
At a test plant in New Zealand’s picturesque Marlborough wine region, Williams and his team feed the wood chips into machines that turn out a form of synthetic graphite. He says the engineered material is as pure as synthetic graphite made from fossil fuels, which is mostly produced in China and can account for as much as half of the weight of a lithium-ion battery.
That puts the company run by Williams, CarbonScape, on the front-line of efforts by developed countries to reduce their reliance on China for critical minerals that power the energy transition. Graphite has been designated a critical mineral in the U.S. and the European Union, where officials hope to encourage more mined production locally by helping to finance new projects.
“Our mission is to decarbonize the battery industry,” said Williams, who believes the technology can be used anywhere with enough wood scraps. “That solves some other problems, too, including localizing supply chains.”
China sent shock waves through battery metals markets in October when it said it would tighten export controls on graphite, citing national-security concerns. The country is estimated to produce 60% of the world’s natural graphite, mined from the earth, and 69% of synthetic graphite. It refines nearly all of the very pure graphite used in lithium-ion batteries.
China’s strengthening of export controls was a reminder of the vulnerability of global commodity markets to geopolitical tensions, already illustrated by wild swings in prices of crude oil, natural gas and wheat due to the Ukraine war. Beijing’s decision to require export permits for some graphite products from Dec. 1 came days after the U.S. tightened restrictions on Chinese companies’ access to semiconductors.
Finding alternative supply of key commodities isn’t easy. It can take years to build a mine, particularly in developed countries with strict permitting processes. Promising technology can be untested at a large scale, and developers often need funds to expand. Government support can be vulnerable when a new leader takes power.
In battery technology, innovation is happening in ways that could redraw the outlook for graphite demand, which the International Energy Agency estimates could rise by as much as 25 times in the two decades through 2040. Some companies are trying to produce batteries that use less or no graphite at all, such as by using sodium with a hard carbon anode. Japan’s Toyota Motor and oil company Idemitsu Kosan plan to work together to advance mass production of solid-state batteries for electric vehicles, in which graphite could be replaced with lithium metal.
CarbonScape’s technology caught the eye of European forestry products company Stora Enso, which invested $18 million in the company for a stake of around 15%. That deal opened up a supply line, and Stora Enso has already delivered some Nordic wood samples for testing at CarbonScape’s New Zealand plant.
To be successful, CarbonScape needs to overcome some skepticism about its technology and whether it can compete with other forms of graphite on cost.
Adam Best, a principal research scientist at Australia’s Commonwealth Scientific and Industrial Research Organisation, or CSIRO, said he doesn’t consider biomass to be an efficient way to make graphite because of the amount of wood chips that would be needed. He wasn’t referring directly to CarbonScape’s process.
“We do see natural graphite as a more sustainable option,” he said, highlighting recycling graphite from used batteries as another possible source of future supply.
Today, CarbonScape takes leftovers from timber making, but Williams believes it could also make use of so-called slash, which is the waste branches and other unwanted wood left in forests during logging. The wood chips are heated using a process known as pyrolysis to create biochar, a carbon-rich material that is then milled and converted to a raw form of graphite. That is purified and coated to get the quality needed for battery anodes.
CarbonScape says it can make one metric ton of synthetic graphite from seven tons of dry wood chips.
There are technical challenges. Battery anodes require graphite of a very high purity, and new processes must compete on cost with other production methods, said Yuan Gu, senior graphite analyst at Benchmark Mineral Intelligence.
Williams said CarbonScape has been developing the technology since 2016 and can reliably produce synthetic graphite. The performance of CarbonScape’s anode material has been verified by some battery makers, including Amperex Technology, or ATL, which is owned by Japan’s TDK and is an investor in the company.
“However, the biggest benefits of CarbonScape’s bio-graphite isn’t in superior performance but reduction in carbon footprints,” said Joe Kit Chu Lam, ATL’s executive vice president.
Graphite made from fossil fuels requires a lot of energy because it is cooked at 3,000 degrees Celsius during processing and creates greenhouse gases and fine particles that are harmful to human health, said CSIRO’s Best.
The cost of producing synthetic graphite from wood using CarbonScape’s technology is competitive with making it from fossil fuels, said Williams, without providing detailed figures. Temperatures required to create graphite from wood chips are lower, and the process takes hours rather than weeks, he said.
CarbonScape aims to select a site for its first commercial plant soon. It is looking in Europe, while also considering southeastern U.S. states, where there are large timberlands and electricity prices are attractive, Williams said.
A commercial plant would typically produce closer to 10,000 tons of synthetic graphite annually, significantly bigger than CarbonScape’s 5-ton pilot operation.
“Graphite from biomass is certainly an interesting new supply route,” said James Willoughby, senior research analyst at Wood Mackenzie.
Unlike fossil fuels, biomass is a form of renewable energy—although critics of biofuels say they can lead to deforestation and question the way emissions are counted. CarbonScape’s process—which the company says doesn’t require additional trees to be cut down—emits some carbon dioxide but, as a whole, is carbon neutral at worst, according to Williams. The use of logging waste could play a role in maintaining forests, he said, which is an increasing priority of some governments as wildfires grow more intense due to climate change.
“Like with every new technology, it takes time to develop,” Williams said. “Then it takes time for industry to adopt.”
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com