The lithium-ion batteries used in electric vehicles are getting better and cheaper – and manufacturers are branching out beyond the automotive sector.
Despite electric vehicles (EVs) garnering less than 1% of the global new-car market last year, the belief that they will dominate the road in the foreseeable future is widely held. Conventional carmakers such as Nissan and General Motors (GM) are making them alongside combustion-engine vehicles, allowing the cars to spread through the industry as production ramps up. New EVs from Tesla and GM were rolled out this year, and Nissan is releasing its revamped Leaf in September. Forecasters say EV and hybrid car sales will soar in the 2020s and take the majority in the 2030s.
Such optimism is due in part to the explosion of the lithium-ion battery business, and the belief that its upward trajectory will continue. The batteries first took off in the 1990s, when they appeared in Sony camcorders and subsequently spread to a wide array of consumer electronics. Demand from consumer products remains high, but analysts expect demand for vehicle batteries to overtake it as early as next year. This, The Economist notes, would mark a pivotal moment for the battery industry.
The top five lithium-ion battery manufacturers – Japan’s Panasonic, South Korea’s LG Chem and Samsung SDI, and China’s BYD and CATL – are increasing capital expenditures with massive expansion in mind. Tesla’s gigafactory, a joint endeavour with Panasonic, is believed to be already producing about 4GWh of capacity a year. The American firm aims to produce 35GWh in 2018.
Importantly, the gigafactory is not focused solely on batteries for cars. Tesla and other lithium-ion battery makers are increasingly adapting the technology to other applications. For example Tesla is working on a battery with 129 MWh of storage capacity, bound for installation in South Australia, where it will provide backup for the state’s power grid. Industrial-scale lithium-ion battery packs are growing in popularity among grid operators, and on a smaller scale, consumers who are seeking independence from the grid.
All of the big producers are adding capacity in one way or another, driving unit costs down. In addition, significant R&D investment has yielded better power density, allowing more storage per kilogram, and better durability. The investment has also resulted in overcapacity, but despite this, battery manufacturers are expanding. Sam Jaffe of Cairn ERA, a battery consultancy, explains their thinking as that of the “traditional Asian conglomerate model”: sacrificing margins for market share.
While Jaffe believes demand for both electric vehicles and stationary energy storage will increase, there are some concerns. Making more batteries will require more lithium and other metals, such as cobalt, which can be difficult to access. The prices of these and other raw materials have risen dramatically. Further, there is no guarantee that EVs will take off in big way, but manufacturers seem undeterred. This shred of doubt provides motivation to pursue other avenues for lithium-ion batteries, like stationary energy storage and grid storage. Besides, the challenges that bedevil them in manufacturing the technology at scale should keep competitors scarce.
