Alternative battery technologies are far from being mainstream, but a renewables-heavy grid cannot depend on lithium-based technologies
MATERIAL IMPACT
The price of key lithium-ion battery materials has soared due to increased demand and limited supplies ALTERNATIVE APPROACHES
The search is on for energy storage concepts that use cheaper, more abundant elements KEY QUOTE
The outlook for supply tightness is worrying for such an enabling technology for the energy transition
Hugh Sharman is fighting a lonely battle to avert disaster in Europe’s energy transition. The veteran battery industry professional is certain that the predicted growth in vehicle electrification and energy storage will hit a brick wall as supplies of materials for lithium-ion (Li-ion) batteries, such as lithium and cobalt, run short, unable to meet demand. “The quantities of these and other critical minerals that are required by lithium-ion battery manufacturers to replace petrol and diesel vehicles by 2050 can simply not be mined and processed,” he says. “I’m trying to get people to take this seriously.” While Sharman despairs over policies that commit Europe to what he sees as a path that is doomed to fail because of materials shortages, technology innovators are searching for energy storage concepts that are not subject to Li-ion’s supply chain problems. RISING DEMAND Li-ion is currently the battery chemistry of choice for electric vehicles and stationary storage applications. With demand for both set to grow, there is no question the energy transition will require vast amounts of raw materials for the batteries. The International Energy Agency’s Sustainable Development Scenario report predicts electric vehicle and energy storage demand for lithium could rise more than 48 times from 22,000 tonnes a year in 2020 to more than a million tonnes by 2040. Global reserves—which the United States Geological Survey put at 86 million tonnes in 2021—should cover this demand. SUPPLY CONCERNS But what worries observers such as Sharman is the way the lithium industry is set up to deliver the metal to battery markets. Almost three-fifths of the world’s lithium reserves are shared by just three Latin American countries—Argentina, Bolivia and Chile—where extraction can take place with little environmental, social and governance (ESG) oversight. Lithium processing is similarly concentrated. China, which controls 77% of global battery cell manufacturing capacity, refines 60% of the world’s lithium, according to May 2022 figures from Gavekal Research. Here again, ESG oversight is limited. “All the national signatories at COP26 [the UN climate negotiations] insisted that net-zero policy aims must also be met ESG compliantly,” Sharman says. “No lithium metal at all reaches battery manufacturers as ESG-compliant today. It is evident from the hugely negative environmental and social effects of extracting the world’s least-cost lithium, currently from Chile’s Atacama salt plateau, that extracting still relatively small quantities will be massively damaging,” he adds. MARKET PRESSURES Such worries are not limited to lithium. Cobalt, another important element for lithium-ion battery manufacturing, is also subject to supply concerns as just a single African nation—the Democratic Republic of Congo—holds more than half of global reserves and 70% of production. Even without ESG considerations, it is becoming clear these restricted supply routes could be a problem for battery manufacturing. Although China produces most of the lithium-ion batteries that go on sale around the world, it also has the world’s largest electric vehicle market, which is increasingly dominating battery demand. Lithium markets have seen the price of the metal increase five-fold in the year to July 2022, in part due to the increase in demand. Yet materials pricing is not just a problem for the battery sector. Along with energy and labour costs, it is affecting the cost of living in most global economies. In the energy sector, price inflation saw the cost of wind turbines and solar panels rise by 9% and 16%, respectively, in 2021. JUST BEGINNING The hope is these wider cost increases are the result of short-term production bottlenecks and will be resolved sooner rather than later. With batteries, however, the problem is just getting started. “[Since 2019,] battery module prices have increased in price in the range of 20% to 30%, depending on the cathode and duration, most of which is a result of raw material price surges,” says Oliver Forsyth of S&P Global Commodity Insights, a market analyst. Prices are not expected to fall much in 2022 as the Ukraine-Russia conflict continues to affect supply chains, Forsyth adds. Furthermore, any respite from battery material price increases is only expected to be temporary as global demand for Li-ion products soars. “We currently expect lithium, nickel and cobalt to enter deficit in 2028, 2026 and 2032, respectively,” says Max Reid of analyst firm Wood Mackenzie. “The outlook for supply tightness is worrying for such an enabling technology for the energy transition,” Reid adds. CAR TROUBLE The concern over supply chain constraints is particularly acute in the electric vehicle industry, which is almost completely reliant on Li-ion batteries for growth. Although the sector is conscious of the challenges it is facing, it has yet to find an energy storage medium that works better than Li-ion in vehicles. Meanwhile, a new generation of solid-state batteries could deliver better performance and safety but worsen the materials supply issue by substituting the graphite anodes used today with lithium, Reid says. Where things might change, though, is in the stationary storage market. For now, projects such as Vistra Energy’s record-breaking Californian Moss Landing site, which has 400 megawatts of power capacity and 1.6 gigawatt-hours of energy storage, still rely almost exclusively on Li-ion technology. “In the majority of cases, lithium-ion remains the strongest, most scalable, most economic technology available,” says Julian Jansen of Fluence, a leading energy storage technology provider. “As such, it is the technology of choice for our customers and for us. We have pre-paid $60 million to secure battery capacities in 2022 and 2023 and we’ve confirmed commitments from tier-one suppliers up to 2026.” INDUSTRY DOMINANCE Li-ion technology is not just favoured by grid-scale energy storage developers but also by companies looking for backup and uninterruptible power supply (UPS) systems, says Himamshu Prasad of Schneider Electric. “For customers who prioritise lower initial Capex, there is a full range of VRLA [valve-regulated lead-acid] battery UPS systems on the market,” Prasad says. “Yet Li-ion batteries are smaller, lighter and provide up to three times the battery life of VRLA,” he adds. “This saves on costs such as battery replacements, reducing time and money spent on maintenance over the life of the product.” Li-ion’s dominance of the battery market has been growing for the best part of a decade. Huge investments in Li-ion battery manufacturing capacity since the middle of the 2010s, mostly in China, have allowed the technology to enjoy significant cost reductions and performance improvements. SUPPRESSED COMPETITION This growth has allowed Li-ion to outpace competing battery chemistries that rely on more readily available materials. Energy storage customers, like utilities, tend to prefer Li-ion batteries because they know the technology is reliable and is backed by a supply chain that is, so far at least, robust. Li-ion’s dominance in the market has thwarted the efforts of firms such as Aquion, which tried to commercialise a battery based on salt water, or Ecoult, which had a product combining ultracapacitors and lead-acid batteries. Reinforcing Li-ion’s command over the electrical energy storage scene is the fact that it is not easy to bring new battery concepts to market. LONG DURATION Despite this, there is now a growing interest in developing alternative storage technology to Li-ion—and not solely because of materials shortages. As renewable energy increasingly dominates grids around the world, batteries are being forced to carry out a growing range of tasks beyond balancing grid voltage and frequency response or addressing short-term mismatches between supply and demand. In some cases, storage systems may be required to discharge power for hours on end. Such long-duration storage applications are hard to address cost-effectively with Li-ion because its costs scale almost directly in relation to the duration required. In other words, a single megawatt Li-ion system that can discharge over two hours will cost roughly twice as much as one that discharges over one hour, because of the cost of the electrolyte and materials used in the battery. Long-duration battery researchers are trying to get around this limitation with chemistries that rely on much cheaper materials, which would allow for large increases in energy storage capacity at a minimal additional cost. COMMON MATERIALS One example is an iron flow battery being sold by US-based firm ESS. ESS’s solution has an electrolyte that is made of iron, salt and water—some of the most abundant materials on earth. The electrolyte is stored in tanks and pumped into the battery system, which is too large to be used for electric vehicles. In stationary storage applications, however, it is possible to scale up the energy capacity cost-effectively by simply adding more electrolyte. Another long-duration storage concept is that being developed by Form Energy, also of the US. Form Energy’s battery system essentially looks to harness the energy released when iron turns to rust, using a reverse reaction to charge its washing machine-sized batteries. The company claims its technology can store energy at less than a tenth of the cost of a lithium-ion battery and its systems could discharge electricity for up to 100 hours. AIR STORAGE Elsewhere, a UK startup called Cheesecake Energy is aiming to use air as a storage medium. The company’s systems use old truck engines to compress air, which is then stored in tanks—along with the heat produced by the compression process, which is kept separately. To release the energy, the heat is used to warm up the compressed air and this drives a generator as it expands, delivering electricity at a cost which Cheesecake Energy says could be up to 40% less than Li-ion-based applications. “It’s about as low tech and low cost as we can imagine,” says Cheesecake Energy’s Mike Simpson. “We’re looking at four, eight, 12 hours of storage and for that it really does benefit us a lot to have a cheap kind of energy storage.” ESS, Form Energy and Cheesecake Energy are just a few examples of companies with technologies that could supplement or replace Li-ion in stationary energy storage applications. Others include Eos, which has a zinc hybrid cathode battery product; Malta, which stores energy in a holt molten salt and cold antifreeze liquid; and Energy Vault, which suspends blocks of concrete in towers, hoarding gravitational capacity. ATTRACTING INVESTMENT Some of these ventures have attracted significant attention from investors. ESS and Form Energy are both backed by Bill Gates’s Breakthrough Energy Ventures fund. Malta was incubated by Google parent Alphabet’s X moon shot division. Eos, meanwhile, went public via a special-purpose acquisition company in 2020 and Energy Vault has raised $100 million from Japan-based SoftBank’s Vision Fund. Although these alternative technologies have a negligible market share in comparison to Li-ion, the latter’s current and future supply bottlenecks could start to shift the balance. “In the early days, grid batteries profited from the cost reductions being driven for EVs,” says Alan Greenshields of ESS. “I would postulate that is no longer the case.” Supply chain competition is on everybody’s mind, he says. “Anyone who’s not a gigantic purchaser of lithium-ion batteries is struggling to get supply at all. That has made them very aware that they have a dependency on a product where if the Chinese government decides to reallocate capacity to EVs, there’s nothing they can do.” DIFFERENT GRID A move away from Li-ion technology could be accelerated with a growing need for long-duration storage, Greenshields adds. “If you have renewables doing 60, 70, 80% of generation, you can’t do it with four hours [of storage],” he says. “It’s a different grid model. You have to replace the baseline load balancing function in the grid, which is typically handled by gas peaker plants. They do the heavy lifting, with runtimes of anything between four and 12 hours.” For all the chemistry’s success in stationary storage, lithium-ion was never designed for big batteries, says Greenshields. “It was originally designed for camcorders. People often forget that.” The technology has been stretched and stretched, he says, and even now it is hard to beat for power applications. However, it is difficult to see how the chemistry could extend to the terawatt-hour storage scales needed for the decarbonised grids of tomorrow, particularly when it will also be sorely needed to hasten the electrification of the transport sector. •
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Jason Deign