Simon Price: It's about trying to persuade our audience that energy storage absolutely matters and that there's different ways to achieve the ends, but some of them get you there quicker and more cheaply and with reduced use of scarce resources. If you can reduce the amount of resources you are putting to a particular application, then you can do more of that application basically.
Teri Viswanath: That’s Simon Price, the CEO of Exawatt, a global strategic consulting company headquartered in Sheffield, England with a deep focus on clean energy technology manufacturing. And I’m Teri Viswanath, the energy economist at CoBank and your co-host of Power Plays. I’m joined by my colleague, Tamra Reynolds, a managing director here at CoBank. Tamra, how are you?
Tamra Reynolds: Hey Teri, I’m doing well, thanks. As we come to the end of 2022, it’s time to make some predictions for the New Year. Looking back on what transpired this year, its likely that supply-chain headaches in the power sector will linger into 2023 and beyond. There’s intense competition for those materials. And the competition for battery materials? Well, it’s only going to get worse as battery energy storage needs compete with new electric vehicle orders. Here’s what Simon had to say about the growing disconnect.
Simon: If we think about the supply and demand for lithium, or lithium chemicals out from now to about 2030, it's going to be dominated by electric vehicles, that's for sure. There are a whole bunch of applications or users of lithium that also have claims on that lithium supply that can't be ignored. To some extent, they don't necessarily take priority but they have equal place in the market.
There's the traditional uses of lithium, lower grade perhaps for technical and industrial applications, like lubricants and greases, ceramics. Then you've got consumer electronics, so laptop and cell phone batteries and things like that. Those have a large today, but over the long term relative to cars will have a fairly small demand, but that demand is going to continue to grow and isn't going to go away.
Then you've got grid storage, which is the wild card really because if you think about how much lithium will the grid storage industry need, we can start with where it's being used now, and extrapolate from there in a way. If we stay with four hours for California, maybe if we downgrade that a bit for the whole of the U.S., you might be looking at an average of two or three hours across the U.S. when we get to a mature market.
If you take that now to the world and you think about all the solar that's being produced today and will be produced in 2030, right now, we're looking at something close to 300 gigawatts of solar modules being installed in arrays in 2022, with hardly any storage, except for in some of those slightly more mature markets like Southern U.S. If we get out to 2030, Exawatt forecasts of typically for 800 gigawatts, and some of the big solar manufacturers in China are talking about 1000 gigawatts installed in that year. If you think about just adding one hour of storage on average to that fleet, remember eight years ahead from now where solar is getting pretty mature, now we're going to need to store quite a lot of that solar-generated energy.
An hour isn't a crazy number to go with for global average. You take that 1000 gigawatts and multiply it by an hour, that's 1000 gigawatt-hours, it's a terawatt hour. That's going to be something like, give or take 0.8 million tons of lithium or lithium carbonate equivalent, so 800,000 tons of lithium carbonate equivalent. That's a lot in a market that the lithium extractors themselves are forecasting, well only supply maybe 1.7, maybe 2 terawatt hours at most. If grid storage could conceivably demand one terawatt hour out of that two, that would put a real dent in the amount of lithium available for the rest of the industry.
Now, in our current forecasts, were talking in the order of, I think 300,000, 400,000 tons of lithium to the grid storage industry. We're underestimating, but there's plenty of scope for that number to go up. When we're talking about the general demand for lithium, when you take out the bit that I've mentioned there for grid storage, and you take out the lubricants, greases, consumer electronics, what you're left with in our forecast right now, is maybe 1.2 terawatt hours of lithium in energy equivalent available to the EV industry. That's about half as much as the EV industry is planning for.
Whichever way you look at it, there's so many claims on that lithium that something's got to give.
Teri: So based on Simon’s comments…Tamra, I’d say your prediction of a tight battery market is spot on. Bloomberg just released their annual ion lithium battery price survey showing a 7% increase in pack prices in 2022 – the first increase since the survey began back in 2010. But, we’re talking about 2030 afterall, so why should we be concerned now? Rosie Madge and Ed Rackley, two members of Exawatt’s battery research team answered that question for us…
Rosie Madge: Essentially we haven't got enough lithium, that's our problem. One of the things we can look to try and solve in that is to move towards other technologies or changing the way we're doing things.
Ed Rackley: If it takes eight years to get a lithium mine from the feasibility study to actually making an amount of material that can hit that dent in the demand, you're talking about, we need to make those changes now to be able to hit the next decade. Running effectively is the shorthand for that in my head.
Tamra: To frame this problem better, Simon explained how batteries work and framed how we might address the supply chain problems this decade. Here’s what he had to say.
Simon: The basic level you can think of a lithium-ion battery is a store of electrical energy. If you think about its design, you can look at it a bit like a sandwich. You've got two layers, which we call the cathode and the anode, and those layers are separated by a porous membrane, which we call a separator. You can think of the energy in that battery as being somehow stored in the lithium. When you charge the battery, the lithium moves from the cathode across the separator to the anode.
Teri: So, as we think about this, where we're at with regard to battery development -- how is the next decade going to unfold?
Simon: There's really two components to that. There's how the storage requirements are going to change, and how the storage technologies will change. Let's assume that we're adding more renewables to the grid. The more we add, the more we'll need storage to maintain the reliability of that grid. When we talk about reliability, we are really saying to make sure that we have the energy when we need it and not necessarily when it's generated. The more solar we add, for example, solar, the sunshine is brightest at noon and the middle of the day, and so the more we add to the grid, the more we're going to need to time shift that energy from noontime to the early evening when it's in highest demand.
Then the second component of this is the technology. Until recently, lithium-ion batteries have been getting cheaper and cheaper for many years now, driven mainly by the growth of the EV, electric vehicle industry. As that industry scaled, the battery industries had to scale to support that, and production costs have come down, but we've now very recently reached a point where demand is growing so fast, primarily for EVs, that a supply of critical materials, including lithium, can't keep up. That means that the price of lithium is rising and the cost of those batteries is going up in parallel.
There's a good argument to be made here that stationary storage isn't necessarily the best use of lithium, especially when it's in short supply. When it's expensive, it makes more sense to use lithium in applications where weight is a critical factor because lithium is a light element. Lithium-ion batteries make a lot of sense in EVs and probably always will. There's no element in the periodic table that's lighter than lithium or there's no metal that's lighter than lithium. There are other elements in the same chemical family as lithium that are a bit heavier, but a lot cheaper because they're more abundant.
The next best hope for batteries where weight doesn't matter-- in application where weight doesn't matter like stationary storage is sodium. The Exawatt team's been looking into the evolution of battery technologies and we think that sodium-ion batteries have the potential to take over from lithium-ion in stationary storage eventually. But that's going to take several years because the technology is only just becoming commercially available this year and only at small scale. We're not expecting a huge amount of sodium ion batteries to hit the stationary storage market until late this decade at the earliest, at least in the U.S. It's starting to happen now in China, and it could scale more rapidly than that, but we don't have a lot of visibility on that just yet.
Tamra: That’s hopeful news but the challenge of lithium shortage still remains. While we know that there is no shortage of lithium itself — it’s almost everywhere on Earth — the pace of extraction and refinement is causing the bottleneck. Lithium is the linch-pin for rechargeable energy. Elon Musk has described lithium refining as the hard part of the upstream supply-chain and has highlighted that these bottlenecks are holding Tesla back. For those who can crack it, he’s stated that it is a “license to print money.” Another sharp analyst from Exawatt, Aaron Wade, expands on this.
Aaron Wade: The problem is there's no getting around the fact that lithium is going to be required in pretty much all of the batteries for the next decade. If we look inside the battery, the cathode is typically the single most expensive component of the battery. This is where most of the lithium goes. The lithium that goes into these cathode materials comes from two components. It's either lithium carbonate or lithium hydroxide. These prices of these chemicals on the spot market have shot up from around $10 per kilo in early 2021 to nearly $80 per kilogram today.
A cathode typically accounts for about half of the total battery cost and its current prices is, lithium is about half of that. The lithium shortage is going to result in a massive spike of our battery devices.
Teri: That's super helpful. Let's understand that a little bit better.
Aaron: The cathode contains lots of lithium, and then lots of other metals. The two most common chemistries used today are something called nickel manganese cobalt oxide or NMC, and lithiumiron phosphate or LFP. The nickel and the cobalt in NMC are very expensive, whereas LFP uses cheap and abundant elements, iron, and phosphorous, and is therefore much cheaper to make. NMC has a greater energy density, meaning more energy can be stored for the same mass or volume. This matters a lot in an EV but doesn't matter much in stationary storage applications because the battery isn't moving.
The other big advantage of the LFP is that it can go through many more charge and discharge cycles, giving them much longer life. In an application where a battery needs to be cycled frequently like grid storage, for example, the cycle life is significantly more important, and so LFP is optimal for grid applications.
Teri: So, we know about the lithium refinement problem, but Aaron sheds light on the possibility of more efficient uses for other cathode materials as part of the long-term solution. I wanted to spend a bit more time on ‘efficient material use’ so I asked Ed Rackley to frame this up for us and here was his response.
Ed: At Exa, we've been focusing on a term that we've called “lithium intensity,” and that's comparing the amount of lithium used in different types of batteries. You can think of this in terms of the kilos of lithium required per kilo hour of battery pack and different battery chemistries, we use different amounts of lithium, especially the long and shorthand of that. Nickel rich chemistry is like, NMC would use a little bit more lithium than LFP, for example.
During their operating lifetime, battery packs will charge and discharge thousands of times and that will cause them to degrade over time as well. Battery chemistries, especially for grid storage need long cycle lives. That's the big figure of merit in that way. Ideally, a stationary storage battery would last as long as the solar array is linked to. If you are looking at the solar array warranty, maybe 25 years, and if a battery is cycled fully once per day, that would be around 9,000 cycles.
Currently, few state-of-the-art lithium-ion battery systems can achieve cycle lives on this scale, even LFP batteries can only handle a few thousand cycles. In a real-world example, the storage system itself would probably need to match the lifetime of the inverters connecting the energy generation, in this case, the PV solar array, and the energy storage, the batteries. This could be as low as five years or about one and half thousand cycles, which pushes the limits of NMC, but is comfortably achievable for LFP.
Using a battery chemistry that can operate for five years in the field would save having to replace the system more times than the inverter, and that just eliminates that extra installation replacement cost. Cycle life is also a major reason why sodium ion, which Simon had mentioned earlier, has been discussed as a potential success of a grid storage applications. This is because its cycle life is starting to approach about 4000 cycles, which would put it very similar to LFP and make it very good and really suitable for colocated solar in BSS, so grid storage.
The third solution is actually to produce lithium-ion batteries that can store more energy. The main way to do this is to increase the cell voltage and new flavors of LFP like lithium manganese iron phosphate, otherwise known as LMFP can also improve on this performance or LFP by allowing more energy to be stored.
Teri: This idea of matching up the battery with components of the entire system. So, we can't match it up with a solar array but maybe the inverters, that's an interesting way to think about this. As we think about also trying to make sure that we lower the cost of the total installation if we are taking a look at this solar plus storage, I would imagine recycling is also going to be super important because of the components of this system. Rosie, I think you've done some work here so I'd love to hear your comments on how that recycling plays into the discussion.
Rosie: Although we are trying to move towards chemistries with longer cycle lives that will allow our batteries to last for longer, they're still going to reach a point where they're no longer usable and we call this end of life. Essentially, it's as it sounds, the battery is at its end of life. When they reach this stage, it's crucial that we have ways to recycle them.
As Simon's mentioned, a battery consists of a number of different components and currently, recycling often focuses on the cathode, basically, because it contains the highest-value elements.
Commonly, the cathode is treated with acids to recover these high-value elements. These are the things such as your nickel, your cobalt, your lithium, and we call this hydrometallurgical recovery. Then these elements can be converted back into starting materials which you can then use to make new cathodes which then can go back into new batteries. But unfortunately, this method isn't perfect. As I mentioned, it focuses only on the cathode and it ignores the other parts of the battery so in the future, we want to move towards methods that will recycle all the parts of the battery and won't just focus on the high-value components.
Something else that we have to consider is that batteries usually take around 10 years to get to a point where they need to be recycled. Actually, 10 years ago, lithium-ion battery manufacturing was pretty much quite a small industry. Therefore, recycling isn't a big issue right now because we don't have huge numbers of these end-of-life batteries that we actually need to recycle. Unfortunately, that means right now, recycling isn't going to solve any of our current supply challenges because there simply isn't enough stock of these end-of-life batteries for us to actually recycle.
Eventually, in 15 to 20 years, the market will reach a steady state and it's at that point that recycling will have the most value. However, something that we need to consider before even recycling the battery is first reusing it, we call this putting them into second-life applications. A common example of this is taking end-of-life batteries from electric vehicles and although these batteries are no longer fit for purpose in a transportation sense, they're still usable in other applications such as energy storage. It's only after their second-life usage that you would then consider trying to recycle them.
Essentially, you want to get as much as possible from the battery before you look at recycling it. The battery's where the value is, so you don't want to deconstruct it before you've got out everything that you can get out. I guess the overall point is that recycling is extremely important and it's only going to become more so as the number of batteries increases but being realistic, it's not going to solve any of our supply chain issues in the immediate future. There's simply aren't enough of these end-of-life batteries coming back into the recycling loop to provide a significant supply of recycled materials to the battery makers.
Tamra: Teri, the Exawatt team emphasized the need for coordinated action to address supply-chain issues in a sustainable way. Over the next decade, they’ll need to ensure that the growing gap doesn’t sideline necessary battery energy storage development, which in turn could stall a clean energy transition.
Teri: That’s right and the concentration of key parts of the supply chain in very few countries represents a further risk to a future powered by lithium-ion batteries. As Simon mentioned to us, most of the refining of lithium into chemicals used to make battery components is done in two countries. Chile exports 66% of the world’s supply of lithium carbonate, which it extracts from evaporated saltwater brine. China produces most of the rest using a different method—refining the lithium carbonate from spodumene ore, primarily sourced from Australia.
Tamra: This is why there is a race to set up our domestic supply chain. With the recently passed Inflation Reduction Act, it importantly requires a domestic content requirement for the $7,500 dollar new EV rebate. To qualify for the full rebate, a certain portion of the critical minerals used in the domestically-assembled batteries must come from nations with which the U.S. has free-trade agreements. This requirement will be phased in and reach 80% by 2030.
Teri: And as our experts from Exawatt tell us, there is no time to waste here. I hope all of you have enjoyed our end-of-year podcast and we look forward to having you join us in the New Year.
Tamra: To all of our listeners, we wish you a happy holiday season!
