Why lithium-ion batteries are so important

People of Volts! At long last, Battery Week is here. It is time
to get into batteries. Waaay into batteries.


Over the next few posts, I’m going to cover how lithium-ion
batteries (LIBs) work and the different chemistries that are
competing for market share, but I thought I would start off with
a post about why I’m doing this — why batteries are important and
why it’s worth understanding the variety and competition within
the space.


Lithium-ion batteries are crucial to decarbonization in two
important sectors


We know that the fastest, cheapest way to decarbonize, especially
over the next 10 years, is clean electrification: shifting the
grid to carbon-free sources and shifting other sectors and energy
services onto the grid.


LIBs are accelerating clean electrification in the two
biggest-emitting sectors of the US economy, transportation and
electricity. (Each is between a quarter and a third of
emissions.)


First, they are colonizing the EV market and enabling ever-higher
performance and range. The global EV market is on the front end
of explosive growth:


Researchers at Deloitte expect growth to accelerate through 2030:


As BloombergNEF analysts show in their “Electric Vehicle Outlook
2030,” it’s not just passenger EVs, either. The fastest growing
EV segment will be buses, followed by scooters.


The global market for EV batteries alone is expected to hit
almost a trillion dollars by 2030. Sustaining that growth is
going to require lots and lots of new batteries. The more
energy-dense, cheap, and safe LIBs can get, the faster the
electrification of transportation will happen.


Second, LIBs are being used both for distributed, building-level
energy storage and for large, grid-scale storage installations.
As the grid shifts from firm, dispatchable sources of energy like
coal and gas to variable, weather-dependent sources like sun and
wind, it will need more storage to balance things out and stay
stable. Batteries can help at the grid level (they can even serve
as transmission assets) and they can serve local resilience at
the building and community level.


Overall, the research firm Wood Mackenzie expects the global
storage market to grow at an average of 31 percent a year over
the coming decade, reaching 741 gigawatt-hours of cumulative
capacity by 2030.


The more energy-dense, cheap, and safe LIBs can get, the faster
storage will be infused throughout the grid and the more
renewable energy the grid will be able to integrate.


All together, here’s what the Department of Energy projects for
the global energy storage market through 2030:


As this graph shows, the vast bulk of the demand for batteries is
going to come from transportation, meaning EVs of various kinds.
Whatever is used for EVs is probably going to end up getting so
cheap, just from scale, that it dominates energy storage as well.


There’s one other cool aspect of batteries that gets too little
attention. Storing substantial amounts of electricity for cheap
is a relatively new thing in human affairs. We are only just now
beginning to explore what can be done with it. What’s happened in
the relatively short history of lithium-ion batteries is that, as
they get cheaper and more powerful, we find new uses for them.


Way back in 2015, energy analyst Ramez Naam called this the
“energy storage virtuous cycle.”


Lithium-ion batteries can do more and more stuff


There’s a reason why, in 2019, the three chemists behind the
initial development of lithium-ion technology won the Nobel Prize
in chemistry. LIBs boast incredibly high energy density and
specific energy, which is to say, they cram lots of oomph into a
small, lightweight package, and they are capable of cycling many
more times than their predecessors.


The first LIBs, commercially introduced in the early 1990s, were
expensive, but found a market foothold in small electronic
devices — phones, laptops, camcorders — where energy density is
at a premium. They have since all but completely taken over the
consumer electronics market.


As manufacturing scale grew, prices fell and more uses opened up:
power tools, lawnmowers, scooters. Scale grew more, prices fell
more, and LIBs displaced other chemistries as the top choice for
EVs.


Especially in recent years, the growth (and anticipated growth)
in the EV market has driven an enormous surge of public and
private investment to LIBs, with dramatic effects on prices.
According to recent research by BNEF, “lithium-ion battery pack
prices, which were above $1,100 per kilowatt-hour in 2010, have
fallen 89% in real terms to $137/kWh in 2020. By 2023, average
prices will be close to $100/kWh.” (It wasn’t that long ago that
most experts agreed $100/kWh was an impossible target.)


And so the cycle continues. Prices fall and more new uses open
up: big trucks, buses, airplanes, data centers, distributed
energy storage, and large-scale grid-storage installations. From
BNEF:


BNEF’s analysis suggests that cheaper batteries can be used in
more and more applications. These include energy shifting (moving
in time the dispatch of electricity to the grid, often from times
of excess solar and wind generation), peaking in the bulk power
system (to deal with demand spikes), as well as for customers
looking to save on their energy bills by buying electricity at
cheap hours and using it later.


Experts generally agree that LIBs are going to hit limits, even
if it’s just the base price of raw materials, before they become
economical for long-duration grid storage. They are being
installed for 4-6 hour storage, sometimes 8-hour, and may some
day even aspire to 12-hour, but beyond that — the weekly or even
seasonal storage a renewables-based grid will need — some other
technology or technologies will have to step in. (I’ll likely do
a separate post on long-duration storage.)


Nonetheless, continued scaling will ensure that LIBs get even
cheaper. Some analysts believe that, with foreseeable
improvements in LIB chemistry, prices could hit $40 or even
$30/kWh in coming decades. We simply don’t know yet what can be
done with storage that cheap.


To take one example, if energy storage gets cheap enough to
become an economically trivial addition to building
construction/renovations, it will eventually be ubiquitous at the
local level, and the benefits of ubiquitous, networked local
energy are … well, hard to predict. We know that it would protect
vulnerable populations through blackouts like those in Texas or
California over the last year. But it could do much more.


Cheap batteries could open up uses we haven’t even envisioned
yet. What sorts of urban mobility vehicles, drones, planes, or
research outposts could we power? What kinds of ships or trains
could we electrify? How could increasingly cheap, ubiquitous
storage be coupled with increasingly cheap, ubiquitous solar
energy?


We don’t know yet. But we’re going to see some cool s**t over the
next few years. Batteries have the potential to change our
ordinary lived experience in myriad ways. It’s worth the time to
understand what’s driving their development and where they might
go.


So here’s the question that is driving Battery Week: are LIBs
going to be to energy storage what solar PV panels are to solar
electricity?


By way of concluding, let me briefly explain what I mean by that.


Solar panels got so cheap, so fast, they swamped all competitors


By “solar panels,” I’m referring to the standard kind — boring
old crystalline silicon photovoltaic panels, the kind you see on
roofs these days, which I will henceforth just call “PV.”


Thanks to key early US research and development, German feed-in
tariffs (which subsidized homeowners to put panels on their
roofs), and a massive Chinese manufacturing boom, PV has received
an enormous, extended push in the last several decades. As the
scale has grown, the price has dropped — a whopping 99 percent in
the last 40 years.


PV got so cheap that it has simply steamrolled all competitors.
Back in the ‘00s, even after Obama won and was putting together
his stimulus bill, multiple solar technologies were in vigorous
development: thin-film solar, concentrated solar power (CSP),
building-integrated solar, multi-junction solar, all sorts of
exotic stuff … there was even this one cool company called
Solyndra that made cylindrical solar PV tubes.


There were boosters of all these technologies who could tell you
chapter and verse about their advantages over plain old PV. They
pulled in a lot of venture capital (and some government loan
guarantees) making those pitches. But in the end, they and their
funders underestimated PV’s one great advantage: it is dirt cheap
and getting cheaper all the time. It’s virtually impossible for
anything else to catch up.


PV’s domination of the solar market has some energy analysts
concerned, thinking that government ought to step in and
encourage innovation and tech diversity in this area, in
preparation for the day that PV reaches its limits and plateaus.
(Varun Sivaram — a researcher at Columbia University’s Center on
Global Energy Policy who was recently made senior adviser to
presidential climate envoy John Kerry — has a whole book on this
subject.)


Some researchers disagree and think super-cheap PV will be good
enough to get us where we need to go. Either way, it’s clear that
without concerted government intervention, PV is going to
dominate for the foreseeable future.


Is the same true of LIBs? Are they going to dominate in storage
markets the way PV has dominated in solar electricity?


They already largely own both the EV and storage markets and have
a substantial head start in manufacturing capacity and know-how.
That head start is only going to get more daunting over the next
decade. This is from a brief on the future of LIBs by a company
called SILA Nanotechnologies:


Before Tesla was founded, Li-ion batteries were almost
exclusively used in consumer electronics — mainly laptops and
cell phones. At the time of the launch of the Tesla Roadster in
2008, the total global Li-ion manufacturing capacity was
approximately 20 GWh per year. By 2030, we expect over 2,000 GWh
of annual production capacity based on already announced plans by
cell manufacturers.


That would be 100X growth in 22 years and a hell of a head of
steam for any competitor to take on.


“It would be unwise to assume ‘conventional’ LIBs are approaching
the end of their era,” concluded a recent comprehensive review in
Nature Communications. “[M]any engineering and chemistry
approaches are still available to improve their performance.”


Nonetheless, LIBs do face restraining pressures, especially
materials and safety concerns, which we’ll get into later. They
could hit speed bumps. And when you’re talking about
trillion-plus-dollar markets, even a niche could be worth
billions. Will competitors be able to get a foothold? It’s an
enormous prize with more researchers and entrepreneurs chasing it
every day.


That’s what we’ll be exploring during Battery Week. Next up: a
primer on how lithium-ion batteries work!


This is a public episode. If you'd like to discuss this with other
subscribers or get access to bonus episodes, visit
www.volts.wtf/subscribe