Idea Transcript
POWER OUT ? November 2015
Mark Hawtin Investment Director
Why can’t I use my smartphone for longer? Challenges and opportunities in battery technology Sharing insights on the economies, markets, companies, themes and trends that are influencing the development of the global technology industry today and shaping it for the future. With the support of leading specialists across the sector, these papers have been designed to share our current thinking with interested parties. Some of us are technology investors, but all of us are technology users: being informed is the first step to harnessing the power and potential of the industry.
A major stumbling block It’s a common complaint. Today’s smartphone has more computing power than the Apollo moon landing spacecraft, yet its battery can barely hold a day’s charge. Periodically an article will point to a revolutionary new battery technology that could transform the industry, promising super fast charging or many times the energy density of existing batteries. But is anything like this on the horizon? The short answer is no, and it will not be for some time. However this doesn’t mean there aren’t some exciting opportunities in the battery space for investors.
Battery developments could revolutionise the energy industry. It won’t happen overnight, but in 2–3 years there could be meaningful progress. Watch this space…”
The challenge: Chemistry vs. electronics Smartphones, along with laptops and most other portable electronics, are powered by rechargeable lithium-ion batteries, as are electric vehicles. While lithium is the newest technology in the battery space, it has still been around for a long time. Exxon demonstrated proof of concept for lithium batteries in 1980 and they first started to be commercialised by Sony in 1991. Like lead acid, nickel-based chemistries and sodium sulphur (NaS) – the other main rechargeable batteries in use today – lithium batteries have taken a long time to evolve and improve. Emerging battery technologies will be no different. In the semiconductor industry, the properties of electrical circuitry have enabled improvements predicted by Moore’s law: shrinking the size of a processor means smaller, more powerful devices that use less energy. Unfortunately there is no equivalent in battery technology. Shrinking the size of a battery does not mean more energy or a more powerful battery; instead improvements are dependent on finding a better combination of metals and chemicals. With a vast array of different chemical combinations to play with, this is a long and research-intensive process.
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Commercial battery production history
Commercial Battery (Daniel Battery)
Lead Acid
1859: Proof of Concept (Plante Battery) 1881: Mass Production) Nickel 1899: Proof of Concept (Sweden)
Cadmium
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Flow 1945: Proof of Concept 1975: First Major Study (NASA, US) Battery Sodium 1960’s: Proof of Concept (Ford) 1993: First ESS Project (TEPCO, Japan) Sulfur 1980: Proof of Concept (Exxon) 1991: Commercialization (Story)
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Source: Bernstein Research, April 2015
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Next-Gen Battery
Optimising performance A battery is any mechanism that stores energy in chemical form, which is converted to electricity as required by the user. A lithium battery is made up of a positive electrode (cathode), a negative electrode (anode) and an electrolyte that sits in the middle and shuttles ions between the two electrodes during charging. A physical separator prevents the electrodes from touching – crucial in preventing an explosive short circuit in the battery known as ‘thermal runaway’.
Designing a battery involves tweaking combinations of metals and chemicals to optimize characteristics for specific applications. The battery that goes into your phone has different requirements to one that goes into a car. A battery to store energy from a solar farm or power station is different again. A high energy density battery may fall down for certain applications on safety grounds. Other batteries with long cycle life and high safety (such as titanium-based designs) are expensive and have lower energy density.
Typical energy density of lead, nickel and lithium-based batteries
Safety is a major reason that new lithium batteries must undergo significant testing before entering commercial use, particularly for transport. Lithium is highly corrosive and reactive and in electric vehicle batteries, requires a battery management system to ensure safe operation. Many consumer electronics batteries are based on the high energy density cathode material Lithium Cobalt Oxide (LCO). However when Boeing built an LCO battery into its 787 Dreamliner in 2013, a battery fire on a parked plane forced Boeing to ground the fleet.
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Source: Battery University, September 2015
Lithium-ion batteries are based on a family of chemistries with ongoing research and development into each of these component parts. For instance, there are six major variations in cathode material in use today, and each has trade-offs, which determine the battery’s performance in relation to: • energy density – the higher the energy density, the less weight / space the battery needs to store a given amount of electric power • power density – the ability to deliver high current • cycle life – the total number of charge / discharge cycles the battery can take • cost – some component materials enhance certain performance measures, but are expensive • safety – how stable the battery is
The choice of battery chemistry significantly affects a battery’s performance characteristics, such that an electric powertrain will be specifically engineered for a certain battery. Choice of chemistry is therefore not a decision to be made lightly. While technology innovations feed more quickly into consumer electronics than transport, there are still major decisions as to when to commercialise an advanced technology. One major research focus today is replacing carbon anode material with silicon, which could potentially improve energy density significantly. However silicon anodes are unstable. Today consumer electronics batteries include blends with a small amount of silicon. Over time this may rise, but not rapidly. The upshot is that while consumer electronics makers and battery manufacturers are investing millions of research dollars into optimising battery chemistry for specific applications, improvements in battery performance will be incremental rather than transformative. For the time being, improving smartphone performance will remain largely dependent on the electronics industry, rather than a revolutionary new battery.
Outlook So where do we go from here? The move to lithium from nickel-based batteries was a step change in the industry, dramatically improving performance. Recognising that future technologies will ultimately need a better battery, investment dollars have poured into battery research – both improvements on lithium and possible replacements. Potential next generation technologies include lithium sulphur, magnesium or aluminium batteries and batteries that combine metals with oxygen from the air. Theoretically, such batteries could offer another big leap forward, but it will be well over 10 years before any of them makes it into your phone. Instead over the next decade we will see lithium-ion batteries realise continual incremental improvements in structure and component materials. One expert estimated this could see energy density improve by 7–8% a year on a volumetric basis. Long-term research targets like a fully silicon-alloy based anode, or a solid electrolyte (which would make the battery much safer by preventing thermal runaway) are probably at least 10 years away from commercial use. Perhaps more significantly though, continuing cost declines could see lithium becoming the battery of choice for a wider range of applications. Since 1991 lithium battery costs have fallen 99% (19% CAGR), for a standard cylindrical design. Over five billion of these standard form batteries are now produced a year, with a very low defect rate.
New applications transform the battery market:
Source: Avicenne Energy Market Review, September 2014
Larger form prismatic / polymer battery costs are xxpected to fall:
The majority of lithium battery demand growth will be in so-called ‘prismatic’ or ‘polymer’ batteries. These come in rectangular shaped, or even flexible ‘pouch’ forms, allowing a battery to be fitted around the shape of other components in a laptop, tablet or electric vehicle. The batteries can also be larger than the standard cylindrical size (which is about the volume of two AA batteries). Prismatic and polymer battery production costs are high because production is not yet standardised. As the market grows, there is a significant opportunity for higher production rates to drive down costs to the point where lithium batteries start being competitive in new markets, in particular in largescale energy storage.
Source: Avicenne Energy Market Review, September 2014
The ability to target utility scale energy storage could be transformative for the USD 50 billion secondary battery industry. With global power generation capacity significantly overbuilt to cope for peak demand, storage could theoretically target 40–50% of current capacity – a trillion dollar market. Various analysts predict that energy storage could add tens of billions annually to the battery market by 2025.
Global markets for secondary battery – Trends and estimates 120
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A major opportunity The standard measure for battery cost is US dollars per kilowatt hour (USD/kWh), the amount it costs for a given battery to deliver a kilowatt of power for an hour. A large form lithium battery pack for an electric vehicle today costs around USD 400–500/kWh. A cylindrical cell costs around USD 180/kWh. Analysts predict that in three to five years, large form battery pack costs will fall to USD 250/kWh or less and large cell costs to USD 200/kWh. This would put lithium batteries well inside the USD 350/kWh benchmark which Texas electricity provider Oncor assessed would justify implementing 5GW of battery storage across its grid.
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Source: Bernstein Research, April 2015
Within energy storage batteries could target frequency regulation, renewables integration, transmission and distribution deferral, peak power substitution at utility wholesale level and building energy management. Although Tesla’s Powerpack launch (see boxed text) focused on the opportunity to use batteries at a residential level to act as power back up or to integrate with a home solar system, the utility scale opportunity is vastly greater and the economic case more compelling. In November 2014 Oncor asked Texas state legislators to change laws to approve it spending up to USD 5.2bn on batteries. Toshiba recently announced that it will supply a 40MW battery storage system to Tohuku Electric Power Company in Japan. The approvals process for major utilities projects means meaningful orders on the Oncor scale may still be several years away (Oncor aims for deployment in 2018), however lithium battery orders on this scale would transform the industry.
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lithium and beyond. Lithium’s major advantage is that it is well understood, has high energy density and with years of commercial production at large scale, is positioned to ramp up into this market, driving down costs. While lead acid batteries may continue to be used in more price sensitive settings, lithium has major advantages in terms of performance and environmental impact. Tesla is by far the best-resourced company in the battery space globally. For all they have started life as an electrical vehicle manufacturer, they are increasingly focusing investments in battery technology, and expanding to markets beyond autos. Tesla claims it can deliver batteries at USD250/ kWh by 2016 / 2017 when a massive new ‘Gigafactory’ comes online. With the launch of its 100kWh Powerpack battery targeting commercial and utility customers in May 2015, Tesla clearly has its sights on the massive potential for secondary battery storage. Whilst Tesla’s pack design and scale gives it a cost advantage today, analysts expect other producers to close the gap in a few years. Sodium sulphur (NaS) batteries and ‘flow’ batteries based on liquid electrolytes are designed for large-scale applications. NaS batteries have been used in energy storage for some time, but their advantages are being eroded by falling lithium battery costs. Next generation flow batteries are being developed by start-ups including Imergy Power Systems, UniEnergy, ViZN and ZBB Energy.
These promise target costs of USD 300/kWh or less, but have some way to go to reach them and lack lithium’s track record. Start-up Aquion Energy has raised over USD 172 million for a non-toxic sodium-ion battery specifically targeting energy storage. Swiss start-up Alevo is also purely focused on this market and aims to complete a 60MW installation of its unique inorganic electrolyte ‘Gridbank’ lithium battery this year. In the meantime, the major lithium battery manufacturers including Panasonic, Samsung SDI and LG Chem are also pursuing the energy storage market with their own offerings and as trusted incumbents are well positioned. Today, these battery manufacturers supply systems integrators like Siemens, AES Energy Systems or Tesla, but in some instances they are also looking to go downstream themselves. None of these batteries will do much for your smartphone performance; for that we will continue to rely on Moore’s law and other chip design improvements to sustain these devices for longer. However, they could revolutionise the energy industry. Given the timescale of major utility scale projects, it will not happen overnight, but in two to three years there could be meaningful progress. We will be watching this space.
Source: GAM, unless otherwise stated. Nothing contained herein constitutes investment, legal, accounting or tax advice and should not be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. The statements and opinions are those of the author at the time of publication and may not reflect his/her views thereafter. The companies listed were selected by the author to assist the reader in better understanding the themes presented. Reference to a security is not a recommendation to buy or sell that security. Past performance is not indicative of future performance. No liability shall be accepted for the accuracy and completeness of the information. Within the UK, this material has been issued and approved by GAM London Ltd, 20 King Street, London SW1Y 6QY, authorised and regulated by the Financial Conduct Authority. JN6689 November 2015