I received The Powerhouse by Steve LeVine as a Christmas gift. The book goes through the history of lithium battery technology, and talks about the potential for this industry to reshape a variety of global markets. If you aren’t familiar with his work, LeVine is definitely worth the read. To simplify a lengthy, but fascinating story, China and the United States have begun a billion dollar race to advance the pure science needed to allow affordable energy storage devices.
The biggest barrier to widespread deployment of renewable energy is storage. Electricity networks are peak-load based, meaning that system must be designed to manage output at the highest point of consumption. The oft cited problem with renewables remains the fact that peak output from the sources doesn’t match peak demand. Sudden increases in demand have typically been handed by baseline sources such as natural gas, and coal, where the systems are easier to ramp up if demand requires it. But what if you have the capacity to store gigawatts of renewable energy, and deploy it as needed?
The potential advance of the most immediate interest is the impact it may have on long term oil demand. Bloomberg Business has a great piece on how the electric vehicles will deal a substantial blow to oil markets, as millions of new cars replace internal combustion engines with batteries. You can find the article here. The skeptics of these topics are vocal, and widespread. The chair of the Argonne National Lab was quoted in the economist stating that “that large-scale batteries need to offer hundreds of miles of driving range, be rechargeable in minutes instead of hours, and provide power at costs comparable with natural gas. These demands are “beyond the reach” of current lithium-ion technology”
Bloomberg outlines four necessary conditions to achieve the necessary breakthrough – all of which are dependent on a variety of price signals. Most public policy solutions discussed in Canada have focused on the first choice, and have seen minimal success. The path outlined by LeVine, The Economist, and others focuses on the fourth – bringing down the costs necessary to ensure EV can compete with internal combustion. How far, and how fast can you go on a single charge, and at what price? Bill Gates, Richard Branson, and others have launched a new venture capital fund focusing on achieving the types of energy breakthroughs that would allow this shift.
1. Governments must offer incentives to lower the costs.
2. Manufacturers must accept extremely low profit margins.
3. Customers must be willing to pay more to drive electric.
4. The cost of batteries must come down.
The good news is that the batteries have improved. Bloomberg estimates the the cost of EV will fall below $200 per kw/h, propelling a jump from 100 GW/h of EV battery in 2020, to 700 in 2030. The following chart is drawn from the article linked above.
As is the case with markets, a sudden spike in demand for a product means that markets must adapt, and prices provide the guidance to achieve this shift. However, the ability of the market to adapt is limited by the capacity of organizations to identify new resources, and build the facilities to extract, process and provide new supplies of these materials. This problem is outlined by The Economist, in their piece “An Increasingly Precious Metal”. The price of lithium has jumped from ~$6,000 per tonne in 2014 to over $13,000 in 2015.
The problem with achieving the four objective of reasonably priced battery technology means that you’ll need an ongoing supply of cheap minerals to make it happen. If you want to achieve that supply, you’ll need the continual and sizable investment in new sources of lithium and the secondary minerals. Will EV still be able to achieve the same improvements in cost per kw/h when the cost of lithium doubles in 12 months?
This type of circumstance is where we start to see the innovative secondary markets that drive major shifts. The inclusion of new geothermal plants on the grid has solved multiple problems, not just in expanding baseline clean energy, but also in providing an innovative source of lithium for EV generation. Tesla is believed to be using joint SV & Geothermal to power their giga-factories in the US. Lithium extracted from the geothermal generation process provides the materials necessary to build the batteries, all within the a single location. Innovating solutions like this will be integral if any substantial shift to electric vehicles in the near term.