2018 was another defining year for the lithium supply chain as the global population continued to make remarkable strides towards the implementation of clean energy and transportation. Although the clean energy and transportation industries are only in their early days, it has become apparent that renewables and electrification of transportation are an irreversible trend, one that has begun to disrupt many established industries.
In 2016 and 2017, the world saw a surge of traditional automakers announcing their entrance into the electric vehicle segment of the market. The lithium supply chain responded in 2018: a number of battery manufacturers moved upstream to capture lithium mineral and chemical assets, in order to ensure availability of supply for their recently announced battery expansion efforts. The capital markets saw a growing list of companies that completed Initial Public Offerings or raised additional capital to finance these new plants and acquisitions. Applications for lithium battery technologies rapidly expanded, probably much quicker than most analysts had anticipated.
In the e-mobility space, nearly every application saw some movement towards electric drive, including passenger vehicles, commercial trucks, municipal coach and school buses, refuse trucks, material handling vehicles, scooters, helicopters and various marine vehicles.
Battery Manufacturers Position for Rapid Expansion
On the battery manufacturing side of the lithium supply chain, 2018 was a defining year for all companies in common concerning the announcement of new production capacity. Throughout 2018, large players such as BYD, CATL, LG Chem and many others announced strategic plans to stay ahead of the industry. Expansion plans that were announced include LG Chem’s global expansion by 32GWh, CATL Chinese and German expansion by 38 GWh and BYD Chinese expansion by 60 GWh.
Even these few lithium battery manufacturers have charted a path to over 100 GWh of battery expansion plans over the next few years. Beyond 2020, consider that CATL has already announced its intention to ramp-up global lithium battery production to at least 100 GWh and Tesla has indicated that it will aim to increase GigaFactory 1 production output to 150 GWh.
Residential Energy Storage Is No Longer A “Cool Toy”
All categories of the stationary energy storage market saw dramatic growth in 2018, especially in utility- scale ‘mega’ projects and in the residential market. In the German residential market, the industry surpassed 100,000 systems installed, while the South Australian government continued to promote its residential energy storage program, which aims to have 40,000 systems installed over the next few years.
The Caribbean markets also saw a breakthrough as Puerto Rico and other islands moved to restore power grids after Hurricanes Irma and Maria. It was reported that all new solar installations in Puerto Rico are now being installed with battery systems and many existing system owners are retrofitting systems to include batteries.
In Q4 2018, California approved new building construction energy efficiency measures that will be a catalyst for solar power to be installed on certain types of buildings, including residential properties. These measures will encourage the procurement of energy storage systems for resiliency and monetary (demand response, rate arbitrage) purposes. The North American residential energy storage market is expected to grow from less than 15,000 systems installed in 2018 to between 40,000-50,000 systems installed in 2019.
“Mega Scale” Utility Projects Take Flight
The utility-scale segment of the stationary energy storage market has witnessed incredible demand and has had the most material impact on the lithium supply chain. Many utilities over the past 24 months have captured headlines by announcing what I define as mega-scale projects.
In recent weeks, we have witnessed a California utility announce plans to deploy multiple energy storage parks amounting to 2.2 GWh of capacity. This is the equivalent of approximately 45,000 electric vehicles. These types of energy storage parks are quickly being financed while product is generally packaged as containerized solutions directly at or near the battery manufacturing plant. This allows for the solutions to be quickly installed, which creates a vacuum of demand over a very short period of time.
According to one recent report, the US utility-scale energy storage pipeline amounted to over 30 GWh, which is equal to well over 500,000 electric vehicles.
Electric Buses Remain A Key Growth Market
Lastly, the electric bus market has reached a tipping point led by full fleet transition in China, with a very encouraging list of pilot projects by nearly all major North American and European transit authorities.
The three categories of the bus manufacturing sector that I closely monitor are: coach, municipal and school bus. Although the replacement of municipal bus fleets often captures the headlines, the largest opportunity is the North American yellow school bus fleet.
It is in my opinion that an increasing number of transit authorities in Europe and North America will continue to announce pilot projects in 2019 with a spillover effect to other regions of the Caribbean and Latin America. Major North American transit authorities, including Toronto, New York and Los Angeles have already outlined plans to achieve a zero-emission fleet between the years 2030-2040.
I believe that the future of electric buses is only a question of when not if. I anticipate that sales will continue to grow given the current political support for them in combination with the declining cost of batteries and electric motors.
The transition to clean energy technologies is well underway. 2018 was another important year for the lithium supply chain as Tier 1 lithium battery production companies announced significant expansion plans and began to raise the necessary capital to deploy related strategies. The move to increase lithium battery production will ensure that supply is available to meet demand that arises from primary applications such as electric vehicles, which in turn will potentially increase supply for secondary applications such as stationary energy storage systems and EV charging infrastructure. Considering the slow ramp-up in global battery module and cell manufacturing capacity, and considering the rapid uptake of electric vehicles and mega utility-scale energy storage systems, it is difficult to visualize an oversupply of high-quality battery modules in the next years.
Below please find my predictions for 2019:
- Record number of electric vehicles sales in the global passenger market
- Increase in the number of electric vehicle options available to consumers
- Ongoing pilot projects and overall shift to electric municipal bus fleets
- Ramp in utility-scale mega-projects in the stationary energy storage market
- Hypergrowth in the residential energy storage (RESS) markets in Europe, USA, Caribbean and Australia
- RESS integration with Energy Block Chain / Virtual Power Plants, Internet of Things, Artificial Intelligence
- Strong advancements in the microgrid markets focused on providing energy access to underdeveloped and developing regions of the world
- Hyper-growth in the EV charging infrastructure
- Battery plant development, including: new facilities, facilities expansion, financing (capital raises), construction development and other related information
- Entrance of new players into the lithium supply chain
- Mega-supply announcements throughout the supply chain (ie: cells, battery modules, chemicals)