Lithium-Ion: Holding EVs Back or Driving Their Future?

Since the Paris Agreement, EVs have been viewed as a catalyst for change by all major countries—a low-hanging policy fruit for hastily-made proclamations, sometimes with, but more often without any regard for existing ecosystems in place. The result has led to many industries being thrown into a new paradigm, better for some as with emerging blockchain technologies, but the same cannot be said for all. The question is not a simple ‘who-what-when’ but also a forgotten ‘where’ as these established value chains tend to be regional or even country-specific, much like their power grids, which provide electricity to factories, buildings, homes, and now cars.

A major component of EVs which many consider as a major bottleneck to adoption, is the battery. Batteries themselves are not new and Lithium-ion has been mass produced since the early ’90s. As such its value chain is large and complex, often evolved from vertically integrated operations where everything from material to the UI on electronic devices were produced by the same company. Within the realm of battery cells, particularly for EV applications, this industry has rapidly evolved into a stand-alone sector. Business models of these companies rapidly evolving, at the behest of their automotive OEM customers.

From a battery cell lens, not all EVs are created equal and it is important to differentiate plug-in hybrid electric vehicles (PHEV) from battery electric vehicles (BEV). This difference is imperative when discussing battery cell technologies as they differ extensively when they are the only source of energy in a vehicle. That being said, BEVs are where the technologies are being showcased. Within that realm, nickel-metal hydride (NiMH), which once powered GM’s EV1, has long been displaced by lithium-ion chemistries.

The five types of lithium-ion (Li-ion) cells that are used in the latest generation of EVs are:

  • Lithium cobalt oxide (LCO)
  • Lithium iron phosphate (LFP)
  • Lithium manganese oxide (LMO)
  • Nickel cobalt aluminum oxide (NCA)
  • Nickel manganese cobalt (NMC)

The main difference between these technologies lies in the materials used in the cathode; however, more subtle differences in the anode exist between suppliers.

LCO on the Way Out, Check Your Cobalt at the Door

Of these cell technologies mentioned, LCO’s last remaining bastion for this technology, China via its automotive OEM users like BAIC, BYD, and SAIC, have all but moved on from the technology. These companies are now using a blend of LFP and something called a ternary battery. Ternary, as the reference would indicated, is a blend of LMO, NCA, and NMC technologies.

So why is everyone leaving LCO? It is mainly due to the price of cobalt, which has skyrocketed since the middle of 2016, this year reaching over $80,000 per metric ton. According to the U.S. Geological Survey, nearly all cobalt is mined as a byproduct of other, more abundant metals, such as nickel or copper, which means that production is driven primarily by the markets for the principal metals, not by the need for cobalt. Only sustained demand will get the big mining companies to move and they finally have started to move with many mining operations geared towards expansion of cobalt production by 2019.

This new capacity may be too late for LCO as blend takes close to a kilogram per kWh of energy produced; it is the most dependent on cobalt and therefore the first to go. If one were to draw parallels to the solar industry, one example comes to mind around the solar cell (different from battery cell) where in 2011 the price of silver paste skyrocketed. Industry participants quickly came up with ways to reduce silver or even use copper as a replacement within 24 months, a similar time to what’s been seen in EVs.

It’s What’s on the Outside That Counts

What is important for the cell value chain is not only the materials being used but the enclosures around them. Li-ion cells are currently produced in three form factors: cylindrical, prismatic (think of a rectangular box), and pouch. The first two are rigid in nature while the third, as the name would suggest, allows for expansion which occurs in all other batteries as well. In a recent study I conducted, analyzing 13 automotive OEMs and their battery form factor of choice, indicated a tight battle between prismatic and pouch form factors. Prismatic currently has the lead but I found the pouch format to be of particular interest when considering the newest NCM 811 blend has garnered attention from the likes of LG Chem and SK Innovation.

These Are Not the Cells You’re Looking For

For those following the battery cell market, since 2014 there has been significant overcapacity. During that year, it was noted as a range of 9-36 percent utilization by major manufacturing country, with China having the lowest and Japan at the top of that scale. Since that time, the conditions have improved on average, but only slightly, and expect the trend to continue through 2019 with major capacity expansion projects from established and new manufacturers on the way. So with overcapacity, it is obvious batteries are not the bottleneck, right? Wrong. Despite plenty of capacity at cell production, not all technology blends are accepted by automotive OEMs who often decide on different blends for each vehicle, even from one year to the next. A lack of data collected on EVs in operation for many years is to play a role; however when looking at the short-term, a bigger issue exists downstream.

The biggest bottleneck is currently at the battery module and vehicle integration segments of battery production. There is limited capacity to connect these battery cells together, and integrate a battery management system (BMS) to them, an issue even Tesla has struggled with recently. These processes are still coming up to speed and will require additional capital expenditure in automation to catch up with to the battery cells. Assuming integrated battery manufactures and automotive OEMs prioritize spending in this segment, this issue should be resolved in the next 18-24 months.

Long-term is a different story as current battery technologies will not reach the ambitious energy density targets of over 300 Wh/kg by 2025, nearly twice as high as the current mass produced cells. Despite rhetoric about a multitude of materials around the cathode, anode, and electrolyte; only a few technologies will be implemented in the next decade. Within this 10 year window, disruptive technologies will likely take a back seat, especially true when one considers those recent capital expenditures and required ROIs. As such, two technologies stand out from the rest, both are solutions to improve the anode of the battery. These are lithium titanate (LTO) and Silicon (Si). These technologies are not yet widely used; however, they are more incremental than disruptive technologies, and easier to implement. The companies leading these anode technology developments should receive more interest as cathode improvements see diminishing returns. Expect these two solutions to penetrate the market at an accelerated pace through 2025, helping drive energy density improvements to hit that ambitious target.

The article was originally published by Power Technology Research here as part of a report on Impact of EVs on the surrounding Ecosystem.

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With a background in market research and consulting, Mike has worked in mobile, renewable power, and electricity transmission and distribution sectors throughout his career. Until recently, Mike was in charge of Consulting in the area of power technology at IHS Markit where he worked for 8 years. He has been involved in many small and large scale advisory engagements ranging from Polysilicon cost modeling through 30-year supply/demand assessments of global energy markets. Most recent accomplishments include a Top-Down macroeconomic model on forecasting Transmission and Distribution spending by country. He is an expert on PV industry competitive dynamics. As part of his prior roles, he maintained competitive profiles, as well as financial and manufacturing cost models on the high impact companies in PV and energy markets. He has worked on competitive analysis and opportunity assessment projects including those for customers in the upstream value chain as well as the downstream players assessing their supply base. Mike has a Bachelor’s of Science in both Financial Services and in Corporate Finance from San Francisco State University.

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