Batteries, single purpose devices that most of us take for granted unless they need to be recharged or replaced, are an essential enabling technology for renewable energy and the sixth industrial revolution. With this week’s impressive launch of A123 Systems, it appears as if investor interest is picking up.
Energy storage is a varied industrial sector that encompasses a variety of mechanical, electrochemical and electrostatic devices and eighteen pure play public companies that range from well known to unknown. This article takes a look at the current state of the technology and the major players involved.
Batteries rely on chemistry, rather than physics, so the rapid rates of change we’ve come to expect from information technology and electronics will be rare in the battery industry. Moore’s Law simply does not apply. It’s perfectly reasonable to assume that battery technologies will continue to improve at single digit annual rates, but expecting disruptive changes that result in huge cost reductions or performance gains is unreasonable. Which is why when EEStor says that they are working on an “electrical energy storage unit” that would hold ten times the amount of power as todays most advanced batteries at the same weight. Their claims have to be meet with a fair degree of let’s wait and see.
The battery business is hard-core manufacturing and revenue growth will be tied to the construction of new factories, a process that requires substantial amounts of time and money. Accordingly, the time lag between a new product announcement and the receipt of substantial revenue from product sales will typically be measured in months or years, rather than weeks.
Battery manufacturing requires huge amounts of raw materials that typically account for 70% to 80% of total production costs. So while material constraints have not been major issues in many new industries, they can be important issues for batteries that are based on scarce or expensive raw materials.
The History of Battery Technology
The earliest known methods of generating electricity were by creating a static charge. Alessandro Volta (1745-1827) invented the so-called “electric pistol” by which an electrical wire was placed in a jar filled with methane gas. By sending an electrical spark through the wire, the jar would explode.
The next stage of generating electricity was through electrolysis. Volta discovered in 1800 that a continuous flow of electrical force was possible when using certain fluids as conductors to promote a chemical reaction between metals. Volta discovered further that the voltage would increase when voltaic cells were stacked. This led to the invention of the battery.
From the availability of a battery, experiments were no longer limited to a brief display of sparks that lasted a fraction of a second. A seemingly endless stream of electric current was now available.
During the 1800s, people began to find ways to make batteries do useful work beyond electro-plating and parlor tricks. From there technology progressed rapidly to a point where batteries are now a ubiquitous but largely invisible part of our daily lives. We don’t usually think about batteries until they need to be recharged or replaced, but life would be very different without them.
Until the 1960s, there were two primary classes of batteries: rechargeable lead-acid batteries and disposable dry cells. Lead-acid batteries handled the heavy work like starting cars and providing emergency lighting while dry cells were used for flashlights, toys and consumer goods, including the first wave of cheap transistor radios.
In the mid-70s, maintenance free valve regulated lead-acid (VRLA) batteries were introduced and rapidly became the dominant technology. They worked so well in fact that the level of R&D spending on lead-acid technology plummeted. Shortly thereafter, new rechargeable battery chemistries including nickel cadmium (NiCd), nickel metal hydride (NiMH) and lithium ion (Li-ion) emerged on the scene. Since the new chemistries had tremendous potential utility in portable electronics, R&D spending on those chemistries soared in response to intense consumer demand. That trend continued through the early years of the current decade because lead-acid batteries were generally adequate for the work they needed to do while batteries for portable electronics were still frequently inadequate.
Over the last few years, an entirely new market dynamic has emerged as people have been forced to come to grips with the amount of energy they waste. Today we are witnessing a seismic shift in the storage sector because none of the technologies we relied on in the past is durable enough or robust enough to meet the demands of an energy efficient future. In response companies throughout the energy storage sector have taken the following steps:
- Instituted new research programs to improve the performance and durability of lead-acid batteries;
- Refocused existing research to concentrate on making larger NiCd, NiMH and Li-ion batteries;
- Increased research on new and improved flow battery chemistries;
- Devoted new resources to physical storage systems like pumped hydro, compressed air and flywheels.
The winners reward will be massive new markets that represent an estimated incremental value of up to $70 billion per year – a whopping 233% increase over current global revenues of $30 billion across the industry.
Understanding performance claims in the energy storage sector can be difficult because there are several critical performance metrics including “energy,” or the capacity to do work, which is usually measured in watt-hours (Wh); “power,” or the rate at which work can be performed, which is usually measured in watts (W); and “cycle-life,” or the number of times a device can be discharged and recharged before it needs to be replaced. Another key concept is “energy density,” which quantifies the amount of energy a battery pack can deliver per unit of weight measured in kilograms (kg) or volume measured in liters (l).
If you think in terms of the humble electric golf cart, energy limits the distance you can travel on a single charge, power limits your speed of travel, cycle-life limits the number of rounds of golf you can play before replacing the battery and energy density dictates the size of your battery pack. So performance metrics are easy to understand when they are tied to the requirements of a particular application. But if you try to discuss performance metrics in a vacuum without considering how they relate to a particular application, all you get are confusing gee whiz numbers.
It would be much less confusing if every company presented summary production, revenue and cost data using a uniform watt-hour metric. The disclosures in the prospectus for the proposed A123 Systems IPO come close, but are still not quite there. This simple change would make it far easier to make apples to apples comparisons and truly understand the competitive strengths and weaknesses of widely varied storage technologies. But since fair comparability might spoil the story that some companies want to spin we might have to wait awhile longer for a standard to emerge.
There is an incredible diversity of needs that the energy storage industry must satisfy, so much so that the best way to describe the challenges is to give some real world examples.
In a light HEV where the principal goal is to use energy from recuperative braking to provide extra boost during acceleration, power and cycle-life are the critical metrics. You need a storage solution that can accept a huge charge over a 10 to 15 second braking interval, deliver that charge over a 10 to 15 second acceleration interval and repeat the process many thousands of times over the life of the vehicle. In a PHEV where the principal goal is to run in electric only mode for 40 or 50 miles and then switch over to an internal combustion engine, energy and power are the critical metrics and cycle-life is fairly unimportant because the average user will not recharge his batteries more than 300 to 500 times in any given year.
Similar disparities are common in the utility industry where power and cycle-life are critical metrics for frequency regulation and short-term grid stabilization, but energy and power are the critical metrics for long discharge periods involving rate arbitrage, renewables leveling and diurnal storage.
In the extreme case of an emergency backup or upgrade deferral system that only kicks in if there is a severe grid disruption, energy and power are the only metrics that matter and cycle-life is almost irrelevant.
Size and weight are mission critical constraints in portable electronic device. They are far less important in motive applications and almost irrelevant in stationary applications. Likewise, high cycle-life and power are critical for light HEVs but expensive overkill for an electric runabout that will only be charged a couple thousand times during its useful life. In the final analysis, the fundamental laws of economics will require that every user pick the storage solution that is best suited to his particular needs and budget.
The first commercial Li-ion batteries were introduced by Sony in 1991 and there have been huge improvements in safety, power and cycle-life over the last two decades. But each major safety improvement has reduced energy density and increased manufacturing costs.
Sony’s original Li-ion batteries had energy densities approaching 200 Wh/kg, were able to deliver their stored energy in an hour and offered between 500 and 1,000 cycles. In comparison, today’s high-end Li-phosphate and Li-titanate batteries offer energy densities of less than 100 Wh/kg; can deliver their stored energy in three to five minutes and offer useful lives of 5,000 to 20,000 cycles. Between these extremes, the variables are almost endless.
While precise cost comparisons are difficult because nobody uses standardized reporting metrics, the bulk of available data indicates that lithium-cobalt batteries based on Sony’s original chemistry cost $0.45 to $0.55 per Wh and high-end Li-phosphate and Li-titanate batteries can cost upwards of $1.50 per Wh. About the only good price news in the group is Li-polymer batteries that cost about $0.35 per Wh to manufacture.
Battery cost per Wh is not a critical issue when a consumer is shopping for a 50 Wh laptop battery. But it will be the primary market driver when that same consumer is shopping for a 2,000 Wh battery for a Toyota Prius, a 16,000 Wh battery for a Chevy Volt or a 26,000 Wh battery for a Th!nk City runabout.
There is no question that today’s Li-ion batteries offer far better power and cycle-life than Sony’s originals. But gains in one performance metric have always reduced energy while increasing manufacturing costs. Over the last two decades, Li-ion technology has seen incremental improvements of 8% to 10% per year, but it’s never seen anything even close to the “Moore’s Law” type performance gains so many investors have come to rely on.
Since we have not seen disruptive performance improvements over the last two decades when Li-ion technology was rapidly evolving and research chemists had all the R&D funding they could possibly use, I think it is unreasonable to assume that disruptive performance improvements will arise in the future as a mature technology is scaled up to larger sizes. There is also the problem of raw materials that are not abundant in nature, unless we believe the reports of mining companies, all of which should be taken with a pinch of salt.
Li-ion is a wonderful technology that has a wealth of potential uses, but is unlikely to be a cheap general-purpose solution for all energy storage needs. Many of the currently proposed uses for the technology will probably be better left to other energy storage technologies.
After the invention of VRLA batteries in the mid-70s, research on lead-acid technology plummeted and there were no substantive new research and development projects for almost 30 years. VRLA batteries were adequate for the work they needed to do and without the pain of necessity there was no compelling incentive for new invention.
That dynamic began to change a few years ago when it became obvious that new energy storage solutions would be essential to minimize waste. At that point, researchers once again began to look at new ways to improve lead acid battery performance by integrating new materials and technologies that were developed for use in other sectors during the 30-year period when lead-acid research stagnated. Established lead-acid battery producers funded some of the research work, but Firefly Energy, Axion Power International (AXPW.OB) and Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO) initiated the more ambitious projects.
The Firefly project was spun out of Caterpillar (CAT) in 2003 and its goal was to use a carbon foam composite to replace lead current collector grids. Firefly’s hope was that its carbon foam technology would reduce the amount of lead used in a battery, minimize lead that was not chemically active and improve energy density. Over the last five years, the Firefly project has grown from a pure R&D initiative to a manufacturing and commercialization partnership between Firefly and C&D Technologies (CHP) that was announced at the end of October. While pricing information hasn’t been released yet, the available performance data indicates that the new Oasis battery will offer a 40% to 50% increase in energy density, higher power and up to 800 cycles at an 80% depth of discharge. The Oasis battery will probably cost $0.20 to $0.30 per Wh, or twice as much as a normal lead-acid battery, but offer four times the performance in suitable applications.
The Axion project was also initiated in 2003 and its goal was to create a true hybrid between a lead-acid battery and a supercapacitor by replacing the lead-based negative electrodes with carbon electrode assemblies. Axion’s hope was that its PbC devices would reduce the amount of lead used in a battery, eliminate sulfation, which is the primary cause of lead-acid battery failure, and bring supercapacitor-like power to the lead-acid world.
Over the last five years, the Axion project has progressed from a pure R&D initiative to a planned commercial rollout that’s expected by mid-2009. While detailed performance and price specifications haven’t been released yet, the available information indicates that Axion’s PbC battery will offer a 400% increase in power and well over 1,200 cycles at a 90% depth of discharge. Axion’s PbC batteries will probably cost $0.20 to $0.30 per Wh, or twice as much as a normal lead-acid battery, but offer six to eight times the performance in suitable applications.
The historical details on the CSIRO project are a bit sketchy but the CSIRO ultrabattery appears to have a lot in common with Axion’s PbC battery since both products are a battery-supercapacitor hybrid. While we don’t know much about the design, construction and electrochemistry of the CSIRO ultrabattery, there are some impressive results from a recent 100,000-mile road test in a modified Honda Insight. The bottom line was that the CSIRO device performed flawlessly; got 2.8% less gas mileage because of the added battery weight; but offered a $2,000 cost savings over the factory original NiMH battery.
These advances clearly demonstrate that disruptive improvements in lead-acid chemistry are still possible when advanced materials and technologies that were developed in recent years are combined into new products based on inherently cheap lead-acid chemistry. When it comes to cost-effective energy storage, Firefly, Axion and CSIRO have made more progress in five years than the entire Li-ion group has made in two decades. This is a space that is set to heat up tremendously over the next few decades and will be crucial in deciding how the renewable energy century plays out.
Image is of a 20Ah Automotive Class Lithium Ion Cell