The world is becoming more and more electrified. Not only are developing countries increasing the electricity supply of their people, but the electrification of existing transportation infrastructure is rapidly evolving. By 2040, more than half of the cars on the road are expected to be powered by electricity.
Batteries play a key role in this shift, but a relatively new battery type seems to be dominant in personal electronics, transportation and heavy industry applications.
In fact, this dominance is going smoothly.
a brief history of the battery
For a long time, batteries have been a part of our daily lives. In 1800, the Italian physicist Alessandro Volt invented the world's first real battery. This invention represents a significant breakthrough, but since then there have been only a few major innovations.
The first is a lead-acid battery, invented in 1859. This is the first rechargeable battery and is still the most commonly used battery for starting an internal combustion engine.
In the past two centuries, there have been some innovative battery designs, but it was not until 1980 that a true game rule changer was invented. It was then that the breakthroughs at Oxford University and Stanford University led to the development of lithium-ion batteries. In 1991, Sony commercialized the first lithium-ion battery.
What is special about lithium?
In lithium ion batteries, lithium metal migrates from one electrode to the other in the form of lithium ions. Lithium is one of the lightest elements and has the strongest electrochemical potential in the element. This allows lithium batteries to store large amounts of energy in a small, lightweight battery. Therefore, lithium-ion batteries have become the battery of choice for many consumer electronics products such as notebook computers and mobile phones.
Lithium-ion battery development accelerates
Due to the inherent advantages of lithium-ion batteries, sales have grown exponentially since the turn of the century. This helps to continue to reduce costs. The cost reduction has also helped lithium-ion batteries gain a foothold in new applications.
According to research firm BloombergNEF, the volume-weighted average price of lithium-ion battery packs (including batteries and battery packs) has fallen 85% from 2010-18, reaching an average of $176 per kWh. BloombergNEF further predicts that battery prices will fall to $94/kWh by 2024 and to $62/kWh by 2030.
This declining cost curve is important for any company that uses batteries in its services, or for companies that need to store energy (for example, power producers). So far, most lithium-ion batteries are sold in the consumer electronics arena, but future sales will increasingly be driven by electric vehicles.
Most cars on the road today still use lead-acid batteries and internal combustion engines. But in the past five years, sales of electric vehicles driven by lithium-ion batteries have increased more than 10 times. In addition, more and more countries are developing future bans on internal combustion engines, hoping that electric vehicles will eventually dominate personal transportation.
Of course, this means that the demand for batteries in the future is much greater. As a result, electric car manufacturer Tesla is working with Matsushita to invest billions of dollars to build a new lithium-ion battery factory. However, the market share of lithium-ion battery manufacturers in the United States is falling behind.
The relevant growth market for lithium-ion batteries is in heavy industrial applications such as crane trucks, sweepers and scrubbers, airport ground support applications and autopilot vehicles. Historically, these niche applications have been provided by lead-acid batteries and internal combustion engines, but the economic benefits have quickly shifted to lithium-ion batteries.
However, one country has seized on this momentum and established an absolute market leading position in this area beyond competitors. But it is not the United States, and many of the key research and development efforts to make lithium-ion batteries are carried out in the United States.
According to an analysis by Bloomberg NEF, the global lithium battery capacity in early 2019 was 316 GWh. 73% of the production capacity comes from China, followed by the United States, with 12% of global production capacity far behind the first place.
By 2025, global capacity is expected to grow strongly, and Bloomberg NEF expects global capacity to reach 1,211 GWh by then. US capacity is expected to grow, but growth will be lower than global capacity. Therefore, the US share of the global lithium battery manufacturing market is expected to shrink.
Tesla is trying to solve this problem by building its own battery factory, but for companies that supply all types of batteries, such as California-based OneCharge, finding suppliers locally has proven to be a challenge. I recently interviewed Alex Pisarev, CEO of OneCharge, who highlighted the challenges facing the company:
Pisarev told me, "American manufacturers will be happy to use lithium-ion batteries made in the United States, but this is unrealistic today. So we must continue to import from China."
China is on the road that has been on the solar panels before it is gone. Although solar cells were invented by American engineer Russell Ohl, China now dominates the global solar panel market. Now, China is working to control the production of lithium-ion batteries in the world.
Is it cheaper to have the cheapest green technology, even if it means giving the manufacturing industry to other countries? Lower solar panel prices have helped drive the explosive growth of new solar PV, which in turn has supported many of the US employment position. But most of these panels are made in China. The Trump administration tried to solve this problem by imposing tariffs on imported solar panels, but these tariffs were strongly opposed by the majority of the US solar industry.
China has the main advantage of cheap labor, which allows it to dominate many manufacturing industries. But China's lithium reserves and production far exceed the United States. In 2018, China's lithium production was 8,000 metric tons, ranking third in all countries and nearly 10 times that of the United States. In 2018, China's lithium reserves were 1 million metric tons, almost 30 times that of the United States.
The way forward
This trend indicates that lithium-ion batteries will increasingly replace lead-acid batteries in the transportation and heavy equipment sectors. This is a key development in a world where carbon dioxide emissions are record.
However, the United States has such advantages in terms of manufacturing costs and raw material supply. Can it compete with China in the world market? If not, as the life of more and more lithium-ion batteries nears the end, can the US Renewable lithium develops a competitive market?
These are all important issues that need to be addressed.
The transition to lithium batteries has brought many new challenges and opportunities. But the United States needs an effective strategy to avoid giving another clean energy manufacturing opportunity to China.