The world is becoming increasingly electrified. Not only is the development of our country increasing the electricity supply for its people, but the electrification of the existing transportation infrastructure is proceeding rapidly. By 2040, more than half 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 certain to dominate applications in personal electronics, transportation and heavy industry.
In fact, this dominance is well under way.
A brief history of batteries
Batteries have long been a part of our daily lives. In 1800, Italian physicist Alessandro Volte invented the world's first true battery. The invention represented a significant breakthrough, but there have been only a few major innovations since then.
The first, the lead-acid battery, was invented in 1859. It was the first rechargeable battery and is still most commonly used to start internal combustion engines.
There have been some innovative battery designs over the past two centuries, but it wasn't until 1980 that a real game changer was invented. It was then that breakthroughs at Oxford and Stanford led to the development of lithium-ion batteries. SONY commercialized the first lithium-ion battery in 1991.
What's so special about lithium?
In a lithium-ion battery, the lithium metal migrates as lithium ions from one electrode to another. Lithium is one of the lightest elements and has the strongest electrochemical potential of any element. This allows lithium-ion batteries to store large amounts of energy in a small, light battery. As a result, lithium-ion batteries have become the battery of choice in many consumer electronics products such as laptops and mobile phones.
The development of lithium-ion batteries has accelerated
Because of the inherent advantages of lithium-ion batteries, their sales have risen exponentially since the turn of the century. This helps keep costs down. Falling costs have 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 (both cells and packs) has fallen 85% from 2010-18 to an average of $176 per kilowatt-hour. BloombergNEF further predicts that battery prices will fall to $94 / KWH by 2024 and $62 / KWH by 2030.
This falling cost curve has important implications for any company that uses batteries in its services, or those that store energy (electricity producers, for example). So far, most sales of lithium-ion batteries have been in consumer electronics, 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 sales of electric cars powered by lithium-ion batteries have risen more than tenfold in the past five years. In addition, a growing number of countries are enacting bans on future internal-combustion engine-based vehicles in the hope that electric vehicles will eventually dominate personal transportation.
Of course, that means much greater demand for batteries in the future. So much so that TSLA, an electric carmaker, is investing billions of dollars in a new lithium-ion battery plant in partnership with Panasonic. But U.S. lithium-ion battery makers are lagging in market share.
The relevant upmarket for lithium-ion batteries is in heavy industry applications such as lifting trucks, sweepers and scrubbers, airport ground support applications and autonomous navigation vehicles. Historically, these niche applications have been supplied by lead-acid batteries and internal combustion engines, but the economics have rapidly shifted to lithium-ion batteries
However, one country has seized the momentum and established an absolute market lead over its competitors in this area. But it's not the United States, where much of the key research and development work to make lithium-ion batteries takes place.
Our country is in control
Global lithium-ion battery production stood at 316 gigawatt hours in early 2019, according to an analysis by BloombergNEF. Of that, 73 percent came from China, followed by the United States, which is far behind at 12 percent of global production.
Global production is expected to rise strongly by 2025, when BloombergNEF expects global production to reach 1,211 gigawatt hours. Us production is expected to rise, but at a slower pace than global production. As a result, the US share of the global market for lithium-ion battery manufacturing is expected to shrink.
TSLA is trying to address this by building its own battery plant, but finding local suppliers has proved a challenge for companies that supply various types of batteries, such as California-based OneCharge. I recently spoke with OneCharge CEO Alex Pizarev, who highlighted the challenges facing the company:
"American manufacturers would be happy to use AMERICAN-made lithium-ion batteries, but that's not realistic today," Pisarev told me. So we have to continue to import from our country."
Our country is going the way it did with solar panels. Although solar cells were invented by Russell Lohl, an American engineer, China now dominates the global market for solar panels. Now, China is trying to control the world's production of lithium-ion batteries.
Is it preferable to have the cheapest green technology, even if it means losing manufacturing to other countries? Lower solar panel prices have helped fuel an explosion in new solar pv, which in turn supports many jobs in the United States. But most of those panels are made in China. The Trump administration has tried to address the problem by imposing tariffs on imported solar panels, but those tariffs have been strongly opposed by much of the US solar industry.
Our country has the important advantage of cheap labor, which allows it to dominate many manufacturing industries. But China's lithium reserves and production are far more than the United States. In 2018, China produced 8,000 metric tons of lithium, ranking third among all countries and nearly 10 times that of the United States. In 2018, China had 1 million metric tons of lithium reserves, almost 30 times that of the United States.
The way forward
The trend suggests lithium-ion batteries will increasingly replace lead-acid batteries in transportation and heavy equipment. In a world with record carbon dioxide emissions, this is a critical development.
But with such advantages in manufacturing costs and raw material supplies, can the United States compete with China in the world market? If not, can the U.S. develop a competitive market for regenerated lithium as more and more lithium-ion batteries reach the end of their useful lives?
These are important issues to address.
The shift to lithium-ion batteries presents many new challenges and opportunities. But the United States needs an effective strategy to prevent another clean energy manufacturing opportunity from being ceding to our country.
