8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
Electrifying everything
After electric cars, what more will it take for
batteries to change the face of energy?
No need for subsidies. Higher volumes and better chemistry are causing costs to
plummet
Print edition | Briefing Aug 12th 2017 | SAN DIEGO AND SUNDERLAND
ABOUT three-quarters of the way along one of the snaking production lines in
Nissan’s Sunderland plant, a worker bolts fuel tanks into the chassis of countless
Qashqais—the “urban crossover” SUVs which are the bulk of the factory’s output.
But every so often something else passes along the line: an electric vehicle called a
Leaf. The fuel-tank bolter changes his rhythm to add a set of lithium-ion battery
packs to the floor of the Leaf. His movements are so well choreographed with the
swishing robotic arms around him that he makes the shift from the internal
combustion engine to the battery-charged electric vehicle look almost seamless.
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
Until recently, it was a transition that many found unthinkable. The internal
combustion engine has been the main way of powering vehicles on land and at sea
for most of the past century. That is quite the head start. Though Leafs are the
world’s biggest-selling electric vehicle, the Sunderland plant, Britain’s biggest car
factory, only made 17,500 of them last year. It made 310,000 Qashqais. And the
Qashqais, unlike the Leafs, were profitable. Nissan has so far lost money on every
Leaf it has made.
Latest updates
There were 750,000 electric vehicles sold
worldwide last year, less than 1% of the
The ACLU stands up for an alt-right author’s
freedom of speech new-car market. In 2011 Carlos Ghosn, boss
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of the Renault-Nissan alliance, suggested
Ryanair drops plans to serve Ukraine that his two companies alone would be
GULLIVER
selling twice that number by 2016, one of
British university rankings
GRAPHIC DETAIL many boosterish predictions that have
proved well wide of the mark. But if the
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timing of their take-off has proved
uncertain, the belief that electric vehicles are going to be a big business very soon is
ever more widely held. Mass-market vehicles with driving ranges close to that
offered by a full tank of petrol, such as Tesla’s Model 3 and GM’s Chevrolet Bolt,
have recently hit the market; a revamped Leaf will be unveiled in September. The
ability to make such cars on the same production lines as fossil-fuel burners, as in
Sunderland, means that they can spread more easily through the industry as
production ramps up.
All we need to live today
Many forecasters reckon that the lifetime costs of
owning and driving an electric car will be
comparable to those for a fuel burner within a few
years, leading sales of the electric cars to soar in
the 2020s and to claim the majority sometime
during the 2030s. China, which accounted for
roughly half the electric vehicles sold last year,
wants to see 2m electric and plug-in hybrid cars on
its roads by 2020, and 7m within a decade.
Bloomberg New Energy Finance (BNEF), a
consultancy, notes that forecasts from oil
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
companies have a lot more electric vehicles in them than they did a few years ago;
OPEC now expects 266m such vehicles to be on the street by 2040 (see chart 1).
Britain and France have both said that, by that time, new cars completely reliant on
internal combustion engines will be illegal.
That this is even conceivable is a tribute to the remarkable expansion of the
lithium-ion battery business—and to the belief that it is set to get much bigger. The
first such batteries went on sale just 26 years ago, in Sony’s CCD-TR1 camcorder.
The product was a hit: the batteries even more so, spreading to computers, phones,
cordless power tools, e-cigarettes and beyond. The more gadgets the world has
become hooked on, the more lithium-ion batteries it has needed. Last year
consumer products accounted for the production of lithium-ion batteries with a
total storage capacity of about 45 gigawatt-hours (GWh). To put that in context, if all
those batteries were charged up they could provide Britain, which uses on average
about 34GW of electricity, with about an hour and 20 minutes of juice.
In the same year production of lithium-ion
batteries for electric vehicles reached just over half
that capacity: 25GWh. But Sam Jaffe of Cairn ERA, a
battery consultancy, expects demand for vehicle
batteries to overtake that from consumer
electronics as early as next year, marking a pivotal
moment for the industry. Huge expansion is under
way. The top five manufacturers—Japan’s
Panasonic, South Korea’s LG Chem and Samsung
SDI, and China’s BYD and CATL—are ramping up
capital expenditure with a view to almost tripling
capacity by 2020 (see chart 2). The vast $5bn gigafactory Tesla is building with
Panasonic in Nevada is thought to already be producing about 4GWh a year. Tesla
says it will produce 35GWh in 2018. Just four years ago, that would have been
enough for all applications across the whole world.
The gigafactory is not just for cars. Hearing of electricity blackouts in South
Australia, Elon Musk, Tesla’s founder, tweeted to the state’s premier in March that
by the end of the year Tesla could provide enough battery storage to make sure that
the grid never fell over again. At the gigafactory they are now hard at work
cramming 129 megawatt-hours (MWh) of capacity into a facility designed to keep
their boss’s word. When installed on the other side of the Pacific, it will be the
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
biggest such grid-based system in the world; but many more are on the way.
Industrial-scale lithium-ion battery packs—essentially lots of the battery packs
used in cars wired together, their chemistry and electronics tweaked to support
quicker charging and discharging—are increasingly popular with grid operators
looking for ways to smooth out the effects of intermittent power supplies such as
solar and wind. Smaller battery packs are being bought by consumers who want
independence from the grid—or, indeed, to store the electricity they produce for
themselves so that it can be sold into the grid at the most lucrative time of day or
night. Batteries are becoming an integral part of the low-emissions future.
The chance to change
The fundamental operating principles of the lithium-ion battery are easily
understood. When the battery is charging an electric potential pulls lithium ions
into the recesses of a graphite-based electrode; when it is in use these ions migrate
back through a liquid electrolyte to a much more complex electrode made of
compounds containing lithium and other metals—the cathode. The fundamental
operating principles of the battery business, on the other hand, are considerably
more opaque, thanks to an almost paranoid taste for secrecy among suppliers and
the baffling economics of the Asian conglomerates that lead the market.
All the big producers are adding capacity in part
because it drives down unit costs, as the past few
years have shown (see chart 3). Lithium-ion cells
(the basic components of batteries) cost over
$1,000 a kilowatt-hour (kWh) in 2010; last year
they were in the $130-200 range. GM says it is
paying $145 per kWh to LG Chem for the cells that
make up the 60kWh battery for the Bolt (the pack,
thanks to labour, materials and electronics, costs
more than the sum of its cells). Tesla says that cells
for the Model 3 are cheaper. Lower costs are not the
only improvements; large amounts of R&D investment have led to better power
density (more storage per kilogram) and better durability (more discharge-then-
recharge cycles). The Bolt comes with a battery warranty of eight years.
But getting prices down this way has not just produced cheaper, better batteries. It
has also resulted in significant overcapacity. Cairn ERA estimates that last year the
manufacturing capacity for lithium-ion batteries exceeded demand by about a
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
third. Both it and BNEF say that the battery manufacturers are either losing money
or making only wafer-thin profits on every electric-vehicle battery they produce.
Despite the seeming glut, though, they all have plans to expand, in part to drive
prices even lower. Mr Jaffe explains their thinking as that of the “traditional Asian
conglomerate model”: sacrificing margins for market share. This may be a sound
strategy given the ever-greater hopes for electric vehicles in the near future. But at
the moment it is also one that looks rather unnerving. Although Mr Jaffe believes
that increased demand for both electric vehicles and stationary storage will justify
the rush to expand, he accepts that, for now, “It feels like a gold rush—but there’s
no gold.”
There are, though, other valuable metals in the picture. Making more batteries
means acquiring more lithium, as well as various other metals, including cobalt,
for the cathodes. These make up about 60% of the cost of a cell. Being assured of a
constant supply of them is as much a strategic consideration for battery-makers as
mastering electrochemistry. Since 2015 lithium prices have quadrupled, says Simon
Moores of Benchmark Mineral Intelligence, a consultancy. Cobalt’s price has more
than doubled over the same period; prices of chemicals containing nickel, also
used in cathodes, are rising too.
New supplies of lithium should not be too hard to find; there are thought to be at
least 210m tonnes of the stuff, says Mr Moores, compared with current annual
production of 180,000 tonnes. New fields are being opened up. In July SQM of
Chile, the world’s biggest lithium producer, said it would invest $110m in a lithium
joint venture in Western Australia. Cobalt is more tricky. Not only are supplies
scarcer, but a lot comes from the Democratic Republic of Congo. This raises both
ethical problems (production can rely on child labour) and business ones (no one
wants to depend on warlords for a vital resource). LG Chem has said it is trying to
reduce the cobalt component of its battery cells, while continuing to improve their
performance. Further down the road, recycling the metals from old batteries could
make the industry much more sustainable.
One of the reasons manufacturers are confidently piling on capacity despite
costlier raw materials is that, at the moment, little else can compete with their
wares. Other battery technologies that sound as if, in principle, they might have
advantages are often touted—but none of them enjoys the decades of development
that have turned lithium-ion devices from an intriguing idea into a dominant
technology. This work has generated a huge amount of knowledge about the fine
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
details of manufacturability, the choice of electrolytes and the ever more
sophisticated nanotechnology of the metallic cathodes.
Kenan Sahin, who heads CAMX Power, an American company that supplies
materials for cathodes, says the lithium-ion battery’s cost and weight, its ability to
charge and discharge repeatedly, its durability and its safety have all been achieved
through an endless process of fine-tuning, rather than eureka moments. He likens
battery chemistry to drug discovery in the pharmaceutical industry. “It’s really
difficult. Whatever you have needs to work at large scale and the side-effects have
to be acceptable,” he says. This is all hard for a would-be usurper to emulate. For the
foreseeable future, ever-improving lithium-ion technology—perhaps with new
solid electrolytes—will make the running, benefiting from yet more refinements
the more applications it supports.
Until now, the mainstay has been a cylindrical cell called the 18650, which looks
like a rifle shell. It is 65 millimetres long, 18mm in diameter and has an energy
density of perhaps 250 watt-hours per kilogram. (The energy density of petrol, for
comparison, is about 50 times greater; but the cell can store that much energy
hundreds or thousands of times.) Tesla and Panasonic have now developed the
2170, a bit longer and wider; Mr Musk says it will be the most energy-dense battery
on the market. The company says that the cost of driving a Model 3, released in late
July to rave reviews, will be half that of any of its previous vehicles. At the car’s
launch Mr Musk seemed a bit overawed at the prospect of producing 500,000 such
vehicles next year: “Welcome to production hell,” he told the assembled workers.
On August 7th Tesla announced plans to sell bonds worth $1.5bn to support its
expansion, giving a badly needed breather to the equity market, where it usually
raises cash (and where its value has risen by two-thirds over the past year). The
company has said that it has 455,000 pre-orders for the Model 3, which, if taken up,
would generate enough cashflow by year-end to start shoring up the company’s
finances. If it all goes to plan, Mr Musk hopes to see the gigafactory become the
largest building in the world, cranking out 100GWh a year—and to be joined by
further gigafactories elsewhere; the next would probably be in China.
All this presupposes that electric vehicles really are poised for take-off. There is no
doubt that they are getting better and cheaper. But there are other constraints on
their use, most notably charging. In Britain 43% of car owners do not have access to
off-street parking and thus would not be able to charge cars at home. Nor are
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8/12/2017 After electric cars, what more will it take for batteries to change the face of energy?
domestic supplies always up to the strains of, say, an 11kW charger; using the kettle
or immersion heater during the six hours it would take to charge up a 90kWh
battery could blow the fuses. The answer will be fast-charging stations, possibly
like petrol stations; some car companies are beginning to build them as a way to
assuage the “range anxiety” that turns some drivers off electric vehicles. Whether
such facilities can expand fast enough to allow the industry’s expansive ambitions
to be fulfilled remains an open question.
This uncertainty about the speed at which electric-vehicle usage will grow is one of
the things that makes stationary storage an attractive alternative market for the
battery-makers. Installations such as the one recently built in a nondescript lot on
the outskirts of San Diego, California, by San Diego Gas & Electric (SDGE) have none
of the glamour of glistening new models hitting showrooms. It is a 384,000-cell car
battery impersonating a trailer park: the dullest Transformer ever. But its
ordinariness is part of its beauty, says Caroline Winn, chief operating officer of
SDGE; the utility uses it to offer power at times of peak demand. Modular
construction meant the 120MWh facility—just a touch smaller than the one Tesla
has promised South Australia—was ready to go only eight months after the start of
the project. It runs so quietly it is hardly audible. Building a gas turbine to do the
same job would have been cheaper but would have taken years, in the unlikely
event that local residents had given it the go-ahead in the first place. The battery
facility “is a lot prettier than a gas turbine,” Ms Winn says.
The final source of energy
For Tesla and other big battery-makers grid-storage projects are the most attractive
part of the electricity market; they offer contracts that use up otherwise surplus
capacity in satisfyingly large job lots. But there is also demand for batteries to go
“behind the meter”. Tesla serves this market with its Powerwall domestic battery
pack, designed to complement the solar panels and solar tiles it offers. Nissan, too,
is looking at behind-the-meter applications. It is working with Eaton, an American
power-management company, to put “second-life”, or partially used, Leaf batteries
into packs that can provide businesses and factories with back-up power, thus
replacing polluting diesel generators. The first big customer is the Amsterdam
Arena, home to AFC Ajax, a football club.
Such systems do not necessarily compete on price; but governments are providing
various incentives for them. In May the New York State regulator gave Con Edison, a
utility, the right to allow business customers to install batteries in Brooklyn and
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Queens to export electricity to the grid. New York,
with a rickety grid that dates back over a century to
the days of George Westinghouse and Nikola Tesla,
is struggling to integrate more renewable energy
into its supplies, and storage offers it a new way to
manage peak power demand. Jason Doling, a state
energy official, says the programme should be
ideal for high-rise blocks; powering lifts from the
battery in mornings and evenings when electricity
prices are highest would be a boon.
The New York fire department remains concerned
that lithium-ion batteries in buildings pose a fire
hazard, however. When they are being installed, it
keeps its engines on standby. As the externally
combusting fiasco of Samsung’s Galaxy Note 7 smartphones reminded the world
last year, lithium-ion batteries can, if badly or over-ambitiously designed, short
circuit in incendiary ways. In general, however, new materials and ceramic
coatings for electrodes have made the batteries for cars very safe.
Setting aside concerns about combustion, companies that install batteries for
behind-the-meter storage, and indeed for grid storage, say they are hampered by
outdated regulation and by insurance problems. This limits the funding available
to them, according to Anil Srivastava, who runs Leclanché, a Swiss battery-
producer. They also need to find ways to make stationary storage pay. Sometimes,
as in San Diego, it is pretty much the only solution to the demands of a regulator:
the California Public Utilities Commission was worried about blackouts in Los
Angeles in the wake of a leak at the Aliso Canyon gas-storage facility in 2015. When
price is more of an object, the batteries need to find more than one service to
provide, a procedure known as “revenue stacking”. For example, a system might be
designed to offer power to the grid for short-term frequency regulation as well as
providing a way of dealing with peak demand.
It sounds complicated. But finding more than one way to sell the same thing is
second nature in the battery business, as it fine-tunes its wares for every market
and every scale. And though today’s exuberance may look a little scary, in the long
run that ability looks likely to see the industry do very nicely indeed.
This article appeared in the Briefing section of the print edition under the headline "Electrifying everything"
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