The battery boom could end up burning some investors
Project investors begin to worry as fast-paced advances could make technology obsolete
Some of the latest battery technologies may become obsolete before reaching the market because of the breakneck pace of advances in the industry.
Teams of scientists from San Francisco to Shenzhen are experimenting with new chemical processes to improve the traditional lithium-ion cell and find new ways to bottle up electricity for use at another time. Investors in those projects are starting to worry that they picked the wrong technology.
That’s turning the debate about so-called stranded assets on its head. To date, the term has been deployed to refer to fossil-fuel projects that may turn unprofitable as pollution regulations tighten. In the future, upheaval in the way energy storage devices are made mean that investments in batteries may turn unprofitable even though they’re at the heart of transforming the way the energy system works.
“If you suddenly have a step change in technology that offers higher energy density, people will want to adopt that quickly, which could mean that they’ll have to reinvest in manufacturing equipment again,” said James Frith, energy storage analyst at BloombergNEF. “Worst case, you may have to redesign entire factories.”
Investment into startups developing new types of batteries rose to more than $1.5 billion in the first half of the year, almost twice the level in 2017, data from Cleantech Group shows.
Carmakers Volkswagen, Hyundai and Renault-NissanMitsubishi have all channelled funds into battery companies. The Japanese industry group New Energy and Industrial Technology Development Organization has announced that it will spend $90 million on researching solid-state devices with a group of universities and manufacturers. “There is a tremendous amount of money being put in- to battery research right now, and eventually that will lead to evolution of technology,” said Peter Carlsson, founder and CEO of Northvolt, a Stockholm-based company that’s constructing a $4.5 billion (U.S.) battery manufacturing facility. “We are building a manufacturing platform to have the capability of evolving.”
Not every technology is likely to succeed. There are thousands of different systems being tested across the industry, involving both major manufacturing companies to startups and universities. Even the lithium-ion cells used in most electric cars and mobile phones have varying manufacturing processes.
“There’s different flavours of lithium-ion, different chemistries, and even within those chemistries there’s different variants on how those are made up,” said TJ Winter, a principal manager at Fluence Corp., a U.S.-based energy storage supplier. “We spend a fair amount of time just screening developments.”
The competition is getting fiercer as carmakers electrify more of their models and energy-storage units become more prevalent in homes and businesses. Demand for battery capacity will rise to 1,784 gigawatt hours by 2030 from about 100 gigawatt-hours currently, according to forecasts from BloombergNEF.
About $16.7 billion has already been spent to install conventional battery factories around the world, and another $42 billion of facilities are expected to be up and running by 2022, BloombergNEF data show.
Lithium-ion will remain the dominant power source for electric cars and storage units for the next decade, according to the International Energy Agency. After 2025, new technologies are likely to enter the market, the Paris-based organization said in its latest Electric Vehicle Outlook.
That leaves open the possibil- ity of either current lithium-ion technologies falling out of favour or newer projects not measuring up to the incumbents. Either way, some investors are likely to end up with batteries that aren’t economical. “There’s an enormous amount of bandwidth being created in the world for manufacturing of lithium-ion batteries,” said Jeff Chamberlain, chief executive officer of Volta Energy Technologies.
Equinor, Norway’s biggest energy company, has been screening storage-focused startups for the past three years but hasn’t yet made an investment in any one developer. “Storage is a prioritized thing for us,” said Bala Nagarajan, an investment director at Equinor Energy Ventures. “There are still technology improvements that are necessary for the adoption of clean energy and adoption of electric vehicles. Is there a chance that our future investments in storage technologies could be failures? Absolutely yes.”