A Ten Year Outlook for the Development of Power Batteries and Its Impact on the Electric Vehicle Sector
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Earlier last year, I took a 3-pieces story series to illustrate Tesla’s development in battery technology and its advantages. Although the scale of ternary materials’ application, especially for high-nickel cathode use cases, has not reached its peak, is it too early to anticipate the next phases of power battery development in light of the excitement surrounding electric vehicles? Power batteries are, in my view, the foundation of electrification globally. Thus I would like to examine the 10-year outlook for battery development and use it as part of my investment thesis when following Tesla’s battery roadmap.
So, I have 3 main arguments for the future:
· There will be a shortage of cobalt and nickel for lithium batteries around 2030, and the development of ternary materials will be unsustainable;
· The future cathode should be a “high-energy-density” material as opposed to the current embedded cathode material;
· The adaptation of silicon-based materials with other new cathode composites will not only have to increase the energy density but also dramatically reduce the cost of lithium-ion batteries.
Electric vehicles require a source of power. To develop pure electric vehicles, battery characteristics such as energy density, life, safety, and cost are vital. The advantages of Li-ion batteries (LIBs) in modern EVs include their high specific energy, low self-discharge, and long life. The performance of LIBs has improved greatly over the past 20 years as a result of technological advancements. It is estimated that the specific energy density of lithium batteries has increased by more than three times, from less than 200Wh/L to over 700Wh/L. In this case, the cost of production is approximately 3% of the original level, and the current cost can be controlled below $150/kWh. However, this still represents a higher cost per kWh than the 100$/kWh target set by the US Department of Energy. Meanwhile, with a rating of 50–100 kWh, the current battery weighs approximately 600 kilograms and has a volume of approximately 500 liters.
In view of the fact that lithium batteries currently have an energy density close to their theoretical maximum, the increase in energy density of LIBs is slowly waning. Considering the rapid growth of the battery market, there is little hope of a reduction in LIB prices. As a result of the surge in lithium battery production over the past two years, the price of cobalt has almost quadrupled from US$ 22 to US$ 81 per kilogram. Increasing market demand and rapid price increases have led some manufacturers to cut corners and violate environmental and safety regulations. For example, in China, dust from graphite mines has damaged crops, contaminated villages, and polluted drinking water. There are also allegations that mining companies in Africa exploit child labor. It is not uncommon for small mines that lack gas masks and other protective equipment to manually mine ore in violation of the law. A number of companies, including BMW, have formulated stringent policies to compel their cobalt suppliers, whereas other manufacturers do not.
In light of all this, developing inexpensive alternative types of electrodes for common metals such as iron and copper seems the simplest solution. In the opinion of Georgia Institute of Technology’s Gleb Yushin and colleagues, the most promising candidates involve ‘conversion materials’, such as copper or iron fluorides and silicon. These store lithium ions by bonding chemically with them. Yet, this technology is still in its infancy. For practical applications, it will be necessary to overcome the issues of stability, charging speed, and manufacturing. According to Professor Gleb Yushin, materials scientists, engineers, and funding agencies must give priority to the development of electrodes derived from rich elements. Otherwise, the promotion of electric vehicles will be adversely affected in ten years.
Nickel and cobalt are scarce and expensive
In the current commercial batteries used in electric vehicles, lithium ions are trapped in tiny voids within the crystals that comprise the electrodes (intercalation electrodes). In general, the negative electrode is composed of graphite, and the positive electrode is composed of metal oxide.
The most common ternary cathode materials are nickel cobalt aluminum oxide (NCA) and nickel cobalt manganese oxide (NCM). Typical lithium-ion battery cathode materials usually require 6–12kg of cobalt and 36–48kg of nickel for a 100kg battery. Typically, cobalt is found as a by-product of copper or nickel mining, and it requires complicated processes to separate it from other metals. Few cobalt deposits are concentrated in a manner that makes them economically viable for mining. In general, most cobalt deposits contain only 0.003% of the metal. Thus, despite the fact that there are 10¹⁵ tons of cobalt on earth, only 10⁷ tons may be used. Similarly, only 10⁸ tons of the 10¹⁵ tons of nickel reserves around the world are of commercial value.
There have only been a few discoveries of cobalt-rich minerals. Africa Congo (DRC) supplied 56% of the world’s 148,000 tons of cobalt in 2015. Most of them are headed for China, where 200000–400000 tonnes of cobalt are in stock. In Australia, 14% of the world’s cobalt reserves can be mined from deep seabed deposits. However, the mining costs, ecology, and economic factors make it impossible to fully exploit.
In a similar vein, more than a dozen countries dominate the production of nickel. 72% of the world’s 2.1 million tons of ore came from Indonesia, the Philippines, Canada, New Caledonia, Russia, and Australia in 2017. Only one-tenth is used for lithium batteries; the remainder is primarily used for steel and electronic products. Although the cost of extraction is lower for nickel than for cobalt, the increase in demand since 2015 has led to a price increase of about 50% for nickel, which went from US$ 9 per kilogram to US$ 14 per kilogram. Nickel and cobalt have both experienced price spikes and collapses in the past few years. For example, disruptions in supply in Australia, increasing demand for steel in China, and actions by hedge fund managers increased nickel prices fivefold, while cobalt prices increased threefold.
Nickel and cobalt are anticipated to be in short supply
Cobalt and nickel will run out of supply within two decades under this growth trajectory. In light of the increasing demand for lithium-ion batteries, it is predicted that cobalt will be in short supply by 2030, and nickel may run out before 2037. Even though we may be able to mine low-quality ore, higher processing costs will increase the price of cobalt and nickel.
Manufacturers and governments anticipate that 10 million to 20 million electric vehicles will be produced annually by 2025. Using the current assumption, each automotive battery requires 10 kilograms of cobalt, so by 2025, electric vehicles would need 100,000–200,000 tonnes of cobalt per year, which is more than the current global production. In addition, 400 million to 800 million tonnes of nickel would be needed annually or 20–40% of all the metals used today. There will be an increased demand for batteries when trucks, buses, airplanes, and ships become electric. The current mining capacity will be overwhelmed by 2030. Similarly, the demand for nickel will almost double by 2050. The shortage of nickel will become evident by the middle of 2030, and recycling will not be able to fill the void. Since lithium-ion batteries have a lifespan of 15 to 20 years, which is three times longer than that of lead-acid batteries. Upon reaching the peak of supply, we estimate that the price of electric car batteries may rise by over $1,000.
Where will battery materials go in the future?
The answer is to use conventional metals (iron, copper) to produce lithium-ion battery cathodes. For example, iron is not only cheap (as low as 6 cents /kg ) but also abundant in reserves ( 76 billion tons). Since traditional iron-rich resources ( LiFePO4 ) and manganese-rich resources ( LiMnO2 or LiMn2O4) have various defects, the most promising alternative is to use “ replacement electrode materials “. Copper/iron fluoride and silicon are able to chemically react with lithium ions to create lithium storage, which can store six times as much energy as standard positive electrodes.
An overview of the conversion cathode material: its electrochemical conversion reaction is an innovation in lithium storage that differs from traditional lithium insertion/extraction mechanisms. Electrodes based on electrochemical conversion have very high specific capacities because many electrons are transferred during the reaction. This type of electrode material is mainly composed of a transition metal oxide, sulfide, fluoride, or a mixture of the three, the transition metal fluoride has a higher operating potential making it more suitable for the positive electrode of a lithium-ion battery. Among them, silicon-based materials are well suited for matching.
If these two materials are successfully incorporated, then the size of batteries used in electric vehicles can be cut in half, while their weight, volume, and cost will all be reduced by half or more. In order to meet this objective, battery researchers must develop high-performance fluoride materials and more effective electrolytes. Engineering teams must devote considerable effort to developing equipment and processes that utilize these materials. Furthermore, batteries made of conversion materials have some shortcomings, such as low conductivity and poor rate performance; serious reactions between the conversion materials and electrolyte; thick positive and negative SEI films with voltage hysteresis; after the electrode is charged, there is more expansion and contraction.
Thus to form a better investment thesis for the EV industry, keep an eye on:
- The capacity and capability of mining industry under existing battery mechanism
- The development of alternative battery structure (Which I will take another piece to elaborate using BYD development as example)
