They can have all the contrarian views they like.........it does not change my view of whats coming over the next few years
The Battery Cycle – Setting the Record Straight
By Anthony Milewski, Chairman, Cobalt 27
The much-touted electric vehicle revolution is upon us and battery storage development is taking off. Look no further than recent EV sales. Over the past five years approximately 5 million EVs have been sold. In the past twelve months 1 million EVs have been sold and over the next twelve months we are on pace to sell another 1.5 million EVs.
When you look at the adoption of new technology, a common theme emerges whether the technology is an iPhone, a personal computer, or the original car, once a tipping point is hit in terms of sales, adoption accelerates. The major barriers for EV adoption are falling away, namely price and range. Similar barriers are falling for grid storage. As I travel around the world speaking with investors, I find a growing understanding and appreciation for the accelerating EV adoption rates and emerging battery storage secular changes underway. We are facing a structural change in energy markets and industries such as the automobile industry. Investors are taking a wide range of approaches on how to invest in these once-in-a-generation structural changes. Many investors are starting to realize that the basic materials that comprise EVs and their batteries, the knock-on effect of electrification on the power grid, as well as energy storage systems are going to have tremendous demand
growth in the coming years and present a unique investment opportunity. In particular, copper, lithium, nickel and cobalt will benefit from the batteries that power EVs. Grid scale battery storage technology is still evolving, but in addition to the aforementioned metals, vanadium, zinc and lead are also likely to play a major role in the future of grid storage. Copper and aluminum will also see significant demand as power grids evolve.
So why are junior mining companies with commodity exposure to these changes underway finding it hard to raise capital? I believe a major impediment keeping investors on the sideline is understanding the battery life cycle, how battery technology evolves and how long it takes to bring a new battery to market. Announcements by companies proclaiming to eliminate a certain commodity from their battery, or invent a new type of battery all together can have a material impact on investor sentiment.
Often these announcements regarding new battery technologies or chemistries give little context to the economic viability of the technology or time to market. Such an announcement may fail to mention the new technology in question can only be created in a lab or that the battery’s cost would be prohibitive, or in the case of EVs, the weight too heavy for a car. The lack of details around these types of announcements causes confusion in the investor community. Many generalist investors don’t understand battery technology and often delay in- vestment decisions as they try to deter- mine the future chemistries of batteries. How long does it take from a scientific breakthrough to commercial battery production? From discovery of a new material to inclusion into a chemistry to wide spread commercial use can take between 10 and 20 years. The Joint Center for Energy Storage Research has come up with a matrix for thinking about the actual time it takes for this process:
Scientific discovery of a new material(s) or process. There is no time frame for this.
New class of material synthesized. Scientists may spend one to two years on this step.
Prove performance of the half cell. Between two to five years.
Proven performance of lab scale fuel cells. Between two to five years.
Material scale-up, cell testing, and scaling up to pack. Between five to ten years.
The implications of this matrix are pro- found for the batteries that power EVs and should be considered by investors. With the exception of Tesla that uses an NCA battery chemistry, nearly every other automaker in the world is using an NMC chemistry. Think about that for a moment. The entire industry has adopted a standard. Billions of dollars of infrastructure is being built to very specific battery chemistries. Academics can debate if there was a more efficient or better technology to power EVs, however, I am reminded of the roll out of VHS tapes in the 80s. While Betamax may have been a better technology, the debate was academic because the entire industry adopted a standard.
When one takes into consideration how long and expensive it can be to invent, develop, and commercialize a new battery and the ongoing commitment by the automobile and battery industries to the current battery formulation, any new commercialized entrants into the space are a decade or more away. In my view, the conversation should be around innovation and development of the NMC and to a lesser extent the NCA technology. Innovation on an industrial scale follows money, and all of the money is being spent on the NMC and NCA lithium-ion batteries for EVs. Certainly we are going to see innovation and developments within the current battery chemistries, however, it is very unlikely that we will see a new widely adopted technology overtake the current lithium-ion battery for at least a decade and probably longer.
Helping investors, journalists and other market participants to under- stand the difficulties and timelines required to come up with new batteries should help to instill confidence that investing in a project that may be years away from production is still a good bet. By better understanding the challenges in developing new batteries some of the guess work in building supply-demand models around basic materials required for battery chemistries should be re- moved. As EV adoption accelerates, the demand for certain basic materials will be substantial and impact commodity price. Mines take years from discovery to production. It is important that the mines that will supply basic materials to the EV revolution are well-funded and continue down the development path now so that the materials are avail- able to the market in the quantity and at the price required. Understanding the battery life cycle is critical as it creates awareness to just how hard it is to bring a new battery into commercialization and for better or worse, the global automobile and battery industries have already chosen their winner – the lithium-ion battery power by the NMC chemistry.
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