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Lithium Economics
Lithium-ion
Batteries: New Business Opportunities?
Sep
02, 2009
Are lithium-ion
batteries really ready to hit the road and if they are, where might new
business opportunities lie?
Given
the growing recent interest in Lithium-ion batteries for different
applications, both within the electric car industry as well as outside of it,
many new products and services are beginning to appear at the advent of a
promising market. Nevertheless, there is still some confusion as to the real
potential for commercialization of this emerging energy storage technology.
In
a recent
interview given
to Business Week, Dr. Menahem Anderman, Founder and President of Total Battery,
a consulting firm specialized in opening business opportunities in the advanced
battery sector, for example, wrongly argues that since Lithium-ion battery
technology is still in its infancy, the danger of using it may be not be
negligible: "A significant risk is that one cell failure will take
other cells with it and then [the trouble] could spread". As is well
known, the safety issue of Li-ion batteries was linked to the use of Cobalt in
their chemical composition. With the introduction of at least two other types
of Li-ion batteries (based on Manganese and Iron Phosphate) into the market,
most carmakers now agree that the problem has been solved. See, for
instance, the recent interview given to CNN by Mr. Wan Chuanfu, Founder and
President of Build your Dreams (BYD), a Chinese company that is revolutionizing
the electric car market.
Moreover,
the above mentioned consulting firm does not seem to have a specific knowledge
about the main trends of the industry in terms of what is actually happening in
the automobile industry. It is not familiar, for example, with
recent events such as the recent decision by a number of carmakers (i.e. GM,
Nissan, Toyota, etc.) to start using Li-ion (instead of NiMH) batteries in
hybrid electric vehicles (both conventional and plug-in) which may pave the way
for the inauguration of the Lithium Era in the world (See my recent Seeking
Alpha article).
Also,
it is not clear about the factors that determine whether Li-ion batteries will
be adopted by the global automobile industry in its transition to electric propulsion. In
fact, in a recent Bloomberg
story,
Mr. Anderman contends: "I would suggest that the EV market in
the U.S. will basically be the California regulatory requirement, plus perhaps
20,000 units.” He then goes on to argue that: "As long as the gasoline
price is under $5 a gallon, there’s no real market for EVs." This
view, of course, ignores other factors that may have something to do with the
formation of the market of both range-extended as well as battery
electric vehicles, such as (i) not only the level of the oil prices
but also its volatility; (ii) technological development of such energy storage
systems; and (iii) resistance to change, mostly focused in terms of a
transition from an energy market dominated by multinational oil companies to a
market ruled by state-owned national companies (See my presentation at the Inaugural
Lithium Supply & Markets Conference held in January 2009 in Santiago
Chile).
Interestingly
enough, I couldn't find in the firm's websites any specific business approach
to new ventures particularly in the Li-ion battery industry. This shouldn't be
surprising given Dr. Anderman's rather skeptical view of the EV market. To the
extent that, the Li-ion battery is about half the electric car, both in terms
of importance and cost, in a way chances are that if a firm has the battery
technology, it will also be able to build an electric car. This is in fact the
kind of approach followed by BYD and other Chinese car companies. With slight
variations, GM and Mitsubishi may be following a similar approach. Remember
also that GM has particularly promised a 10-year guarantee for its Volt car
battery. Under these circumstances, it is highly unlikely that these
batteries may be freely commercialized in the market. They will be
probably sold by those carmakers themselves. Certainly, one could always invest
in these companies, but I feel that is not the kind of venture all new
entrepreneurs might be looking for. In this context, there appears a need for
identifying some other interesting business opportunities in the Li-ion battery
and/or electric vehicle markets.
In
terms of other business opportunities that imply leasing (instead of
selling) the batteries, which is essentially Better Place's (and
Nissan-Renault's) approach, I can only say that this may be highly dependent on
technological development of the batteries. If, for instance,
technological development comes around fast, then it would not make any sense
to invest in any costly battery replacement infrastructure, such as the one
proposed by both Shai Agassi and the Japanese-French Consortium. I have been
following closely this issue and I tend to believe that this may be a
short-lived business opportunity. But this is only a preliminary
impression, one that needs further scrutiny.
Lastly,
there might be as well other business opportunities outside (but connected to)
the Li-ion battery and/or electric car market that may also look promising but
they still require further analysis.
Times Article Viewed:
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Note.- This is a republication of a blog originally published on EVWorld.com on September 02, 2009.
