John Petersen
Before moving to Switzerland in 1998 I lived and worked in Houston, Texas, a place that teaches you the importance of keeping an eye on long-term weather forecasts, particularly during hurricane season. Most of the time it turns out to be wasted effort because Mother Nature is fickle and highly unpredictable, but when it’s important it’s really important. The same logic holds for investments in energy storage and electric vehicle technologies. You have to keep a close eye on the industrial and regulatory climate and be ready to change your plans when conditions change.
For eighteen months I’ve cautioned that lithium-ion batteries are not suitable or cost-effective for use in cars with plugs, which are collectively classified as grid enabled vehicles, or GEVs, by the Electrification Coalition, a newly organized industrial lobby for the lithium-ion battery and electric vehicle industries. I raised the storm watch flag based on a DOE report that discusses the technical and economic challenges of using lithium-ion batteries in GEVs; a White House report that the GM Volt is not likely to be competitive; an unpublished DOE roadmap for lithium-ion battery development that highlights the need for several generations of improvement in battery chemistry and manufacturing technology; a National Research Council report that battery costs are likely to remain high for decades; and an Energy Information Administration forecast that GEVs won’t account for more than 3% of the market before 2035. Politicians, reporters and eco-clerics are all enamored with GEVs, but they generally live in a “wouldn’t if be great if …?” world where economics, paychecks and monthly bills don’t matter. In contrast, the people who bear the front line responsibility for implementing unsound policies see nothing but problems.
Now I think it’s probably time to upgrade the storm watch to a storm warning.
Storm Warning I: Lithium-Ion Batteries
On December 7, 2009, the DOE’s Advanced Research Projects Agency – Energy, which goes by the acronym ARPA-E, released a $100 million funding opportunity announcement for battery research and development projects that have a reasonable chance of achieving the long-term price and performance goals for electric vehicle batteries that lithium-ion technology can’t even approach. While DOE funding opportunity announcements are a little arcane for most investors, I found the discussion in the Background section of the Program Overview revealing, which is why I’m upgrading my storm watch to a storm warning.
The background discussion starts out by repeating the widely publicized facts that the U.S. imports roughly 60% of its petroleum and uses almost 70% of available supplies for transportation. After describing the desirable economic and environmental impacts of shifting transportation to the electric grid, ARPA-E lays the blame for the anticipated shortcomings of GEVs squarely at the feet of the battery industry:
“However, the widespread deployment of electric vehicles has been prevented to date by their limited range and high upfront capital costs due to the limitations of currently available battery technologies. Currently available high performance Lithium-ion battery technologies are limited to system level energy densities of ~100-120 Wh/kg, costs of $800-$1200/kWh, and short cycle life, resulting in unacceptably short driving range for the vast majority of consumers and un-economically high lifetime costs for electric vehicles.”
After praising recent strides that have been made toward developing high-power batteries for HEVs (without plugs), the tone becomes decidedly ominous on the topic of high-energy batteries for GEVs where oft-stated performance goals “are pushing up against the fundamental energy density limits of traditional Lithium-ion based batteries.” After referencing “strong doubts in the battery community as to whether the energy density of Lithium-ion batteries will be able to be pushed to the 200+ Wh/kg system level energy densities required for widespread deployment of all-electric vehicles” and grave reservations “as to whether traditional Lithium-ion based battery production for electrified vehicles offers an opportunity for the U.S. to assert domestic technology and manufacturing leadership within the context of the existing Lithium-ion based battery technology platform,” the funding opportunity announcement confirms ARPA-E’s “strong interest in supporting the development of new high energy, low cost battery technology approaches beyond traditional Lithium-ion batteries” and offers up to $100 million in grants for battery researchers that are willing to rise to the challenge.
Overall the discussion struck me as a politically guarded admission of the inescapable reality that lithium-ion batteries are not good enough, durable enough or cheap enough for GEVs; and they’re not expected to improve much in the foreseeable future. In other words, it’s time to kick lithium-ion batteries to the sidelines, launch Plan B and develop new battery technologies that may actually be capable of doing the required work at an acceptable cost.
Storm Warning II: Raw Materials Constraints In Electric Drive Motors
A second storm warning that came to my attention this weekend is an issue that my friend Jack Lifton has been writing about for years Chinese domination of the global market for rare earth metals. On December 22, 2009 the DOE released a “Notice of Intent – FY2010 Vehicle Technologies Program Wide Broad Agency Announcement” that includes the following area of interest:
“Subtopic 3 (d)-Motors Using No Rare Earth Permanent Magnets for Advanced EDV Electric Traction Drives
This subtopic is for motor technologies that eliminate the use of rare earth permanent magnets. Analysis of recent price trends and resource availability indicate cost and availability concerns of these material types. Approaches may include the use of non-rare earth magnet materials or motor technologies that do not use permanent magnets to meet the desired size, weight, and cost targets.”
I can’t wait to see the formal funding opportunity announcement on this one. We may even see a carefully worded admission that the Chinese need their rare earth production to satisfy domestic demand and mining is so unpopular with the eco-clerics that it’s easier to do without GEVs unless we can invent a whole new class electric drive motors that are not material co
nstrained. I wonder how long the anti-mining attitudes will last when the general public comes to the realization that the generators in wind turbines are subject to the same raw material constraints.
The Perfect Storm
In combination I view these two DOE funding opportunities as a one-two punch for GEVs. The lithium-ion batteries that the investment world is valuing at nosebleed levels are not going to be up to the job and even if the batteries improve beyond the DOE’s wildest expectations there won’t be any permanent magnet motors to drive the wheels. From where I sit, it’s beginning to look like another abortive government attempt to create a market for technologies that consumers don’t want and global supply chains can’t support. Other fine examples of the syndrome include:
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Timeframe |
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Revolutionary Technology |
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25 years ago |
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Methanol |
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15 years ago |
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Electric vehicles |
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10 years ago |
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HEVs and Electric vehicles |
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6 years ago |
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Hydrogen Fuel Cells |
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3 years ago |
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Ethanol |
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Today |
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2011 |
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What’s next? |
Disclosure: Author is a former director Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide Technologies (XIDE), C&D Technologies (CHP) Active Power (ACPW), ZBB Energy (ZBB) and Great Western Minerals Group (GWG.V).
Without getting into a dispute over lithium batteries, the national scandal is that for a decade we have had a battery, NiMH, which can be the basis of a sound electric car industry. This battery has been proven reliable and durable over billions of miles by hybrids. In the few hundred pure electric vehicles that Toyota didn’t destroy they have given virtually trouble-free performance for distances of over a hundred thousand miles. Reputedly SCE, which operates a fleet of them, has increased the range of this small SUV to about 150 miles.
Desertstraw, NiMH is a thoroughly proven battery technology that performs exceptionally in hundreds of thousands of Prius class HEVs. The problem is that the M is a rare earth metal named lanthanum that is in very short supply. At present, China is responsible for over 95% of global rare earth metal production and they’re clamping down on exports because they need their rare earth metal production for their domestic market. If you’re looking for the real reason everybody is talking lithium, you need look no further than global shortages of lanthanum.
What a load of rubbish! In your ignorance you have completely passed by induction motors, as used by Tesla Motors that use nothing more exotic than copper and steel!
As for Li-ion batteries, Nisan have already committed to production of lithium-ion battery using a lithium nickel manganese cobalt oxide cathode with roughly DOUBLE the power density as standard Li-ion at approx the same price (which will reduce with volume)
If you’re claiming you can predict the future (ie. how the EV market will pan out) then get down to the local horse track…
You can’t read a few reports and become an expert on an ENGINEERING subject! You have to actually know something about ENGINEERING!
Great points on Li-ion and rare earth magnets.
Adding to your points on the post on GEVs: part of the special sauce to sell the concept is always the promise of SmartGrid integration for “peak load balancing” – that energy will flow in and out of your park-n-plugged GEV from and to the utility grid. Now getting power from the grid is so simple, your mother-in-law could go (indeed, may well have already gone) to Home Depot and buy parts for $20 and build an applicance to take power from the grid (think “lamp”).
But putting power back to the grid is very complicated, requires relatively expensive electronic control (rated to withstand lightning strikes), gets involved with regulatory issues, and requires reliable auditing of costs to and fro – all this for 25kWh of power if it drains your GEV (making it unusable until recharged off-peak), worth $2 at 0.08 per kWh! Yeah baby – another viable plan there!
Paul, Tesla may be using an induction motor, but Toyota, Nissan and all of the top tier OEMs plan to use permanent magnets. Presumably they have a good reason for doing so. If it was a non-issue, the DOE wouldn’t be planning another major research program to find a solution.
The quote on battery costs and energy comes directly from the DOE and the conclusions about future prices come directly from the National Research Council. I’m not predicting. I’m merely reporting what the experts predict. The long awaited price collapse in lithium batteries could happen any day now, but it won’t happen without a battery fairy godmother to slash raw materials and equipment costs. I’d also point out that collapsing battery prices will never be a good thing for stockholders of battery companies.
It doesn’t take an engineering degree to read technical reports, think about what the experts are saying, and perform rudimentary financial calculations to forecast the impact. It does take time and effort. I would encourage you to invest a little of both before criticizing.
Why are so many manufacturers developing electric vehicles? I hear of new models and makers almost daily. Do they not have the same insight as you?
Much of the impetus for plug-ins comes from a small but very vocal group of activists and government officials. When faced with ever tightening environmental restrictions and the veiled threat of “you will make a plug-in if you want to continue selling cars in California” it’s far easier to capitulate with grace than fight the powers that be, even if you expect disaster.
John Peterson: your paranoid view of California “environmental activists” forcing auto makers to produce plug-in electric/hybrid cars would be more persuasive if only American companies were adopting this “self-destructive behavior”. California has less people than Spain – not exactly the “must have” market of, say, China, which is 42 times bigger. Even Japan is 4 times bigger.
Given that Japanese, Chinese, French, and German automakers are also rushing to bring such cars to their domestic markets, there is clearly something else going on: look into Peak Oil for a clue as to why the world is moving away from classical ICE cars.
Were it a country, California would be the 8th largest economy in the world. That is by definition a must have market.
I agree wholeheartedly that we must move away from conventional ICE. The problem is that moving from ICE to HEV (without plugs) will save 4X more gasoline and 10X more CO2 emissions than moving to plug-in vehicles. For more detail see todays new article.
If California were a country, it would be the 10th largest economy in the world.
The U.S., China, Japan, India, Germany, Russia, United Kingdom, France and Brazil would all be larger, and Italy would be just about as large.
But it is not “economies” that buy cars, it’s people. 37 million people of California might have a large GSP, but the per capita income only ranks 7th in the US. Large parts of the central valley are impoverished – Larry Ellison of Oracle might make $500 million/year, but how many cars will he buy ? 3 ? The nine countries, plus Italy, all have many more people than California.
China and India are the obvious prizes for auto manufacturers, not California.
Plug-in vehicles replace oil products with electricity.
Cleaning up the electrical grid is a separate problem.
That’s exactly the problem!
HEVs use a little bit of battery capacity to reduce gasoline waste – to reduce the total amount of energy consumed in transportation.
Plug-ins use a lot of battery capacity to take the fuel combustion out from under the hood and move it to a power plant. They do nothing to reduce aggregate consumption of energy.
For the foreseeable future, battery supplies will be the chokepoint in the commercialization of HEVs and plug-ins. If the batteries are devoted to HEVs there is an immense reduction in global energy use. If the batteries are devoted to plug-ins, global use does not change.
Thanks for giving me an idea for my next article.
John Petersen’s comments about a ‘coming storm’ for lithium-ion battery technologies are right on-the-mark. Somewhat further out in time (~5 years or so)is a potential ‘super storm for li-ion and all chemically-based battery technologies: it is called low energy nuclear reactions or LENRs. Importantly, while presently still obscure and quietly under development, it is a truly clean, ‘green’ nuclear energy technology. LENRs do not produce gamma radiation, energetic neutrons, or long-lived radioactive isotopes. Thus, shielding and containment subsystems are not required and, if the technology can be successfully commercialized, battery-like LENR devices with energy densities a million times greater than chemical batteries could potentially be realized. There are presently no ‘pure’ publicly-traded stock plays in this technology. However, some very large public companies such as Mitsubishi Heavy Industries (Japan), STMicroelectronics (Italy), Pirelli (Italy), Toyota (Japan), and Honda (Japan) have disclosed active R&D programs in this area and will develop commercial LENR-based products if they are able to. Investors with positions in battery companies should closely monitor technical developments in this arena. BTW – the American Chemical Society electronically published a “Sourcebook” on LENRs and related new energy technologies about two weeks ago.