Energy Storage Market Trends: Lithium-Ion Batteries

In this fast-moving discussion about energy storage, E3's Ginger Elbaum and Chris Wright talk about the trends that E3 is seeing in the marketplace, particularly with regard to lithium-ion batteries. Chris notes that the top three trends he sees are the following: 

1) The Age of Energy Storage is here. Market structures (i.e. state incentives - ISO RTO  are changing, FERC is changing the grid and the way we interact with the grid and the way we consume energy, etc.). 

2) We're going to start seeing battery shortages and developers are going to have to look to other suppliers, not just tier one players.  This will be the subject of an upcoming podcast. 

3) Lithium-ion is king for the next five years or so while other longer duration options are developed. 

We hope you can take a few moments out of your day to listen to our podcast. And let us know what else interests you and whether you have any questions. Write to us at e3co@e3co.com. 


 

Transcript

Ginger Elbaum (9s):
Welcome to the top three by E3, a monthly podcast about the intersection between engineering energy and project finance. My name is Ginger Elbaum, managing director at E3 Consulting and I'll be your host today. And today I'm joined by Chris Wright, head of E3's energy storage practice. Welcome, Chris.

Chris Wright (25s):
Thanks for having me today

Ginger Elbaum (27s):
Thanks for coming on. So, Chris, today, we're going to talk about what's going on with energy storage markets, as well as I think we're going to talk a little bit about lithium-ion battery energy storage systems as well. So, so why don't we start there? So Chris, tell me what's going on in the energy storage market.

Chris Wright (45s):
Well, Ginger, these are exciting times. We're seeing a complete transformation of how the electric grid is operated and how energy will be transacted in the future. Not to mention the realization that renewable energy is here to stay. Yeah, all of this really is being enabled by grid-connected energy storage. And not only that, you know, though, we're seeing a lot of opportunities in the market that are enabling energy storage, everything from, you know, Cal ISOs resource adequacy, contract structures, PJM adjusting their 10-hour requirements, Massachusetts SMART program, lots of work in ERCOT, you know, and, and those are really, you know, ISO levels at the state level. There's a lot of other incentives too, but we're also seeing plenty of progress at the federal level we have with FERC Order 841, which survived the legal challenge, but it allows energy storage to participate in wholesale markets.

Chris Wright (1m 36s):
When interconnected at the distribution level we've got FERC Order 2222 to allow us to distribute energy resources, to participate in the wholesale markets by aggregating. We have a lot of talk now about a possibility for the ITC for standing alone energy storage. And we're seeing a lot of activity and opportunities to possibly build a domestic lithium-ion battery supply chain, you know, again, lots of exciting times and, and, you know, really when it comes to energy storage now up to the four-hour duration that the amount is really still king.

Ginger Elbaum (2m 11s):
Well, so, so lithium-ion is, is king currently. So Chris, tell me more about lithium-ion.

Chris Wright (2m 18s):
Oh sure. Ginger lithium-ion, there is a, is a term used or a phrase used to describe a family of batteries that utilize lithium to, and their structure for charging and discharging and specifically lithium-ion batteries, transport lithium ions from the cathode to the anode structure during charging. And then they go from the anode structure back to the cathode structure during discharge, you know, and an interesting note about that is just the inside the construction of the battery. You know, you have a cathode, you have an anode, you have electrolyte and you have a separator. And the separator has to be on a click conducted yet electrically insulated because you can only have the arms moved back and forth.

Chris Wright (3m 1s):
If you actually have an electrical current move back and forth, that would be a shorting of the battery. So that's not really a specific they'll let them on battery, but it's an interesting note about batteries in general and you know, the lithium-ion market lithium-ion batteries have been around a long time. They're in all of our consumer electronics and we're really seeing a lot of that. They're really becoming the defacto battery also in how for the electric vehicle market. you know, lithium-ion batteries, you know, the ones used for EV, which are really a version of what we use ourselves in, in stationary storage have three form factors. We call them. One is cylindrical. These are around cells that look like your traditional AA batteries, but larger.

Chris Wright (3m 44s):
They have a pouch cell. A pouch cell really looks like an aluminum foil bag. And then there's a prismatic cell, which is becoming more and more popular. The prismatic cell actually has a metallic can that the battery is actually placed down into the metallic can and it has a connection at the top. And so, yeah, those were the three main form factors we see. Yeah. And we're also seeing, I would say two main chemistries for lithium on, we see the nickel-based cathodes, which use nickel and their cathode and have a, typically a higher energy density, although they normally are not as cycling tolerance, so they don't have as high of a cycling tolerance.

Chris Wright (4m 27s):
And they also can also have higher energetics and in a scenario of thermal runaway. And then we're also seeing ion-based cathodes, which is lithium iron phosphate or LFP, which is what we're really seeing a lot of in the stationary storage market. And that, that technology has a little bit less energy density, but often has a higher cycling tolerance and also has a little bit lower energetic. So it doesn't seem to have, as it's not as risky when it comes to a thermal runaway situation, the energetics are lower. And so when it comes to lithium batteries in general, there's the inherent risk. We talk about it. And there are lots of, lots of articles out there about, you know, like your vehicle, car fires and stationary fires and car system fires.

Chris Wright (5m 11s):
And really, you know, the technology where we are today the biggest risk we see as what's called thermal runaway. This expands to a cell, a pack, a rack, or even a system, but essentially when a battery cell begins to generate more heat than that battery cell can decipher dissipate. The battery cell goes into what's called thermal runaway and the technology of what the mom batteries at this time, a certain amount of hot heating the electrolyte actually can turn into a gas and that'll increase the pressure inside the battery cell to the point, the battery itself can burst a lot of battery cells now have safety features that allow that gas to be released relatively safely in a thermal runaway event.

Chris Wright (5m 58s):
However, that gas is oftentimes flammable and can reach concentrations in an enclosed container that are actually explosive. And so one battery cell often is not going to do that. But what you're worried about is what's called thermal runaway and then propagation where a single battery cell or a single battery module goes into thermal runaway. And the heat being generated causes adjacent cells or adjacent modules to go into thermal runaway. And then you can have a large-scale thermal event, you know, about our system. And so that's kind of like our inherent risk and there's lots of work going on to mitigate those risks, starting at a hazardous, just simply with a hazard mitigation plan on a battery system to begin with.

Chris Wright (6m 39s):
There's a lot of work in gas detection, fire, and smoke detection and suppression, and, you know, just a smarter and smarter design work being done to eliminate thermal runaway risk from cell to cell and module.

Ginger Elbaum (6m 54s):
Where are we going?

Chris Wright (6m 56s):
Well, you know, in the short term, I think, you know, we're looking for hours of energy storage up to about the four-hour mark, things like that. You know, we're, we're really going to stick with lithium-ion batteries and saw talk about where we're going with lithium-ion batteries, you know, a big push in the market. And there's a lot of investments been flowing into this area and we've seen a couple of companies come out, come out of stealth mode in the last couple of years, but there's a lot of conversation about the next step with the existing technology is what's called solid-state. And so a solid-state lithium-ion battery is a bass lithium-ion battery that uses a solid electrolyte instead of a liquid electrolyte.

Chris Wright (7m 36s):
And so what'll happen is that solid electrolyte will make the battery is, allows it better, can be much more inherently safer because it won't break down at the lower temperatures and start to vaporize. And it'll eliminate some of this gas generation and, and risk issues we have with thermal runaway now, you know, eliminating cobalt and the battery cathodes is another big push that cobalt there's. There are cobalt is expensive. The material pricing tends to not be as predictable, predictable as people would like. And there are also some ethical concerns about where, where a majority of the cobalt in the world is mine. So there's a lot of work to try and eliminate cobalt from the batteries a lot of, and when you eliminate cobalt, you've got to do something else to get versions of the same performance is that we're seeing a lot of what we call high nickel and high manganese cathodes come out.

Chris Wright (8m 25s):
A lot of work in that area where the nickel, the nickel fraction goes up all the way to two eight parts, Nicole, one part cobalt, one part manganese, and some high nickel cathodes. And then we're seeing work on how am I getting these cathodes to Volkswagen Battery Day. There was a lot of con a lot of talk about from Volkswagen about how manganese cathodes, and then, you know, LFP the lithium iron phosphate that we're working with. Now, there's a lot of advanced and performance increases go on there. You know, I've been astounded that at the energy density gains that have been found for LFP battery cells, and a lot of innovation is being done in the packaging of lithium on you know, of a lithium iron phosphate battery cell and into innovative packaging that has actually seen LFP start showing up in passenger EVs.

Chris Wright (9m 15s):
And at one point in time, a few years ago, we never thought we would see a lithium iron phosphate powering pasture rebates, but sell the pack technologies, packaging technologies, and things like that are really moving LFP forward too. So a lot of exciting things.

Ginger Elbaum (9m 31s):
Yeah. I think the innovation in the battery storage market has been pretty spectacular and really fun to watch. It's really neat. Well, so, so what else do you see happening in the stationary storage market. What's what else?

Chris Wright (9m 49s):
Well, you know, there there are trends going on in the market, and a few of them that I think that, that we really see that, you know, we w we really see and, and see how tracks should ride is that, you know, one of the earliest market trends we saw was at one point in time, when you, you build a lithium-ion battery system, you took batteries, you put them in racks, you'd put them inside of a 40 foot ISO container, and you installed them on site. And there were issues with the ability for someone to walk inside of those containers. There were safety issues related to that, and things like that. And the, and the risk to the batteries, you know, going into the thermal runaway and maybe someone, you know, not enough situational awareness inside the container to know what's going on. So we've seen external enclosures is really, one of the first major trends we've seen where you really are not selling battery systems in enclosures that people can go into anymore.

Chris Wright (10m 41s):
They access them from the outside. And this is, this is due to safety concerns. And also ironically allows a tighter packing of the batteries inside the containers too. So it's actually good, in both ways, a lot of work in gas detection, smoke detection, heat detection, you know, when it comes to this, you know, mitigating thermal runaway, detecting it quickly, taking the battery system offline, a lot of work going on there and gas detection. I think we'll get more and more advanced as we move on a lot of work in venting.  And deflagration, that is where you are essentially designed these enclosures, where if there was a buildup of gas because of the thermal runaway event, and maybe some other safety systems that operate you have, what's called a deflagration vent.

Chris Wright (11m 24s):
These can be an active ventilation system that essentially is designed to release any kind of pressure build-up in the enclosure and any kind of event, whether it just be an off-gassing of the batteries during a thermal runaway event, all the way through a, you know, the lower explosive levels rates. And there's actually an explosion inside the colors of the deflagration events that will drive that up. So seeing a lot of work there. LFP is, is really lithium. Iron phosphate is really the battery of choice. We're. Now, if five years ago, you really did not see Yellowfin stationary storage projects you saw in MC, but you're seeing really LFP all over the market now and, you know, cost reductions and performance increases, right.

Chris Wright (12m 6s):
It's just amazing to see what's happening in the market. You know, we're really fortunate enough to ride the coattails of the electric vehicle industry, right? So we're, we're taking a lot of upsides on the work that's being done there on energy density, your increased cycling safety, your cost reductions, things like that. The stationary storage market is really fortunate to be able to take advantage of those trends that are moving larger than us now, you know, there's, there's a lot of bankable players in the markets, but they're still concerned. When you look at the projected amount of batteries that will be installed in the United States over the next few years, there's really no way for the top few battery suppliers that to supply them.

Chris Wright (12m 47s):
And so there's not only is there concerns with some of the top suppliers when there are, you know, safety issues with their batteries, whether they're being an electric vehicle or a stationary storage fire but there's just not enough batteries in the market. At tier one, we would call, you know, it's kind of a rough way of saying, bankable player. So there's a lot of opportunities for other battery suppliers to come to the market and, and really they're going to have to come into the market to help fill the demand. Seeing a lot of momentum in the residential market, a lot of residential storage at one point in time in residential storage was a tray of lead-acid batteries in somebody's garage. And that was the extent of what you had. But now you're seeing a lot of work on the lithium-ion batteries being used for residential storage and really the advancement of the inverters in the residential space are allowing residential energy storage projects or products to back up the power to the house for a certain amount of time.

Chris Wright (13m 42s):
So you're seeing the residential grow a lot for resiliency for backup. And then, you know, self-consumption is where essentially you've installed solar on the roof. And during the day when the solar output is high enough now, you're starting to net meter to the grid and some utilities have backed off. And the amount of money they're paying for solar that is pushed on the grid from a residential space. And so you really start to see a business case for I'm going to take this solar energy, and I'm going to put it into energy storage, a battery system at my house. I'm going to discharge it at night, but my loads are a little higher when I'm home, maybe, you know, cooking and running the washer shade at night. So, so a lot of opportunities in the residential space, amazing to see how much momentum is being gained there.

Chris Wright (14m 23s):
And then lastly, I think there's a lot of talk and you're seeing a US-based domestic battery manufacturing, right. We don't really produce many cathodes and anodes in the U.S. Yet, but we're producing battery sales. And I think it's just a matter of time before we'll see more and more domestication of the lithium-ion battery supply chain here in the United States.

Ginger Elbaum (14m 46s):
Yeah. That's all, that's all exciting. And it's a lot to look forward to, but, you know, kind of to my earlier comment, it's impressive how everything is moving and moving quickly, you know, I mean the, you know, the market is just evolving fast and it's, it's really fun to watch. So, okay. So Chris, you know, thank you for all this information. So, you know, we're top three by three. So, you know, tell us what you think the listeners should take away as the top three from this,

Chris Wright (15m 14s):
You know, top three to me, number one is just, you know, the age of energy storage is here, right? Market structures, you know, state incentives, you know, ISO RTO market structures are being changed. And, you know, at the federal level at FERC, right, we are changing the grid and the way we interact with the grid and the way we consume energy, and this is pushing energy storage to the forefront, right. It has to be there to enable high penetration, renewables enabled there to be a transaction level with the grid, things like that. So, yeah, it is an exciting time and we're going to continue to see very high growth in the utility and the residential space for energy storage, electric vehicle battery demand. You know, that vehicle demand is, is, is a major player in what we're going to be doing in the future on the stationary storage side, because the electric vehicle battery demand, if it starts to strain supply chains, which it's straining capacity.

Chris Wright (16m 6s):
Now, you know, we're going to see battery shortages at the, at the tier two levels, right? Really you're going to have to go look for another supplier, right? You're not, you're not going to be able to go to the top three batteries manufacturers in the world and be able to buy your batteries. We're going to have to find other sources of batteries. And I would like to talk more about that on subsequent podcasts. I won't go into it in much, much farther now. And then, you know, the last one is, you know, that the lithium-ion is king here for the next five years or so when it comes to, you know, up to four-hour battery storage, long duration, energy storage is coming. You know, I think there's a RFP coming out for a pump hydro project out in San Diego area very soon.

Chris Wright (16m 46s):
So, you know, we're seeing long duration, energy storage kind of move along too. And, you know, lithium on really doesn't fit in days or weeks of energy storage, like, like a pump hydro would, but, but let the king for the hourly stuff we're doing now. And I think it will be for a foreseeable future, but I'll talk a little bit more about long duration, energy storage on another podcast.

Ginger Elbaum (17m 8s):
Great. Well, and for our listeners, this is the first in a series of podcasts on energy storage. So here's more to come, so stay tuned, I'm looking forward to those additional topics. And then Chris, thanks for those takeaways. I think great insights and a great introduction to lithium-ion as well as the battery storage markets and for our listeners. We, you know, thank you for listening today and joining today's session. If you have any questions for Chris or any other topics, suggestions, you know, please let us know. We'd love to cover any of your questions in our podcast and subsequent podcasts, and you can submit any questions or recommended topics to us at e3co.com.

Ginger Elbaum (17m 54s):
Chris. Thanks again. Appreciate it. Thank you again to our listeners for listening.