Electric vehicles

31Mar 2017

We, that’s all of us on this planet, buy every year 1.6 billion smartphones. It works out to one new smartphone every year for every four living human beings on this planet. Cumulatively, we own and use 4 billion smartphones around the world. Every region of the world, rich or poor, is buying smartphones. Many developing nations in the Middle East, Africa, and Asia are growing their smartphone subscriptions at a fast rate. Ericsson reports that by 2021, there will be 6.3 billion smartphone subscriptions, that’s nearly every man, woman and child around the world. Impressive!

Of course, each and every one of these smartphones has a battery in it. Your first reaction is: “that’s a lot of batteries.” Yes, that is true. Sadly, many of these batteries go to landfills after they are exhausted. The easiest way to gauge the size of the market for batteries is to calculate the entire energy supplied by all of them. Of course, that is a large number. It is measured in billions of watt-hours, abbreviated as GWh. As a reference mark, the battery in a top of the line Tesla S is 100 kWh. One GWh = 1 million kWh = 10,000 Tesla S.

 

Screen Shot 2017-03-31 at 9.48.15 AM

 

In 2016, the battery factories around the world manufactured about 50 GWh worth of batteries for consumer devices. That drives an industry and a market worth in excess of $10 billions annually. Forecasts indicate that the consumer market will use about 65 to 70 GWh worth of batteries in 2020. Our appetite for more batteries is insatiable and the numbers show it.

Now let’s look at batteries in electrified vehicles, including both hybrid plug-in cars and pure electric cars (xEVs). This is a relatively new market. The Tesla S first came in 2012. The Nissan Leaf came a little earlier in 2011. Many states in the US or countries around the world haven’t yet experienced or experimented with such vehicles. In 2016, all of these vehicles accounted for a mere 0.9% of all car sales. In total, they amounted to less than 1 m vehicles in 2016.

 

GWh

 

However, in battery lingo, these cars accounted for an increasingly large number of GWh. The year 2016 was the first year that the battery capacity used in xEVs equalled that of all consumer devices, about 50 GWh. By 2020, xEVs will account for ⅔ of all battery production in the world. No wonder Elon Musk and the major car makers pay a lot of attention to their supply chain, including building these Gigafactories.

 

23Aug 2016

Tesla Motors announced today upgraded versions of the Model S and X boasting 100 kWh battery packs, up from 90 kWh used in their earlier top-of-the-line electric vehicles. One hundred kilowatt-hours sounds like a lot, and it is, but I bet that many readers don’t have an intuitive sense of this amount of energy. This is what this post is for.

First, a kilowatt-hour is a unit of energy, not power, and is most commonly used in electricity. To put it in perspective, an average home in California consumes about 20 kWh of electrical energy per day, so this 100-kWh fully-charged Tesla battery would cover this home’s needs for about 5 days.  Now that’s great if you like to go off-grid.

A Nissan Leaf has a battery with a capacity of 30 kWh and has a driving range of approximately 107 miles (172 km). If the Nissan Leaf were to have its battery upgraded to 100 kWh, then its range would increase to 350 miles, or about what you get from your average gasoline-engine car. That would be real nice!

100kWh is also equal to 341,000 Btu, that is if you like to use the British system of units. At about 10,000 Btu to run a home-sized air conditioning unit, this battery will provide you 34 hours of uninterrupted cool air. It it also equal to 3.4 US Therms (each Therm is equal to 100 cubic feet of natural gas), sufficient to heat a California home in the winter for about 4 days.

Now let’s get a little more creative in this comparison exercise. This high amount of energy can be quite explosive if not designed and operated properly and safely; 100 kWh is the same amount of energy delivered in 86 kg (190 lbs) of TNT….enough to level an entire building.

On a more cheerful note, this battery packs the equivalent energy of 86,000 kilocalories, or what an average human consumes in food over 43 days!

Yet as big as this figure sounds, and it is big, only 3 gallons of gasoline (11 liters) pack the same amount of energy. Whereas the Tesla battery weighs about 1300 lbs (590 kg), 3 gallons of gasoline weigh a mere 18 lbs (8 kg). This illustrates the concept of energy density: a lithium-ion battery is 74X less dense than gasoline.

19Aug 2016

As I pondered over the past couple of weeks what might be a befitting topic for this 100th post, a group at MIT announced that they discovered how to make batteries with double the energy. Of course, the operative word in the press release was “first-prototype” which means that it might be a long while before, that is if, we see commercial deployment. However this announcement was the catalyst to focus this post on the state of the lithium-ion battery: In other words, if we ignored future inventions, what is the best that we can expect from the lithium-ion battery today across a number of applications.

For the vast majority of modern applications, the lithium-ion battery is capable of delivering the requisite performance. So if you are wondering why is it that most users complain about the battery, I will use an analogy of a jigsaw puzzle. The solution to storing electrical energy involves many pieces, like the pieces of a jigsaw puzzle. These pieces include the battery materials, chemistry and design, which is often provided by one party: the battery manufacturer. But also a critical piece includes the power management of the device and system, in particular the electronics and software needed to monitor how the energy is efficiently used, say by the apps on your smartphone. An equally critical piece is the battery management intelligence, which is what we do here at Qnovo, that is responsible for the integrity and efficient operation of the battery. If water use is to represent energy use, then the battery is the reservoir; power management is akin to water conservation, something we, Californians, are familiar with; and battery management is ensuring the integrity of the reservoir and its contents, making it large and free of toxins.

Separately and individually, each piece of the jigsaw puzzle is today at an exceptional state of the art for consumer electronics, energy storage, and electric vehicles. For example, energy density of batteries in commercial deployment is already near or at 700 Wh/l. This energy density is sufficient to power smartphones comfortably for a full day of use, or power an electric vehicle for 300 miles. Power management has become quite sophisticated, especially in consumer electronics where now the operating systems, e.g., Android OS and iOS, are asserting clever decisions on how apps may use power. Battery management intelligence has also become quite sophisticated, peering deep into the battery in real time and ensuring its continued health and integrity under extreme operating conditions.

But now imagine for a moment trying to build a jigsaw puzzle where multiple players share in putting the puzzle together, or worse yet, each player owns a subset of the puzzle pieces, but not all the pieces. Now you can imagine that putting the puzzle together can get quite complicated. You see, battery vendors know how to build the battery itself but tend to be quite novices in power management and battery management intelligence. System integrators and OEMs tend to have plenty of experience in power management but their knowledge of the battery chemistry tends to be limited. As to battery management, both battery vendors and OEMs have historically under-estimated its need and are playing catch up.

This, for example, begins to explain why Tesla Motors wants to own all these three pieces of the puzzle, beginning with their widely discussed Gigafactory but also their less-advertised efforts in power management and battery management. Apple is also in the same league. While Apple does not manufacture their own batteries, it is widely known that Apple does design their own batteries as well as having growing expertise in both power and battery management. But these tend to be early adopters who have recognized that they need to lead in owning and putting the pieces of the puzzle together. There are other giants who are in need of playing catch up, and they include the likes of Google, Microsoft, Facebook…as well as industrial players who are eyeing batteries for stationary energy storage and electric vehicles. Gradually, they are all beginning to make power and battery management integral to their long-term strategies.

Historically, system integrators and OEMs treated the battery as yet another component they source from suppliers, like the display or other electrical or mechanical components. But this model of outsourcing the battery expertise is beginning to fray. First, battery vendors are hitting the limits of materials and are struggling to meet the increasing demands of their customers without the use of intelligent power and battery management algorithms. Second, there is a growing discomfort, and I might dare say mistrust, between the OEMs and system integrators on one side, and the battery vendors on the other. Third, with the advent of cheap, meaning both inexpensive and lower quality, batteries form China, the business model of the traditional battery vendors, in particular Sony Energy, Samsung SDI, LG Chem is under pressure. A quick evaluation of their financials is sufficient to show they are not healthy. Sony recently announced the sale of their battery business to Murata Manufacturing. These shifting dynamics complicate the necessary tasks required to put together this battery puzzle and are forcing participating companies to seek different alliances.  For example, see the growing alliance between Tesla and Panasonic as well as between GM and LG Chem. In China, witness the growing influence of BYD in making batteries and making electric vehicles. The result is that the optimal battery system that incorporates the right battery, right power management intelligence, and right battery management intelligence is accessible to limited few organizations that either have the means to be vertically integrated or put together the necessary alliances.

As the reader can gather, the challenges in offering a great battery experience is really not technical in nature, but rather have economic and organizational origins. For consumer applications, the technology already exists to build elegant smartphones with battery capacities in excess of 3,000 mAh, charging very fast at 1 to 1.5C, and lasting 800 to 1,000 cycles. These specifications give the average consumer an excellent overall battery experience. For energy storage, the challenge is not the battery chemistry but rather hitting the right price points and building out comfort in the specifications from extensive testing. For electric vehicles, the cost of the battery is rapidly dropping. The Chevy Bolt and the promised Tesla Model 3 are prime examples of vehicles targeting the broader population at an increasingly affordable price. That is not to say that engineering innovations and continued disciplined product improvements are not necessary; they are important. But the perception that the battery industry is in dire need of a large breakthrough in technology and materials is not well founded. Instead, there is a bigger need for all the players around the battery jigsaw to learn to work together and leverage each other’s expertise and technologies. This is happening; in the process, we will continue to see a race to build up intellectual property, patent ownership, expertise, and skills by the various participants.

31May 2016

Every so often, I hear at a dinner gathering the question: “Is there enough lithium?” I have already covered this question in a previous post. The answer is YES. However, an abundance of a resource in the earth’s crust does not mean that its economics will always be favorable. These depend on several factors, in particular the balance or lack thereof between supply and demand.

We know demand is rising. Batteries in consumer devices, electric vehicles, energy storage….But what about the supply? how is lithium mined? where is it mined? which countries or corporations control this supply chain? …etc. Let’s explore.

Let’s start with some basics. Lithium is a metal. With an atomic number of 3, it sits right below hydrogen in the first column of the periodic table. That means it is a very light metal. Also, it means it is an alkali metal, and as such, it is highly reactive and flammable. Lithium is not found in nature in its purest metal form. Instead, it is found in various types of deposits; the most common lithium ores are spodumene and petalite minerals (mined as pegmatite rocks), as well as lithium brine deposits that are essentially underground saline water enriched with dissolved lithium.

Gemstones

Spodumene is a lithium aluminum silicate, with the chemical formula LiAlSi2O6. In its simplest form, it is a yellow or brownish crystal but spodumene includes two gem varieties that are more precious: the pink Kunzite and the rarer green Hiddenite. Petalite, with the chemical formula LiAlSi4O10, often occurs alongside spodumene, though the latter has a higher Li2O content and is considered the more important ore.

Spodumene is found in low concentrations in pegmatite rock deposits (these are rocks, like granite, that formed millions of years ago in the final stages of the crystallization of magma as it cooled down). Spodumene mines follow traditional drill-and-blast methods that expose unweathered zones of the pegmatite rock ore. The spodumene ores containing about 3 to 5% Li2O  are then processed in neighboring plants into high-grade lithium sludge-like concentrates that are then crated for shipment. This is what a refinement or a conversion plant receives for further processing into the final product, either lithium carbonate or lithium hydroxide. The latter is typically used in the manufacture of batteries using NCA or NCM cathodes (like the ones used in the Tesla electric vehicles) whereas lithium carbonate is the preferred material for batteries with LFP cathodes (widely used in China) or LCO cathodes (the typical cathode material in consumer applications). This older post reviews the different types of common cathode materials used in lithium-ion batteries.

Lithium brine deposits are processed in different and far less expensive ways. Much like salt ponds used to make table salt, the brine, often holding a concentration of 200 to 1,400 mg per liter of lithium, is pumped to the surface and stored in a succession of ponds where evaporation results in a higher concentration of lithium salt. This drying process can last 9 to 12 months and yields the required 1 to 2% concentrate of lithium. This is then further refined at chemical plants into the final product, again lithium carbonate or lithium hydroxide. A lithium brine field might require $150-$300 million in capital expenditures, whereas a spodumene mine could easily require 5 to 10 times that amount. But as we will see below, there are advantages to spodumene mines.

The primary mines for spodumene are in Western Australia with the Greenbushes mine being one of the largest. Africa also boasts of additional mines with the Manono-Kitolo mine in the Democratic Republic of Congo being a notable one. There are also known deposits in the US, Canada, Europe (e.g., Austria, Serbia, Russia) either still unmined or in small mining operations. In contrast, brine deposits are largely concentrated in South America, with the Uyuni field in Bolivia and the Atacama field in Chile containing enormous reserves. The provinces of Catamarca, Salta and Jujuy in Argentina also hold significant reserves. The USGS reports that Australian and Chilean mines each produced in 2015 a total of 13,400 and 11,700 metric tons, respectively, accounting for 77% of the world’s production of lithium. An interesting tidbit: The United States government, through its Defense Logistics Agency Strategic Material, held in 2015 a strategic reserve of 150 kg of LCO and 540 kg of NCA battery cathode materials.

GB2-2

The Greenbushes mine as seen from space (Google Earth). The opening of the mine on the right is about 2000 ft (or 600 m).

Known world’s deposits of spodumene tend to be smaller than those of brine deposits, around 10 million tons of lithium for spodumene vs. over 25 million tons of lithium for brine. However, the diverse geographical distribution of spodumene deposits makes pegmatite mining less susceptible to supply chain disruption and a more reliable source of lithium.

Companies mining for lithium have seen their fortunes rise in the past 10 years. In Chile, anecdotally called the Saudi Arabia of lithium, Sociedad Quimica y Minera (SQM) is the largest lithium mining company in the world. It just formed a new joint venture with Western Lithium and Lithium Americas, two smaller US operations. In the US, FMC Corp. and Abermale  Corp. (through its acquisition of Rockwood Lithium) are two large players. In Australia, Talison Lithium is very prominent. These four companies account for about 55% of the world market of lithium, with Chinese chemical companies, such as Ganfeng Lithium and Tianqi,  accounting for an additional 45%.

Given the rising demand for lithium, it is not surprising that the four major Western suppliers all announced significant expansions in their production of lithium carbonate and hydroxide. But as supply tries to keep up with demand, spot prices of lithium ore have hit a near high price in excess of $600 per tonne, up from a long term average near $400 per tonne. Goldman Sachs estimates that these prices translate to a spot-market product price of $20 per kg for lithium hydroxide up from the average $9 per kg that Korean and Japanese battery makers were typically paying. As supply and demand balance out in the coming years, lithium hydroxide pricing will return to more normal levels, but these normal levels could easily be above $10 per kg. In other words, lithium is getting more expensive — but one thing is very likely, as lithium gets more expensive, batteries continue to get commoditized placing serious financial pressures on battery manufacturers.

If you are an investor, however, looking for a pure lithium play, you are a little out of luck. That is because many of the mining companies tend to be diversified chemical conglomerates, and lithium, as a commodity, still does not have futures contracts or swaps, leaving equities as the only play.

29Apr 2016

Tesla Motors presold over 400,000 Model 3 electric vehicles (EVs) in the course of a couple of weeks. Should the traditional carmakers with conventional internal combustion engines (ICE) be concerned? …the answer is probably not before 2025 or beyond.

In one of my earlier posts from 6 March of this year, I explained how gasoline prices had to rise substantially before they become economically competitive with ICE cars. Goldman Sachs just published a report this week predicting that EVs will not be a threat to conventional cars before 2025. Based on their models of GDP growth, gasoline prices and other factors, they predict that EVs will reach, in a best case scenario, no more than 10% of all new cars sold in the US, itself about 1/4 of all global car sales. Their more reasonable base model calls for only 381,000 EVs sold in the US in 2025, or 3% of all US car sales, hardly a threat to ICE carmakers. The chart below predicts instead an increasing penetration of hybrid vehicles beginning in the 2018-2019 timeframe.

Global-sales

Neglecting the issues of driving range and charging infrastructure, I will examine here 3 key assumptions that impact the decision of consumers as they ponder EVs vs. ICE cars: i) the gradual decline of the cost of EVs over the coming years, ii) the price of gasoline, and iii) the price of electricity over this time period. Collectively, these 3 points impact whether EVs will be cost competitive taking into consideration the upfront cost differential between EVs and ICE cars, as well as the cost of operating these vehicles.

The cost of buying an EV is primarily driven by the cost of the lithium ion battery. Standing today near $150/kWh, it is projected to decline to $100/kWh by 2021. For a 200-mile range car using a 60-kWh battery, that translates to a present battery cost (excluding the electronics) of $9,000 dropping to $6,000 over the next 5 years. This is a significant reduction but an EV will most likely remain more expensive than an equivalent ICE car by $5,000 to $10,000.

Gasoline prices are primarily impacted by crude oil. The next chart shows that, based on past historical records from 1990 to 2015, crude oil needs to reach $110 per barrel before gasoline hits an average US national  price of $4.00 per gallon. In March 2016, North Sea Brent crude oil stood at an average price of $38 per barrel; the US Energy Information Administration is forecasting that it will rise to $41 per barrel in 2017. That is certain to keep average US gasoline prices near $2.00 per gallon for the foreseeable future.

oil-vs-gas

What about the price of electricity? Will it rise? and what has impacted it? It turns out that the real (i.e. adjusted for inflation) average price of residential electricity in the US has remained rather constant over the past decades, hovering near $0.12 /kWh in today’s dollars. The oscillations in electricity pricing are due to seasonality.

electricity

At $4.00 per gallon and near constant electricity prices, the cost of operating an ICE car is $0.16 per mile vs. $0.03 per mile for an EV. If the EV’s price tag is $10,000 higher than the comparable ICE car, then it will take on average $10,000/$0.13 = 77,000 miles, or about 6.5 years to breakeven. This is naturally an oversimplified analysis but provides sufficient insight to appreciate the hurdles.  Clearly, the industry has to continue chipping away at the battery expense; governments will continue to provide incentives; oil prices will fluctuate as they have in the past…put altogether, it will take several years before EVs become a threat to the carmakers, possibly 2025 or beyond. The silver lining is that the discussion is no longer whether EVs will make it as mainstream cars, but rather its timing.