Is there enough Lithium to feed the current battery market demand?

The demand for electric vehicles and solar power has skyrocketed, and with that has come an increase in demand for a critical component of those sustainable technologies, batteries. Learn more about today's energy storage landscape and why investing in lithium mining might just be as profitable as mining for bitcoin.

How do batteries fit into the solar power picture?

The explosion in solar power use over the past several decades has led to the growth of a number of adjacent industries. Of these, one of the fastest-growing is the solar battery industry. According to a market research study released by London-based Technavio, the global solar batteries market is expected to grow at a compound annual growth rate of more than 16% through 2020.

Sales of solar batteries (sometimes called residential energy storage units, or RESUs) have increased along with solar system installations. While a solar battery isn’t necessary for every home equipped with a solar energy system, they can be advantageous for saving additional money on the electric bill and providing a source of backup energy in areas where the grid is unreliable. And for off-grid solar systems, a battery is crucial, allowing homeowners to use electricity even when the sun doesn’t shine.

Why lithium ion?

There are two main types of solar batteries: lead-acid and lithium ion. Lead-acid batteries are a tried-and-true technology - the basic concept has been around since the 19th century. But compared to lead-acid batteries, lithium ion batteries have much higher energy densities. In other words, for a lithium ion battery and a lead acid battery of equal weight, the lithium ion battery will be able to store and provide more energy. It takes a lead-acid battery that weighs six kilograms to store the same amount of energy that a one-kilogram lithium ion battery can.

Lithium ion batteries can also be discharged more completely than lead-acid batteries. Only about 50 to 75 percent of a lead-acid battery’s total energy should be expended before recharging it. Utilizing more than that could shorten the battery’s lifespan. But recommended discharge rates for lithium ion batteries are far higher, typically around 80 percent.

Historically, the main advantage lead-acid batteries had over lithium ion batteries was the price point.. But continuous improvements in lithium ion technology, increased lithium production, and the rapid expansion of the lithium ion battery industry has led to rapidly declining costs. In the 18 months leading up to June 2016, for instance, lithium ion battery prices fell 70 percent. Analysts expect that by 2020, manufacturing costs for lithium ion batteries will be 50 percent lower than they were in 2015.

So in combination with their increased efficacy and declining costs, lithium ion batteries have now become the go-to for energy storage.  

Still, the technology is far from perfect. Research and investment in lithium batteries remains one of the most exciting new frontiers in energy storage. The Joint Center for Energy Storage Research at Argonne National Labs, for instance, recently discovered that self-discharge of lithium batteries could be reduced through cell compression and protective coating. The discovery could pave the way for batteries that can better retain a charge. And SiNode Systems, a Chicago-based startup, recently received $4 million from the U.S. Advanced Battery Consortium to develop advanced anode materials for lithium ion batteries.

What are the implications for electric vehicles?

The USABC’s interest in lithium ion batteries isn’t purely academic. The organization is a subgroup within the U.S. Council for Automotive Research, which is funded by Ford, Fiat Chrysler, and GM. These companies hope to manufacture stronger, cheaper, and more efficient lithium batteries for their various electric vehicle lines, which are slated to expand dramatically. GM will begin producing two additional electric cars this year and at least 18 other electric vehicles by 2023. Ford, likewise, will be producing at least 20 electric vehicles by 2023.

Of course, the Big Three aren’t the only ones interested in lithium batteries for the burgeoning electric vehicle market. Tesla has already begun planning additional gigafactories – massive manufacturing plants like the one in Nevada that came online last year – that will enable the company to meet its production target of 500,000 cars per year. And China is moving to position itself as a world leader in the electric vehicle industry. Its global share of battery cell production is expected to rise to over 70 percent by 2020.

By 2030, electric vehicle production is expected to be 30 times greater than it is today. And by 2037, when up to 40 percent of all vehicles could be electric, the electric vehicle industry alone will be worth an estimated $240 billion.

Lithium ion batteries will make this revolution possible, and huge profits potentially await investors in this emerging sector of the green economy. Excitement around the growth of the industry has inspired the foundation of a host of battery-specific venture capital firms like Chicago’s Volta Energy Technologies, which connects investors with battery technology companies and entrepreneurs.

And the solar and auto industries aren’t the only ones that utilize lithium. Smart watches, portable music devices, mobile phones, laptops, and many other devices also use lithium ion batteries. At least one company, AllCell, offers lithium ion batteries for electric bikes.

Will the lithium supply keep up with demand?

Overall, the ceramics and glass industry still consumes more lithium than the battery industry. (Lithium lowers the melting point for ceramics and glass, making them more malleable.) But battery production is slated to accelerate rapidly in the coming decades. From 2007 to 2014, the percentage of lithium devoted to battery production rose by 50 percent. Analysts at Deutsche Bank expect that by 2025, battery production will consume 70 percent of global lithium supplies.

This rapid increase in lithium consumption has some analysts worried about potential production shortfalls. While there’s no need to worry about a lithium shortage in absolute terms - Bloomberg New Energy Finance estimates that less than 1 percent of the world’s reserves will be depleted over the next dozen years - production might not keep up with demand.

Production has expanded dramatically in recent decades. Back in 1980, production hovered around 1 million tons per year. By 2000, that number had doubled, and by 2010, it had doubled again. According to the U.S. Geological Survey, global lithium mine production increased from 31,500 metric tons to 35,000 metric tons between 2015 and 2016 alone an 11 percent increase.

Lithium mines are already slated to more than double (from 16 to 36) in the near term, but the first of these additional mines won’t open until 2019. In addition, mines contain just 13 percent of all lithium resources  – the portion of lithium that can be recovered in a cost-effective way. The rest of the accessible lithium is in salty brine lakes. While it’s cheaper to recover lithium from brine, it also takes a long time: the evaporation process can take anywhere from eight to 36 months.

Anxieties over a potential lithium shortfall have been led to dramatic price spikes. Prices today are twice what they were in 2015. Fortunately, prices are expected to fall somewhat over the next two years, but won’t return to 2014 levels any time soon.

Despite these fears, recent research has found that lithium supplies will likely be able to match demand eventually. New reserves could be tapped, and more efficient lithium recovery processes could bring more of the metal to market. And the USGS has suggested that even if there were a shortage, other metals - including calcium, magnesium, mercury, and zinc could substitute for lithium in battery applications.

The more pressing problem, researchers now say, isn’t a shortage of lithium itself, but a shortage of cobalt and the other rare materials in lithium ion batteries.

Thanks to Kyle Pennell from PowerScout (a marketplace that lets you compare multiple quotes for home solar installations) for contributing this article. You can find PowerScout on Facebook and Twitter. 

By Emily Achler | February 13, 2018