Batteries: one size doesn’t fit all

In 2016 Sir James Dyson, the founder of the iconic vacuum-cleaner manufacturer, announced his company’s plans to develop a radically new electric vehicle, committing to invest £2 billion in the project. But last October, Dyson announced it was ditching this project and would be reallocating the funds to other products, including battery technology.

This strikes us less as a negative indicator for the electric-vehicle market, and more as a positive endorsement of the innovative and disruptive growth potential of new types of battery to which investors can gain exposure.

Electric vehicles are certainly one of the most promising areas of growth for battery producers, but batteries are now being deployed everywhere – from the portable electronic devices we all know and own to large-scale utility projects.

Currently, lithium-based batteries are undisputedly the dominant technology in almost every application, having unseated the previous nickel-cadmium standard. Lithium-ion batteries triumphed thanks to their relative stability, security, lower weight, and longer life span.

Yet we should not assume that lithium ion will always be the pre-eminent battery technology; the choice of most appropriate battery for any given use requires some trade-offs. We have identified seven factors that need to be taken into account:

1. Safety: a key characteristic for every type of battery, from electric vehicles and mobile phones to utility-scale energy storage systems. Everyone remembers the media coverage of exploding smartphones.
2. Power density: the amount of power that a battery can deliver per kilogram of weight.
3. Energy density: the storage capacity per kilogram of weight.
4. Velocity of recharge: the time necessary to recharge the battery. Batteries’ recharging process is not linear, and some batteries may be able to reach 80% of their charge rapidly.
5. Life span: how many life cycles or years a battery can be used before its degradation affects its capacity. Batteries can start degrading as soon as they get out of the factory, irrespective of their usage, and some of them can be damaged if completely discharged.
6. Temperature performance: the ability of a battery to work in different conditions and environments.
7. Cost: the overall cost of a battery pack.

Li-ion roars

Manufacturers have learned how to use different cathode materials to improve different attributes of their lithium-ion batteries to make them better suited for different uses. For example, consider this non-exhaustive list of the different types of lithium-ion batteries:

• Lithium cobalt oxide batteries (LCO) are often used in portable devices such as smartphones and laptops due to their low weight. However, this type of battery has a relatively short lifespan and doesn’t cope well with extreme temperatures.

• Lithium nickel cobalt aluminium (NCA) batteries are used in the Tesla S Model. This technology provides impressive energy levels and ultra-fast charging, able to reach an 80% charge in 30 minutes. The large battery of the Tesla S Model provides a high driving range of over 400 kilometres, but at the expense of battery weight.

• Lithium nickel manganese cobalt (NMC) is currently the most popular chemistry for electric vehicles other than Tesla. NMC batteries accounted for nearly 28% of global electric-vehicle sales in 2018, and are expected to account for 63% by 2027.

• Lithium titanate (LTO) allows ultra-fast charging without stress, but at the cost of a lower capacity.

• Lithium iron phosphate (LFP) is considered extremely safe and can deliver high power. LFP batteries can function in most environments with greater adaptability to different temperatures, so are often used in industrial vehicles.

And this is just some of the variety in the lithium family of batteries alone; alternative technologies are carving out their own niches in the battery market, notably in energy storage. In this space, li-ion batteries are constrained because they work best in mild temperatures.

Battery assiduous

One of the most promising technologies in this field is sodium-sulfur batteries, which are less sensitive to external temperatures. Furthermore, they allow for a longer period of storage and so reduce the total system cost. One of the leaders in this market is the Japanese manufacturer NGK Insulators, which provided sodium-sulfur battery systems for a 108MW/648MWh project completed in January 2019 in Abu Dhabi.

220 years have passed since Alessandro Volta paired copper and zinc discs separated by a layer of cardboard and salted water. Now, thanks to some recent breakthroughs, the battery technology market is again in an early growth phase, ready to power the next technological revolution.

Investors should be aware that the opportunities opened by battery technologies go beyond the adoption of electric vehicles. We have witnessed exceptional growth in storage capacity throughout the world and technological progress in this space is a vital step forward in the transition to a world that uses more renewable energy world.

The battery technology market is continually evolving. It is hard to say now which chemistry, if any, will become the standard. The price and supply of the raw materials adds further complexity to the chemistry. In recent years, for example, manufacturers have been trying to reduce the amount of lithium in their batteries due to the metal’s high price.

For investors looking to participate in this secular growth theme, we therefore believe it is crucial to gain exposure through a diversified portfolio spanning the full value chain of the battery market.