NAATBatt Blog

Battery Innovation Continues to Defy Its Critics

December 19th, 2014 by

For the past three decades, the once sleepy technology of electrochemical energy storage has been going through a revolution of historic proportions.  The improvements in battery energy density and performance produced by new lithium-ion, nickel metal hydride, advanced lead acid and other chemistries represents vast improvements in a technology which had largely stagnated since the Bagdad Battery of 0 A.D.  While the speed of improvement in battery technology has not yet matched the Moore’s Law of semiconductors, its pace has been sufficient to enable fundamental changes in the many technologies that batteries can power, from automobiles to the electricity grid to robotics and to any number of future technologies the nature of which we cannot yet fully imagine.

There is no sign that the revolution of the last three decades will slow anytime soon.  This past month, two major users of battery technology doubled down on investments in new battery technologies.  Volkswagen, the world’s most profitable automaker, purchased a 5% interest in QuantumScape.  QuantumScape is is an early stage battery startup that is commercializing technology from Stanford University.  It is reportedly developing a new method for stacking trace amounts of materials together, which can lead to high energy and power densities, and also higher cycle life than standard lithium ion batteries.

Also this month, Samsung, the electronics conglomerate, made a $17 million investment in Seeo, a Hayward, California-based company developing lithium polymer batteries.  Seeo’s batteries incorporate its proprietary DryLyte™ solid polymer electrolyte.  The new electrolyte reportedly enables Seeo’s batteries to operate with enhanced safety and at an exceptionally high energy density.

Skeptics of advanced battery technology have never been hard to find.  One of the most eloquent in recent years has been John Petersen, a regular contributor to Seeking Alpha.  John’s columns often criticize lithium battery technology and he reportedly maintains a long position in Axion Power International, a manufacturer of lead carbon batteries.  This past week, however, Axion apparently had its own stumble.  Axion announced “significant” salary deferrals by management in order to conserve cash while the company tries to execute a new strategy.  This stumble may not be significant; Axion’s technology is itself quite interesting.  But the stumble illustrates the broader danger of betting against some battery chemistries just because they seem in the short term to have some issues.

The bottom line is:  Don’t bet against innovation in battery technology.  Battery technology is evolving rapidly and it is far from clear which chemistries, designs and systems will ultimately win out in the competition to power the increasing number of technologies that will rely on stored electrical power.  The fact that some of the biggest companies in the world are still investing heavily in advanced battery technology is a testament to its future and its potential.

NAATBatt International is also betting heavily on new battery technologies.  Our mission is to help those technologies move more rapidly from the laboratory into commercial application.  Each year at our Annual Meeting, our members select from among dozens of applications the 20 most interesting new energy storage-related technologies to make “flash” presentations at the Meeting.

This year will be no different.  At the NAATBatt 2015 Annual Meeting & Conference in Phoenix on February 16-19, 2014, the following 20 companies have been invited to present: Ambri, Paper Battery Company, SiNode Systems, Worcester Polytechnic, 1Energy Systems, Envia Systems, XG Sciences, Eguana Technologies, NOHM Technologies (Li-Sulfur), Urban Electric Power, Yunasko, Bess Tech, SeaWave Battery, University of California-San Diego, Voltaiq, Inc., Nickel-Cobalt Battery LLC, NOHM Technologies (Electrolytes), NETenergy, Ecoult, and Stria Lithium.

I very much hope that you can join us for this program in Phoenix next February.  The battery revolution is continuing and will affect us all.  Our Annual Meeting will provide an opportunity to see some very interesting glimpses of the future.

The Three Functions of a Battery

December 12th, 2014 by

I have written previously in this column about the great promise of advanced electrochemical energy storage technology.  Batteries may be ancient, but advances made just within the last three decades are transforming what had been a sleepy, not very important technology into one of the most significant enabling technological forces of the Twenty-First Century economy.

But what about the business of batteries?  Given the tremendous progress that has been made in battery technology and its importance to such a wide range of technologies, why do so many of the companies engaged in the battery business seem to be struggling?  To answer this question, it is necessary to understand not just what a battery does but what function a battery performs in commerce.

To my mind, batteries perform one of three functions.  The first function is improving the efficiency of energy systems.  Hybrid vehicles, such as the Toyota Prius, demonstrate this function.  In the Prius, a battery permits the gasoline engine to work more efficiently, improving fuel economy.  The batteries in most electricity stationary storage (ESS) on the grid demonstrate the same function.  ESS systems obtain their value from the efficiency gains they bring to the grid.  By leveling electricity load, batteries allow thermal plant electricity generators to operate more efficiently.  ESS systems also reduce the need for grid infrastructure otherwise required to transmit and distribute electricity at times of peak demand.

The problem with the energy efficiency function of batteries is that the cost of the energy and grid infrastructure saved by batteries defines the upper limit of what one can charge for the batteries themselves.  The not so unfounded criticism of xEV’s is that the cost of the batteries that power them is often higher than the cost of the fuel they save.  Even where this is not the case, the cost of the displaced gasoline generally defines the upper limit on what can be charged for the battery.  As a consequence, many battery companies that have devoted their businesses to providing batteries for energy efficiency functions have found the economics of the battery business to be challenging.

The second function of batteries is a fuel substitution function.  Batteries, of course, are not themselves a fuel.  Batteries are an energy vector, which store energy generated by a wide variety of fuels.  Batteries enable a customer to switch among different forms of energy in order to take advantage of price differences or, more often, to accommodate government policy.  Electric vehicles exist because governments have decided that they want to replace petroleum with other fuels, such as wind, solar and natural gas.  ESS is growing on the grid because governments have decided that they want to replace traditional coal and natural gas electricity generation (or, in Germany and Japan, nuclear power generation) with renewable fuels.

The problem with the fuel substitution function of batteries is that it is ultimately dependent upon government policy.  And over time government policy can be fickle.  This makes building a long term battery business around the fuel substitution function problematic.  By way of example, many early investors in A123 Systems who got out quickly did very well. But those who held the stock longer ultimately fell prey to the U.S. government’s unwillingness to continue the kind of financial subsidies that helped build the A123 Systems business initially.  Batteries used only for fuel substitution purposes pose a challenging business model.

The third function of a battery is power enablement.  In this function, a battery serves as a mechanism to bring power to an application that could not otherwise be powered on a practical basis.  Cell phones are a good example of the power enablement function.  Without batteries, cell phones would not work.  Similarly, many industrial batteries provide a power enablement function to such application as UPS systems for cell phone towers, implantable batteries for medical devices and SLI batteries for cars.  In the absence of a battery, the application it powers would not work, or would only work with a substantial loss of functionality.

The power enablement function allows for a more lucrative business model than fuel efficiency or fuel substitution.  Where a battery enables the application itself, the only limit (aside from competitive market forces) on what you can charge for the battery is what the consumer is willing to pay for the application.  No natural upside price cap or uncertain government policy impacts the business of selling batteries for power enablement.  That is probably why the most successful companies in the battery business seem to be the ones that focus on power enabling functions.

I mention the possible advantages of power enabling functions as a business model for batteries in order to highlight an interesting aspect of the NAATBatt 2015 Annual Meeting & Conference next February in Phoenix.  On Wednesday, February 18, 2015, there will be panel discussion about thin film battery technology organized by Applied Materials.  In theory, thin film batteries are intended to power the future “internet of everything”:  a web of micro-electronic devices that will interconnect with each other, from household appliances to wearable devices to imbedded control devices.  This future has not yet quite arrived.  But if, and probably when, it does, thin film batteries will fundamentally enable those new applications and potentially command attractive profit margins.  Those in the battery business should take note.  Hope to see you all in Phoenix next February.

Understanding Lithium-Ion Battery Safety and Its Implications

December 5th, 2014 by

This week saw the release of the National Transportation Safety Board (NTSB) report about the January 7, 2013, fire on board a Japan Airlines Boeing 787-8 aircraft at Boston’s Logan Airport.  The fire involved a lithium-ion battery located in the aircraft’s the auxiliary power unit (APU) and was followed by a second fire, nine days later, in Japan involving the main battery unit of another Boeing 787 aircraft.

The two fires shook the aircraft and advanced battery industries.  The Federal Aviation Administration (FAA) grounded all Boeing 787’s in the United States for three months.  It was not that the risk of thermal incidents in lithium-ion batteries was unappreciated by aircraft and battery designers.  Rather it was the fact that two thermal incidents occurred in the batteries of the 787 fleet after less than 52,000 accumulated flight hours. The expectation had been that the rate of occurrence would be about 1 in 10 million flight hours.

The NTSB determined that the probable cause of the incident in Boston was an internal short circuit within a cell of the APU lithium-ion battery, which led to thermal runaway that cascaded to adjacent cells, resulting in the release of smoke and fire. The incident resulted from Boeing’s failure to incorporate design requirements to mitigate the most severe effects of an internal short circuit within an APU battery cell and the FAA’s failure to identify this design deficiency during the type design certification process.  The NTSB report identified the principal safety issue as the failure to anticipate a catastrophic failure of the entire battery system:  i.e., the ability of a single, defective APU battery cell to trigger cascading thermal runaway in the other cells within the battery.

I attended this week the UL’s Lithium-Ion Battery Safety Summit in Washington, D.C., where a team from the NTSB presented its Boeing 787 report.  The UL Summit also brought together representatives of the battery industry, the airline industry, a wide range of battery customers, and the first responder community to review the NTSB report and discuss its implications for the use of lithium-ion batteries in commerce.

One of the most interesting insights of the Summit was that discussion of lithium-ion battery safety often confuses two different hazards.  The first hazard is the one that dominates most discussion about battery safety:  the danger of ignition due to an internal short or defect within the battery.  This is the 1 in 10 million flight hour problem.  This is the problem that is at the root of most debates over which lithium-ion batteries or battery chemistries are better or safer than others.

The second hazard, which is different and separate from the first, is the hazard of lithium-ion batteries becoming the fuel for any kind of fire.  This hazard is unrelated to the question of how the fire starts.  Lithium-ion batteries store large amounts of energy, and the amounts of energy that batteries are capable of storing increases every year.  Some electrodes, and today substantially all electrolytes, are highly flammable.  Even the smoke generated by a battery undergoing a thermal event is flammable.   As one of the first responders noted, in a fire smoke is fuel.

The challenge of lithium-ion battery safety, therefore, is not just a matter of moving from Six Sigma to Nine Sigma in manufacturing efficiency.  It is a challenge of controlling a lithium-ion battery thermal event after that event has started, regardless of the cause.

In a sobering note, Lt. Paul Rogers of the Fire Department of New York noted that in the 1970’s the State of New York banned the storage of LNG in residential buildings, a ban which continues to this day in New York City.  Lt. Rogers noted that today there are proposals to fill entire floors of New York City high-rises with lithium-ion batteries in order to permit peak shaving of electricity usage.  Lt. Rogers said that the NYFD will not hesitate to ban lithium-ion batteries, just as it banned LNG, if their storage in residential buildings cannot be proven to be safe.

Given that the State of New York is now seen, after the State of California, as the most promising market for grid-connected electricity stationary storage (ESS) in the United States, Lt. Roger’s remarks underscore how precarious a market it is.  It is critically important that the battery industry get its arms around the lithium-ion safety issue—and quickly.  The future of a good part of the ESS market may well depend upon it.

Kodak Syndrome and the Battery Business

November 29th, 2014 by

Daimler announced this past week that its Li-Tec subsidiary would cease production of lithium-ion battery cells in December 2015.  This followed Nissan’s announcement last month that it would diversify its supply sources of lithium-ion batteries from Automotive Energy Supply Corporation (AESC), a joint venture between Nissan and NEC, to LG Chem and, potentially, other suppliers.  Nissan noted that AESC’s products were about 15 percent more expensive than those of LG Chem.  Daimler’s and Nissan’s outsourcing of lithium-ion battery manufacturing to third parties that manufacture cells in high volumes and have deep experience in consumer batteries underscores a trend in the automotive battery sector that has been underway for some time.

Also this month Proctor & Gamble sold its Duracell battery business to Berkshire Hathaway for $2.9 billion, representing about a 60% decline in value of the Duracell brand from 1996. The decline of Duracell, once one of the most respected and recognized consumer brands in the United States, is most likely attributable to the incorporation of rechargeable lithium-ion batteries inside of consumer devices displacing the replaceable primary batteries that are the mainstay of the Duracell brand.

The Daimler and Duracell stories may seemingly have little to do with each other.  But they each illustrate an important stage in the battery product development cycle that will inevitably be repeated within the battery industry.   As a battery technology matures, there is a natural tendency to commoditization.  The companies that can manufacture most efficiently at scale—the LG Chem’s of today and the Duracell’s of yesterday—will capture market share.  Volume manufacturing leads to great price efficiencies and the possibility of better quality control that lower volume manufacturers will have a hard time competing with.

But with market dominance comes greater vulnerability to technological change.  All glory is fleeting and business dominance can disappear in not much more than the blink of an eye.  Duracell was too heavily focused on primary batteries to make the major investments necessary to enter the lithium-ion rechargeable battery business as a major player.  Duracell fell victim to Kodak Syndrome–the paralysis that sometimes afflicts market leading companies confronted by technological change.  It was not the first large company to do so, nor will it be the last.

The recent Daimler and Nissan announcements seem to indicate that we have a new Duracell (or perhaps a few Duracells) in the industry.   It will be interesting to see whether these new leaders in lithium-ion cell technology are able to avoid Kodak Syndrome when their time comes.  Certainly, lithium-ion battery technology will one day be replaced by better electrochemical energy storage technology, which may interact quite differently with the devices it powers.   If LG Chem and the other lithium-ion battery leaders wish to avoid the fate of Duracell, they will need to foster a culture of innovation within their companies and a willingness to explore and invest in the battery technologies of the future.

The collapse of Duracell as a battery market leader reminds us that we are in the midst of a battery revolution of historic proportions.  The ability to store electric energy in increasingly smaller mass is advancing rapidly with no end in sight.  The industry leaders of the future will be those companies that keep abreast of technology developments and invest in them.  Those companies that do not are destined to go the way of Duracell and Kodak.

Roadmapping Electricity Storage in Ontario

November 21st, 2014 by

I had the pleasure of attending this past week the 26th Annual Canadian Power Conference in Toronto, where I served on a panel entitled “The Energy Storage Roadmap: Where is storage technology headed, what opportunities exist in the Canadian ES value chain?”  Following my presentation I was asked what I thought Canadians could learn from efforts in the United States to roadmap the electricity storage supply chain.  It was a great question and caused me to think hard about the best way to roadmap an emerging technology and, more fundamentally, what the purpose of a roadmap is anyway.  Here are a couple of thoughts:

Focus Hard on the Real Objective.  The United States government has in recent years undertaken several efforts to roadmap and fund the development of a domestic lithium-ion supply chain.  By and large, those efforts have been unsuccessful.  Much time and treasure was spent on companies deemed to own technology critical to the manufacture of lithium-ion batteries.  But too little effort was spent identifying exactly what kinds of lithium-ion batteries consumers would want to buy.  That question was left to little more than hope. As a consequence, a great deal of the $2.4 billion Stimulus Package funding for advanced battery technology, which probably represented the best one-time chance to put a critical mass of U.S. companies into the business of lithium-ion battery technology, was wasted.

A supply chain roadmapping project must start by defining the ultimate goal of the roadmap.  That goal must be the production of a product that has sustainable demand in the marketplace.   In terms of roadmapping the supply chain for energy storage in Ontario, this means defining a role or roles for storage that makes sense on electricity grid in Ontario.  Energy storage, like lithium-ion batteries, is a broad and diverse subject.  Focusing on exactly what you want to achieve with storage before diving into the exercise of roadmapping and building a supply chain for it is an essential prerequisite of success.

Focusing on the specific objective is not as easy as it sounds, particularly where the roadmapping is done by a political body or an entity that reports to one.  Focus requires making hard choices about priorities.  Making those choices may leave important stakeholders outside the scope of a properly focused roadmap.  This is not easy for a political body to do.  Political courage and perseverance are necessary prerequisites of focus.

Include De-Risking the Technology in the Plan.  Deploying storage technologies on the grid will be a capital intensive undertaking.  With the balance sheets of public utilities eroding (at least in the United States), the importance of lenders and project financiers to successful deployment of energy storage systems on the grid, including deployments behind the meter, cannot be overstated.  Anticipating the needs of the financial community in an energy storage roadmap is essential.

One of the key needs of a lender in almost any project finance transaction is the absence of technology risk.  Lenders are in the business of underwriting credit risk.  They are not in the business of assessing the risk of whether the equipment that will generate the cash that will repay the loan will work as anticipated.  Accordingly, it is important that a roadmap plan for de-risking the technology it hopes to promote, either by focusing on technology the risks of which are already understood in the marketplace or by creating a mechanism whereby those risks can be understood.

There are three pre-requisites for de-risking a new energy storage technology, such as an ess system incorporating a novel design or chemistry.  First, standards for those systems need to be developed.  Standards provide predictability and something against which to measure.  Second, there needs to be a certification process by which a credible, independent third party can opine as to whether the ess system has complied with the applicable standards.  Third, and most importantly, there needs to be multiple, multi-year deployments of the ess system in the field.  The importance of successful operating history in a lender’s assessment of technology risk cannot be overstated.  No supply chain roadmap can be successful unless it includes provision and funding for deploying new ess technology in the field independent of market demand.

Good luck, Ontario.

Welcome to NAATBatt International

November 14th, 2014 by

The Board of Directors of the National Alliance for Advanced Technology Batteries has voted to rename and rebrand our organization as NAATBatt International.  This is an exciting change, not just of name and logo, but also of focus, mission and capabilities.

NAATBatt, initially named the National Alliance for Advanced Transportation Batteries, has a storied history.  Organized in 2007 by Jeff Chamberlain, Ralph Brodd, Carlos Helou and I at the request of the then junior senator from Illinois, Barack Obama, NAATBatt was intended to create a manufacturing R&D consortium in the U.S. battery industry based on the model of SEMATECH in the semiconductor industry.  This battery industry version of SEMATECH was to facilitate the entry of multiple U.S.-based manufacturers into the lithium-ion battery business.  The ultimate goal was to ensure that as automobile drive trains electrified, the United States vehicle fleet did not trade dependence on foreign petroleum for dependence on foreign batteries.

The SEMATECH concept was not ultimately successful.  An interesting history of the Stimulus Package and its $2.4 billion investment in battery technology in 2009-10 can be found in Seth Fletcher’s book, Bottled Lightening (see: http://www.amazon.com/Bottled-Lightning-Superbatteries-Electric-Lithium/dp/0809030535). But in 2009, NAATBatt reorganized as a trade association under the name the National Alliance for Advanced Technology Batteries, and found a new mission in promoting advanced battery product sales and manufacturing in the United States.

But two things have become clear since 2009.  The first is the opportunities for companies working in advanced battery technology go well beyond electric vehicles.  Electrochemical energy storage is the most important technology challenge of our time.  Solving the problem of how to store more electricity in a smaller mass is fundamental to progress, not only in vehicle technology, but also in Smart Grid applications (such as ESS), robotics, consumer electronics, unmanned aviation, fuel efficient maritime systems, electricity-based weapons systems, medical devices, monitoring systems and many of the other technologies that will shape human society in the 21st Century.

The second realization is that defining the business of advanced electrochemical energy storage technology by reference to national borders makes little sense.  While many national governments continue to invest in advanced battery industry and research, few NAATBatt member firms see themselves as concentrating in any one national market.  The opportunity for our members is global.  Few wish to be identified and potentially constrained by the physical location of their home office.  Accordingly, NAATBatt’s Board of Directors has voted to internationalize our name and our mission.  Going forward NAATBatt will promote our members’ technology and help them make new business connections and sales wherever in the world opportunity takes them.

Going forward, I expect that NAATBatt’s international mission will be evident in a number of ways:

  • NAATBatt will sponsor more programs outside of the United States. Our first international members site visit meeting took place last month at Hydro-Quebec and Grafoid in Canada.  As NAATBatt sees opportunity to help our members gain visibility and build relationships outside of their home markets, I expect that we will be having more of these international site visit programs.
  • NAATBatt will seek to provide intelligence in markets outside the United States for our members. I will expect that this will take place by working through a network of partnerships, such as NAATBatt’s partnership with the India Energy Storage Alliance and our partnership, just announced this week, with InterSolar in Germany.  It is my hope that NAATBatt International will become a valuable resource for our members looking for information and to make contacts in foreign markets.
  • Promoting the commercialization of emerging electrochemical energy storage technology will remain a core mission of NAATBatt International. But this mission will now take on an international aspect.  As difficult as it is for many of our members to identify and keep track of corporate development opportunities in their home markets, scouting overseas is even more complicated.  Easing that task for our members will become a new focus at NAATBatt.

I am looking forward to NAATBatt’s new international focus and believe that our members will find that it brings important new value to their membership investment.  Please check out our updated Web site at: www.naatbatt.org.

Advanced Batteries and the Midterm Elections

November 7th, 2014 by

On Tuesday of this week, Washington reshuffled with Republicans capturing a solid majority of the U.S. Senate. With their capture of the Senate, the Republicans control both houses of Congress and have the ability to pass legislation of their choosing. Given that Cleantech and renewable energy technologies have gotten caught up over the last six years in the debate about climate change, which has become heavily politicized, it is reasonable to ask: what effect will the Republican victory have on electricity storage and investments in advanced battery technology.

The answer, I believe, is not much. Because the Republicans do not have enough votes in Congress to override a Presidential veto, their passing any legislation over the next two years will depend on either cutting a deal with President Obama or getting sufficient support among Democratic lawmakers in order to force the President’s hand or override a veto.

Of the things that the Republicans have talked about doing that may bear on the future of the advanced battery business, here is how I think things will play out:

Keystone XL Pipeline. Approval of the Keystone XL pipeline is low-hanging fruit. The pipeline has broad support even among Democrats and it is difficult to see the Republicans missing the chance to claim an early victory by pushing it through. During the recent campaign, pipeline proponents widely claimed that its approval would help bring down gasoline prices. Falling gasoline prices could crimp demand for electric vehicles. But no one familiar with the oil markets takes this seriously. Although the pipeline may create jobs in the United States and reduce U.S. dependence on petroleum producers located outside of North America, it will not in itself drive down oil prices or create any pressure to relax the fuel economy standards that are driving adoption of electrified drivetrains. In any event the falling price of conventional crude oil (see my commentary in the October 24, 2014 issue) is probably a greater threat to the future of Keystone XL than the Sierra Club.

Relaxation of EPA Regulations. Republicans have been hostile to the EPA’s regulation of greenhouse gas emissions (GHG’s). There has been some speculation that if Republicans can limit the EPA’s authority to regulate GHG’s, coal will become a more attractive fuel for electricity generation and slow adoption of variable wind and solar power, which electricity storage technology helps accommodate. But even setting aside the debate over GHG regulation and climate change, coal burned in the traditional manner is a dirty fuel and, global warming beliefs aside, Republicans are likely to have little success cutting back the clean air regulations that have done much to improve air quality and impair the economics of coal. Wind and solar power are here to stay and get cheaper by the day. The associated demand for storage to balance their variability is here to stay as well.

Tax Reform. Tax reform is reportedly a top priority of the new Republican-led Congress and reform does not bode well for tax provisions such as IRC § 30D. IRC § 30D provides tax credits of up to $7,500 to purchasers of electric vehicles. Simplifying the tax code is something that almost everyone can agree on. But actually getting that done will be extraordinarily complicated and time consuming. The Internal Revenue Code is, famously, more than 5,000 pages long (2014 CCH edition, excluding regulations). Every single one of those pages, including the page on which IRC § 30D appears, was sponsored and fought for by some special interest group and its lobbyists. There is no reason to believe that all those special interest groups will go quietly into the night. Tax reform may be a good idea. But the realities of Washington politics probably dictate that IRC § 30D and the thousands of provisions like it will be around for some time.

Battery Research. Developing new battery technologies takes decades, far longer than most private investors can afford to wait for a return on their investment. Accordingly, government investment in advanced battery research is essential to the continued development of that technology. The general hostility of Republicans to discretionary spending might appear to put continued government support for battery research at risk. But appearances can be deceiving. In fact, Republicans have generally been supportive of basic scientific research (excluding the Hell No Caucus—John Boehner’s words, not mine), particularly where the technology in question has important industrial or defense applications. After all the Reagan Administration funded SEMATECH, the public-private initiative that reinvigorated the U.S. semiconductor industry (and upon which NAATBatt was originally based). Some Republican legislators have criticized government spending on applied research vs. basic research on the grounds that applied research picks winner and losers in the private sector. But the dividing line between basic research and applied research is often hard to define. The battery industry will need to keep an eye on future budgets to make sure that battery research is not shortchanged. But the industry is likely to find a more sympathetic audience on the Republican side of the aisle than many may anticipate.

The more things change, the more they stay the same.

Rising Electricity Prices Will Open More Opportunities for Storage

October 31st, 2014 by

Last week I wrote in this column about the threat of a long-term decline in crude oil prices to “green” technologies, such as xEV’s.  I noted that world crude oil prices have declined by over 20% since June 2014 and that, should that trend continue long-term, it could serve to discourage investment in alternative fuels technology, much like what happened in the 1980’s and 1990’s.

But before panic sets in among battery technology investors, it is important to note that, while the future of investment in electrochemical energy storage technology may be determined in large part by the cost of energy, such as crude oil, crude oil is not the only from of energy with which advanced batteries compete.

A significant competitor to advanced battery technology is the centralized electricity power plant and the associated infrastructure necessary to get that power to consumers.  As the cost of centralized electricity rises, the opportunities for distributed energy storage, most probably provided by advanced batteries, will rise along with it.  Rising centralized electricity prices make distributed generation, a natural market for storage, more attractive.  Rising centralized electricity prices can also open more opportunities for load leveling and rate arbitrage by storage and make alternatives to storage economically less attractive.

Although crude oil prices may be falling, the cost of centralized electricity is clearly moving in the other direction.  The U.S. Energy Information Administration reports that U.S. retail residential electricity prices in the first half of 2014 averaged 12.3 cents per kilowatt-hour, an increase of 3.2% from the same period last year. This is the highest year-over-year growth in residential prices for the first half of the year since 2009.

It is likely that the cost of centralized electricity will continue to rise.  Beyond taxes, fees, and other charges, there are two main components of electricity bills: the generation component, which reflects the costs of generating the electricity, and the delivery portion, which reflects the costs of transmitting and distributing that electricity.  Today, about 39% of electricity in the United States is generated by coal, a fuel that will likely continue to be burdened by increasing regulatory expense.  Natural gas, comprising about 27% of electricity generation, has enjoyed an anomalously low price in the United States over the past few years.  But, regardless of the size of domestic reserves, many in the industry expect gas prices to return to historically higher and more volatile levels in years ahead.

The cost of transmitting and distributing centralized electricity is also expected to rise.  The American Society of Civil Engineers opined in 2012 that $673 billion of new investment is required in the U.S. electricity grid by 2020 in order to keep it well-maintained and functional.  Actual investment since 2012 has not kept pace with that recommendation.  But sooner or later massive investment in grid maintenance and infrastructure will need to be made and its cost will be passed on to electricity consumers in the form of higher electricity prices.

So the news is not that bleak for the future of energy storage technology.  In a world where energy will increasingly become more dear and its price more volatile, there will always be a need to use energy more efficiently.  Whether in a vehicle or on the electricity grid, that is a role that electrochemical energy storage technology is well-positioned to play.

Falling Oil Prices May Make for Unlikely Allies

October 24th, 2014 by

World crude oil prices have declined by over 20% since June 2014 and prices could decline to much lower levels by year’s end.  This may be good news, short term, for U.S. consumers.  But the declining price of oil, if it continues longer term, jeopardizes both manufacturers of “green” energy technologies, such as xEV’s, and producers of domestic unconventional oil, two groups whose interests have not always aligned.

There are many explanations for why oil prices are falling.  Slowing economies in Europe and Asia, discord within the OPEC Cartel, and growing U.S. domestic crude production (coming in large part from unconventional reserves) are all contributing factors.  But it has also been suggested that certain large foreign oil producers may intentionally be manipulating prices in order to squeeze out competition to conventional crude oil and preserve their share in the petroleum market.  A similar drop in oil prices in the 1980’s effectively shut down U.S. investment in alternative fuels and stalled efforts to improve automotive fuel economy for the better part of two decades.

Fool me once; shame on you.  Fool me twice; shame on me.  The oil price declines of the 1980’s and resulting loss of investment in alternative fuels left the U.S. woefully unprepared for the energy price spike of 2008, let alone for dealing with the long-term consequences of foreign oil dependence and GHG emissions.  We must not repeat this historic mistake.

To the extent that falling oil prices are a consequence of market manipulation, the target of that manipulation is more likely producers of unconventional oil than promoters of green technologies.  Unconventional oil, which accounts for about 70% of total crude oil reserves, poses a real threat to the market share of traditional oil producers.  But the cost of producing a barrel of unconventional crude oil is generally substantially greater than producing a barrel of conventional petroleum.  According to the International Energy Agency, production costs for oil produced through enhanced oil recovery (EOR) techniques (such as fracking) run from about $40 to $85 per barrel vs. production costs from conventional reserves, which run from about $10 to $30 per barrel.  If the price of oil can be held low enough long enough, investment in EOR technology could be shut down just as effectively as was investment in alternative fuels in the 1980’s.

Companies with interests in “green” energy technologies and unconventional crude oil production therefore share a common interest and probably a common fate.  Both sets of companies have a strong interest in ensuring that the dumping of conventional crude oil in the international market does not shut down investment in technologies that hold the promise of making the United States more energy secure and efficient.

It will be interesting to see if and how this new coincidence of interests between domestic producers of unconventional crude oil and manufacturers of “green” energy technologies plays out.  Wouldn’t it be remarkable if the impetus for finally taking action to reflect the true, societal cost of imported oil in its price came, not from “green” energy technology advocates, but from within the oil industry itself?

Graphoid Wows NAATBatt Members With Tour of New Graphene Development Centre

October 18th, 2014 by

NAATBatt held this week its first international event:  A members site visit meeting and tour of the Grafoid Global Technology Centre in Kingston, Ontario and a tour of the energy storage laboratory of Hydro-Quebec IREQ located outside Montreal.  The joke among those NAATBatt members who attended is that Grafoid and Focus Graphite, which organized and hosted the meeting, have set the bar for these meetings so high that it may be difficult to get other members to host such meetings.

The meeting began with a tour of the energy storage testing laboratory at Hydro-Quebec.  NAATBatt members have previously had the opportunity to tour other, impressive battery testing laboratories.  But Hydro-Quebec’s laboratory is simply in a different class.  Hydro-Quebec, an electric utility wholly-owned by the government of the Province of Quebec, has been working in lithium-ion battery technology since the 1980’s.  It claims to hold about 90% of all patents in the area of basic lithium-ion technology and receives about $20 million per year in licensing revenues from those patents.  That revenue, together with payments Hydro-Quebec receives from battery development partners, is continuously reinvested in its battery lab.  The result, in terms of the sophistication and capabilities of the facility, is unprecedented.

The highlight of the Hydro-Quebec program for me was the lunch following the tour of the battery lab.  NAATBatt members were joined at lunch by Karim Zaghib, the long–time Director of Energy Storage at Hydro-Quebec.  Dr. Zaghib, who is recognized as one of the leading experts in the world in advanced battery technology, spent nearly an hour with NAATBatt members talking about advanced battery technology, where he thought it is headed, what he views as the greatest challenges and opportunities, and answering members’ questions about the technology.  Dr. Zaghib also discussed Hydro-Quebec’s partnership with Grafoid, which focuses on enhancing the performance of lithium-ion cathode material by using graphene.

Members then boarded a bus for the drive to Kingston, Ontario.  There, members toured the recently opened Grafoid Global Technology Centre, where Grafoid and several of its affiliated companies make and develop new applications for graphene.  Although members did not have a chance to see graphene being made (Grafoid uses a highly confidential and proprietary batch process to produce large quantities of graphene at low cost), members toured multiple labs where scientists from Grafoid and its affiliated companies are developing technology to embed graphene on surfaces and in the structures of various materials.

In conjunction with the tour, Gary Economo, the CEO of Grafoid, gave a talk about some of the applications that Grafoid is developing for graphene technology.  Several partners of Grafoid, including Braille Battery, Stria Lithium and Alcereco, spoke about how they were using graphene to enhance the performance of their products.  Members left the meeting at Grafoid with a real appreciation for the properties of graphene and how wide ranging its applications are likely to be in the future in advanced battery and other technologies.

A wrap-up of the meeting would not be complete without noting the boat tour of the 1,000 Islands in the Saint Lawrence River and the reception and dinner at Fort Henry outside Kingston.  Both took place during the height of autumn colors in Southern Ontario, providing an aesthetically impressive finish to a technologically impressive program.

Many thanks to Gary, Chester, and all of our hosts at Grafoid, who put on a truly exceptional program.  The joke among attendees is right (at least in part):  The bar has been set very high for future members site visit meetings.