The bottom line: While tech followers await in anticipation of the next battery tech breakthrough, it’s likely that the rate of improvement will prove to be incremental and continuous. We will still refer to the batteries in EVs as lithium-ion given that lithium will likely remain the key metal in cathodes for the foreseeable future.
For this fifth report in our “Battery 101” series, our goal is to outline the potential opportunities in battery innovation over the next two decades. A programing note: Elon Musk has been vocal on the topic. While he doesn’t know everything when it comes to batteries, he does influence which technologies make it to market. And, there are still many unknowns when it comes to what’s next in batteries, as evidenced by Musk’s response on a December 2019 earnings call Q&A:
Q: Wouldn’t it make sense to raise capital to pursue acquisitions, especially bolt-ons that could help you accelerate capabilities in battery technology?
A: I mean, if you know of any acquisitions, we’d love to hear about them. Yes, sure. It sounds great. Who should we acquire?
Not made clear by Musk’s response is Tesla’s progress with its next-gen 4680 battery pack along with the reality that they’re currently experimenting with more than 30 battery chemistries. Despite the uncertainty of the future of batteries, Musk believes even that even without significant battery tech breakthrough, “the opportunity to transition Earth to sustainable energy is still very possible.”
Lithium-ion batteries are the EV workhorse
Today, lithium-ion batteries account for almost all of the batteries used in EVs. Some pros: energy density for a 300-mile range, portability and reliability.
Cons:
- Battery degradation. A typical lithium battery loses about 3-5% of its storage capacity each year, which means a 300-mile range battery will degrade to a 190-225 range (a decline of 25-37%) after 10 years.
- Fire risk. The National Transportation Safety Board reports that there are about 170k car fires in the US annually. While almost all of those are from gas-powered vehicles, EV batteries can catch fire and pose challenges for first responders. After an accident or battery malfunction, the battery has stranded energy and once extinguished can reignite hours and or days later. Just like a gas vehicle, it’s unlikely that a EV battery would explode.
- Affordability. The battery in an EV is expensive, accounting for between 15-20% of the overall cost of a vehicle. For example, in a $55K Model Y, the battery accounts for about $10-$12K in costs.
Current rate of battery improvements
A typical lithium battery sees an annual energy density improvement of 5-8%. This rate of progress pales in comparison to the 41% annual improvement outlined in Moore’s Law for semiconductors. While there is a debate as to whether Moore’s Law still holds, there is no debate that battery tech advancements lag chip advancements.
The DOE’s Vehicle Technologies Office outlined the following goals for battery development by 2025:
- Reduce the cost of EV packs to less than $100/kWh, ideally $80/kWh. Current battery cost: $130/kWh.
- Increase the base range to 300 miles. Current average range: 235 miles.
- Decrease charge time to 15 minutes or less. Current charge times range between 5-10 hours, or less at a supercharger.
The goals are aspirational yet lack any incentives to move the industry forward. That said, the freehand of the market is at work, leading to the development of an array of next-gen battery chemistries.
What does the next-generation of battery tech look like?
At its most basic level, current and future battery architects will include a cathode and an anode. The topic around next-generation batteries is centered on changes to the chemistry, architecture and battery cell alignment that make up the cathode and anode. As mentioned, an important takeaway is that lithium will likely remain the essential metal used in cathodes for the foreseeable future. Despite the dangers of predicting anything in tech will be around in 20+ years, we believe lithium will still be essential beyond that period. In other words, we expect consumers will refer to “lithium batteries” in their EVs for decades to come.
The Silicon anode
While still in a proof of concept phase, the most promising research in battery tech is related to the silicon anode. In theory, a silicon anode can increase the range of a vehicle by 2X, provide additional energy to power features like autonomy and reduce charge time in half. Another benefit to silicon is that it reduces geopolitical risks around metals supply. We estimate that almost 90% of total graphite supply is directly or indirectly controlled by China given China’s influence over African suppliers. We’re likely 3-5 years away from the chemistry making its way into consumer electronic batteries and 10+ years away from making it into electric vehicles.
One challenge to the silicon anode is swelling. When the battery charges, the silicon expands which can result in prototypes breaking and catching fire. Today, manufacturers are slowly building to a full silicon anode by adding small amounts of silicon into a graphite anode in a process known as anode doping.
Solid-state dry electrode
This architecture is totally different than a lithium battery and considered to be a science project today. It uses solid electrodes and does not use lithium. The selling point for solid-state batteries is that the provide improved performance and greater safety. We don’t expect them to go mainstream given the high cost (varying from $400-800/kWh) and poor performance in low temperatures.
Some companies working to develop solid-state batteries include QuantumScape (QS), SES (SES), SolidPower (SLDP) and Toyota (TM). Additional startups exploring the development of solid-state batteries include SVOLT, Automative Cells Company (ACC), Northvolt and Britishvolt.
Hydrogen
Hydrogen powered cars likely won’t gain traction. In the US, there are about 20k hydrogen powered cars on the road (compared to about 2.7m EVs)—all of which are in California, where there are retail points to fuel up. Most hydrogen-powered vehicles are made by Honda and Toyota. The battery is safe in a crash (despite word association with the Hindenburg disaster) because a hydrogen car battery does not pool gases like a 1937 German airship. There won’t be uptake of the hydrogen battery because it doesn’t produce enough power for the way most people drive. That said, if you prefer to drive like a grandparent, a hydrogen car may be for you.
Why all of the excitement around Tesla’s 4680 battery?
Tesla’s 4680 battery goal is to power a vehicle for more than 1m miles. It uses a slightly different cell architecture and is expected to be in volume production next year for Model Y’s with a partnership with LG Energy. The chemistry of the battery is similar to conventional lithium batteries. The benefit of the 4680 is a 16% increase in range with little additional costs. This 16% step up is a step ahead of the typical 5-8% annual energy density improvements.