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Alex Luce is a Principal at Creative Ventures where he invests in entrepreneurs using deep technology to tackle industry challenges arising from global secular trends such as labor productivity, climate change, and changing demographics.
Last month, I watched Ford announce the electric F150 Lightning with intrigue. If Ford is successful, this will mark an inflection point in the adoption of electric vehicles. One in sixteen vehicles sold in the US is an F150, making it the most sold vehicle of any type in the US. Priced below $34K after a federal tax rebate in the US, the electric F150 is close to price parity with its gas-fueled predecessor.
Broadly speaking, every major automobile manufacturer has announced numerous EV offerings, and we will see EVs reach price parity with their gasoline-powered equals this decade. The question isn’t whether we will see EV’s displace combustion engine vehicles, it’s when.
After 20 years of preparation, the coming decade is poised to unleash a wave of electrification beyond just vehicles. Efforts of this magnitude haven’t been seen since the initial push to electrify the US over 100 years ago.
The trend to electrify will touch every sector of the economy. This won’t be without challenges, however.
Increased EV adoption requires battery innovation
The biggest limiter to EV adoption has been cost and range, both of which are driven by the price and performance of the battery pack.
Technology and manufacturing improvements in battery tech have resulted in a roughly 10x cost reduction in the last decade alone, but continued innovation is needed. The increasing pace of EV adoption means automakers are going to need a lot more batteries to power these cars.
Furthermore, new battery innovations are subject to stringent manufacturing requirements requiring an enormous amount of time and investment to reach “gigafactory” levels of production. Though it makes the most sense to co-locate the manufacturing of batteries close to where R&D and vehicle production is done, a global race is currently underway as countries around the world are trying to assert dominance over battery manufacturing. Whether or not battery manufacturing is outsourced or not is a key strategic decision for both companies and governments alike.
Energy storage will also play an increasingly important role for the stationary power sector, helping to provide power to buildings and the electricity grid. Renewables are often the cheapest form of power generation in many geographies, and they’ve grown to account for most of the new electricity generating capacity in the US. Due to the intermittency of wind and solar generation, stationary energy storage is increasingly needed across multiple durations–ranging from hours to weeks.
These stationary batteries, though historically the same lithium-ion cells used by their vehicle counterparts, will start to become increasingly specialized and purpose-built for this different use case. New technologies are currently being developed and this will continue to be an area demanding the attention of innovation, manufacturing, and suitable business models and financing structures in order to succeed.
Assessing the battery landscape
The humble lithium-ion battery will be one of the most important and foundational technologies of the next 10 years. It’s the enabler of our mobile electronics, electrified transportation, and a more efficient and resilient power grid.
Still, it’s not the only game in town and further innovation is needed before many other sectors can be electrified.
There is opportunity at every stage of the value chain – from mining, to manufacturing, to recycling – for technology innovation and new business creation. The entire supply chain will need to get scaled up to meet demand. Material sourcing and selection challenges will need to be overcome to provide enough of the raw materials that are needed.
Furthermore, figuring out how to deal with batteries at the end of their lifetime and recycling are particularly important, as there currently don’t exist viable solutions to recycle or reprocess lithium batteries at the large scales that will be needed. The lead-acid battery, which is still used to start conventional cars all over the world, is a great success story for the recycling industry, with up to 98% of the battery able to be recycled. In comparison, lithium-ion battery recycling is still in its infancy with a number of projects announced or under development now, and will need to be scaled up to meet the growing influx of used batteries.
Finally, there exists a new generation of batteries being developed now which promise to deliver higher energy density and better performance. Much attention has recently been paid to solid-state batteries, which use a metallic lithium electrode and a solid separator in place of a liquid electrolyte. These batteries offer superior performance, but are challenging to commercialize and manufacture as lithium is a very reactive element.
Another approach is to utilize lithium-metal electrodes while still retaining a liquid electrolyte, which may prove to be easier to manufacture. It’s important to keep in mind that different battery designs are often best suited for different applications or requirements, so we are unlikely to see a ‘one size fits all’ solution any time soon.
It’s an incredibly exciting time though, both for investors and entrepreneurs. Rarely do we have moments that impact so broadly across various industries. Public and private sector funding and innovation has begun to seriously focus on this area after a decade of anticipation. The challenge now will be understanding which approaches can be commercialized at scale in the next 5-10 years.