The Lithium Ion Battery Conundrum: Who Will Win The Holy Grail Of Energy Storage And Electric Cars?

Jun.17.14 | About: Electrovaya Inc. (EFLVF)

Summary

The Lithium-ion battery industry has a Dirty Little Secret; large quantities of toxic N-methyl-pyrrolidone (NMP), a known reproductive toxicant, are used in manufacturing, causing substantially increased production and regulatory costs.

The additional cost of handling massive quantities of toxic chemicals makes lithium-ion batteries expensive (capital/operating expense and future liability). Production in Japan, EU and US difficult due to regulations.

Despite massive demand from electric cars and energy storage markets, several major manufacturers of lithium-ion battery manufacturers are struggling: some have declared Chapter 11, others have exited the business.

Electrovaya, which uses a unique, non-toxic, non-NMP proprietary process, has far lower production costs with no regulatory costs and is emerging as a winner in the Great Battery Race.

The Lithium Ion battery is the strategic technology of choice for both electric vehicles and Energy Storage. Tesla (NASDAQ:TSLA), General Motors (NYSE:GM), Toyota (NYSE:TM), DongFeng (OTCPK:DNFGY), Nissan (OTCMKTS:OTCPK:NSANY) and all other electric vehicles manufacturers have moved to lithium ion batteries. The cost of these batteries must be significantly reduced in order for energy storage and electric cars to be accepted into the mainstream market.

The demand for lithium ion batteries is skyrocketing as more energy storage systems are being built for storing electrons and more electric vehicles coming on the market. Analysts from Navigant, Lux Research, Boston Consulting and IHS are predicting market sizes exceeding hundreds of billions of dollars within the next few years. Dr. Bernard Fleet, the author of this article, believes that lithium ion will be the dominant energy storage solution for the next 5 to 10 years. This prediction is based on Dr. Fleet's decade of experience in the field, including his role as lead author on the Canadian Government Electric Vehicle (EV) Roadmap report and his research at Ryerson University, where he is a professor. Dr. Fleet is also a board member and technology advisor to Electrovaya (EVLVF).

In spite of soaring demand, well-funded conventional manufacturers of lithium ion batteries are struggling. Recently, three leading NASDAQ pure play conventional lithium ion companies (A123 Systems (OTC:AONEQ), Valence Technology (OTCPK:VLNCQ) and Ener1 Inc. (NASDAQ:HEV)) filed for Chapter 11. Several conglomerates are also struggling. Dow Chemical (NYSE:DOW) has written off about $1 billion of lithium ion and other assets and essentially walked away from its new conventional production plant in Michigan, built at an estimated cost of over $600 million. Sony (NYSE:SNE) has 5 similar plants and has been trying to sell them for over 2 years with no success. Europe's largest conventional lithium ion battery plant (Li-Tec), built at a cost of over $1.3 billion and owned by Daimler (OTCPK:DDAIY), is also for sale, as announced in summer 2013.

The Lithium Ion Battery's Dirty Little Secret

The Lithium Ion battery has a "Dirty Little Secret." Conventional process uses massive quantities of toxic chemicals (n-methyl-pyrrolidone NMP) to manufacture these batteries; these chemicals are reproductive toxicants suspected of causing birth defects and also have other toxic effects (California, EU, Japan). In the conventional manufacturing process, the cathode powder is made into a slurry by adding three times the volume of toxic solvent NMP. This wet slurry, which contains about 70% of the liquid NMP, is then used to coat the Aluminum current collector foil, and the coated electrode along with the NMP liquid is then slowly evaporated in 300 feet long furnaces that vaporize the thousands of gallons of the liquid NMP. Now the NMP is vaporized, forming a toxic stew of air and NMP. These toxic NMP vapors needs to be captured completely, and it becomes increasingly difficult and prohibitively expensive to remove the last traces of these gases.

This use of these toxic birth defect-inducing chemicals (n-methyl-pyrrolidone - NMP) creates the need for high capital expenditure, high operating costs,, and of course, future liabilities (remember asbestos). The capital costs of conventional new plants are generally covered through governmental and equity funds, however, the high operating costs linked to the use and handling of toxic chemicals remain and make this NMP-based process unsustainable in jurisdictions where environmental pollution is strongly regulated. This is reminiscent of nuclear energy where there cannot be any margin for any accidental release of toxic chemicals.

The conventional NMP process is an unsustainable technology with massive operating costs, capital costs and uncertain future liability costs, and as a result, there can be no long-term sustainable lithium ion battery plant using toxic NMP.

For instance, Tesla may have problems building a battery plant in California with its Panasonic (OTCPK:PCRFF) partner, because California has strong regulations around toxic NMP and Panasonic manufactures using the conventional NMP process. The occupational exposure limit for NMP is extremely low; 1 part per million in Japan, 5 parts per million in California, and the EU has a new regulatory draft to further reduce NMP exposures there.

Electrovaya's Unique Green Production Process

Electrovaya (OTC:EFLVF), a Canadian company listed on the Toronto Stock Exchange and trading on the grey markets in the US, is the only company that to date has developed a completely non toxic production process. Electrovaya is growing quietly and rapidly; has a unique non-NMP manufacturing process supported by over 150 patents and years of use and experience.

Electrovaya's technology breakthrough allows lithium ion batteries to be produced at costs well below $200/kWh and opens up massive mainstream deployment of low cost Lithium ion batteries into the electric vehicle and energy storage applications. Electrovaya is not yet well known to the investment community, however, major global industries are working with the company, including Dongfeng Motors (OTCPK:DNFGY), one of China's largest automotive companies, which lists at No. 142 on the Fortune 500. Electrovaya is also working with other companies all in the Fortune 50 list and major utilities worldwide.

Additionally, Electrovaya is now receiving contracts from global majors in applications such as China's largest electric car project (Dongfeng); utilities (Scottish & Southern Energy (OTCPK:SSEZY), HydroOne and others); Norwegian electric ferry; mining from Fortune 20 companies and micro-grids with Canadian Solar (NASDAQ:CSIQ). It is expected that Electrovaya will become the globally dominant lithium ion battery company because of this technology breakthrough, which reduces the costs of lithium ion batteries by more than 50%. EFL's capital cost requirement is a small fraction of competitors using toxic NMP while operating costs are also significantly lower, because it has no toxic chemicals to handle and operates a low cost, emission free green plant. Electrovaya's 2.0 technology was launched in late summer 2013, which combined extraordinary safety performance with its non toxic green production process. CY 2014 revenue guidance for Electrovaya is $15 million, and 2015 should mark the start of exponential growth.

Electrovaya's green process fundamentally reduces the operating costs of the conventional toxic NMP process by over 50%, as also noted by the Department of Energy. This is an important breakthrough for all applications of lithium ion batteries such as electric vehicles and energy storage. This breakthrough technology allows the lowest cost possible manufacturing and is likely to become the global dominant lithium ion battery manufacturing process. Electrovaya's exponential growth will be a combination of licensing agreements and direct production. One of Electrovaya's recent non-exclusive licensee is Tata Motors (NYSE:TTM), part of the $100 billion Tata Group.

The Department of Energy has started recognizing Lithium Ion's "Dirty Little Secret" as it was the main agency that funded all the conventional NMP based plants in the US. The DoE is now giving major research dollars to Johnson Controls (NYSE:JCI), National Labs like Argonne and others to develop a non-NMP process. In its feasibility report to DoE, JCI confirms that a non-NMP process would reduce the costs of the batteries by over 50%.

Disclosure:

Disclosure: The author is long EFLVF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it.

Additional disclosure: Dr. Bernard Fleet Ph.D, D.Sc., long Electrovaya (EFL:TSE); Board member and Consultant); worked in this industry for many years; Professor and Consultant. Dr.Fleet, a Professor of Environmental management at Ryerson University is a member of the Board of Directors at Electrovaya - he has over ten years experience in lithium energy storage and electric vehicles including serving as lead author on the Canadian Federal Government Electric Vehicle Roadmap.

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