Lithium-Ion Batteries and Centerfolds

They’re glamorous, sleek, sexy and hot; the building blocks of pubescent dreams and mid-life crises. But they’re expensive, temperamental, potentially dangerous and scarce.

For the last few years, news from the battery sector has been dominated by stories about advances in Li-ion batteries that hype performance while downplaying system costs and safety risks. As a result, U.S. companies operating in the Li-ion space like Ener1 (HEV) and Altair Nanotechnologies (ALTI) have attained nosebleed market capitalizations based on little more than dreams. While some recent articles have noted that global lithium supplies are limited, nobody has come to grips with the fact that it is prohibitively expensive to recycle used Li-ion batteries to a point where you can use the lithium in new batteries. So much like the oil industry, the Li-ion battery industry will have to come to grips with raw material shortages far sooner than anyone imagines.

In comparison, major lead-acid battery manufacturers including Johnson Controls (JCI), Exide (XIDE), Enersys (ENS) and C&D Technologies (CHP) have established product lines and rust-belt market capitalizations. Lead-acid innovators like Axion Power (AXPW.PK) and Firefly Energy are currently manufacturing commercial prototypes of advanced lead-acid batteries that promise huge leaps in performance at modest prices. To top it off, over 98% of used lead-acid batteries in the U.S. are recycled into new batteries; minimizing resource waste and pollution.

Size, weight and energy density are critical in cell phones and laptops, but far less important in transportation and alternative power applications: and despite all the safety talk, catastrophic failure rates of one cell in 10 million, or even one cell in100 million, are not comforting when it takes thousands of cells to make an automotive battery pack and a single failure can start a chain reaction (remember the Pinto).

History shows that two key factors determine whether a technology will be widely adopted: bottom line cost and proven product safety. I believe Li-ion fails on both counts because the technology is neither cheap nor safe.

There is growing consensus that energy storage is the next big investment opportunity because cost-efficient storage can significantly improve the profit potential and reliability of every alternative power technology. Transportation applications are an important part of the picture. But the market potential in transportation pales in comparison to bulk energy storage for wind, solar, and utility applications.

When you get real about issues like cost, safety and materials availability, I believe advanced lead-acid batteries offer an attractive alternative to their sexier but more problem prone cousins. In energy storage as in life, the plain and reliable girl next door is probably a far better bet than the airbrushed centerfold.

Disclosure: Author holds a long position in AXPW

Comments

[paultaut]

Alti has developed a 2 megawatt storage battery for EAS which is a start in the right direction. The current grid needs to be able to store all the wasted energy.

[JohnPetersen]

The comment on my biographical information was fair. Let me remedy the oversight.

John L. Petersen, Esq. is a U.S. lawyer based in Switzerland who works as a parter in the law firm of Fefer Petersen & Cie and represents North American, European and Asian clients, principally in the energy and alternative energy sectors. His international practice is limited to corporate securities and small company finance, where he focuses on guiding small growth-oriented companies through the corporate finance process, beginning with seed stage private placements, continuing through growth stage private financing and concluding with a reverse merger or public offering. Mr. Petersen is a 1979 graduate of the Notre Dame Law School and a 1976 graduate of Arizona State University. He was admitted to the Texas Bar Association in 1980 and licensed to practice as a CPA in 1981. From January 2004 through January 2008, he was securities counsel for and a director of Axion Power International, Inc. a small public company involved in advanced lead-acid battery research and development.

As a securities lawyer, my due diligence obligation is second to none. I have to fully understand the technological and competitive landscape in order to assure adequate disclosure. I'm not an engineer or an electro-chemist, but I've devoted a huge amount of time to the storage industry and believe my comments on the sector are far from uneducated.

[jenepher]

EESTOR capacitors will be the next breakthrough technology in energy storage. You can't buy shares in EESTOR, it's a private company - but ZENN cars (trades on Toronto) has bought a peice of them and will be using them in their new highway capable cars by 2009. Lockheed Martin has also invested in EESTOR. Lead acid batteries are so last century, Lithium Ion batteries are so last week. The EESTOR capacitor is a solid-state (read safe!) ceramic capicitor that will charge in minutes and have virtually unlimited recharge capacity. [Full disclosure: yes, I own shares in ZENN]

[David Lentz]

The safety concerns surrounding lithium batteries can be addressed by tightened manufacturing practices, and the recent development of lithium manganese dioxide batteries by Hitachi improves on that, as well as providing much faster recharge times without the hazards of exploding batteries.

No existing battery (or ultracapacitor) technology comes close to the energy density achieved with lithium batteries, so they will continue to be used anywhere that portability is an issue, from cellphones to cars. Ultracapacitors have a role alongside batteries of all types, by managing the charge/discharge cycles, acting as a buffer. As the cost of ultracapacitors comes down, they will begin to displace batteries in applications where weight is not a factor, but until they significantly improve their energy density, lithium batteries will remain the portable energy reservoir of choice.

The issues with the difficulty in recycling lithium, can be addressed (at least from an investing perspective) by investing in SQM, the largest producer of lithium.

[User 227598]

What an unbiased opinion from someone who not only was employed by, and a director of Axion, but who also is long in the stock. Gee, I guess he's not interested in seeing their technology flourish.

[User 29653]

John L. Petersen, Esq. is a U.S. lawyer says it all. Most of these guys would throw their mother under a bus to get rich. Lead Acid Batteries, what a dork.

[fairplay]

Wow -- who would have thought an article on batteries would engender such emotion? Almost makes you think that energy storage really is "the next big thing" ..? Based on the comments here, looks like everyone is voting with their wallets, not always the best basis for reason. AXPW recently put a whack of prototypes into third party hands for evaluation. They claim 300-400% the life cycle of typical lead acid and up to 1000% the uptake (charge intake) ability (like a supercapacitor). And they claim to be cost-competitive with lead-acid. And they say that they are going to produce electrodes only so that any battery company in the world (traditional) can transition to their design. And they just got a $10 mil progress payment from a vencap investor known for its thorough DD. These are not-inconsiderable claims, especially for an almost-unknown firm with negligible trading volime and a cap that barely justifies the patents. Everyone is entitled to their opinion, guys. Over time, the market will indeed decide who wins and who loses. But if calling the author names works for you, don't let reality intrude.

[Bad Article]

While I agree that there will be an increased place for lead acid batteries and the stocks of ALTI and HEV are ‘lottery tickets’, this article is very wrong on two fronts:

1) Nearly every major auto OEM and current battery maker (Toyota, Sanyo, Samsung, NEC, LG, Hitachi, etc…) has invested significant resources in large format Li battery development and the results are very encouraging. Such batteries have formidable advantages over current technology and will clearly power our cars in several years. Safety is an issue, but not one that cannot be overcome.

2) Lithium is the 35th most abundant element on the planet and the extraction process is rather simple. We have more lithium than we could possibly need. Furthermore, most batteries now use approx 1.5kg of Li / kwh or about 3kg for a standard 2kwh hybrid car battery. Even if prices doubled (which they won’t) to $7.00/lb this only means your hybrid car battery uses about $45 of lithium or a very small % of the over all cost.

[GH]

"Size, weight and energy density are critical in cell phones and laptops, but far less important in transportation and alternative power applications"

In the sentence above you betrayed yourself as either ignorant or a liar. No need to care which; I stopped reading your drivel right there.

[silentcinder]

ALTI has obtained nose bleed market capitalization??? You start off with right away with incorrect facts.

[dune36]

Petersen hasn't done his homework. The Altair Nano lithium titanate batteries have been shown to be completely safe. They've performed "hot box" tests at temperatures up to 240 degrees C - more that 100 degrees above the temperature at which graphite-based batteries can explode - with zero explosions or safety concerns. See www.b2i.us/profiles/in....

How is is that people who are paid to write articles don't bother to find anything out about the subject, first?

[creativforce]

I don't know what to believe on the Internet. But I read a couple of reports on world lithium supplies from geologist who say there isn't enough lithium in the world to supply10% of the auto market. Can you expect to build a business on hype alone? I wouldn't invest a dime in Lithium battery technology because geologists have already told us it can't work. The mineral is simply too rare. The hype machine on the other hand screams from every news outlet that lithium batteries will be the future.
I used to invest in a company called Power Technology (PWTC) that had a lead acid battery that was supposedly 50% lighter for the same amount of power as current technology, but it fell off the face the Earth about a year ago. EESTOR exists in a shadow world with Steve Meyers--the Water Car guy who may have been poisoned? Like him, EESTOR seems to be paranoid and unwilling to share anything about what they are doing. ECD (ENER) had a great battery that drove the GM EV1 for 100 miles on a charge, but now GM says they can't achieve 50 miles with the Volt? But somebody killed that Electric Car right? ECD couldn't sell their battery after Shell Oil invested heavily in their company in 1999. ECD didn't make a profit until they spun the battery division off this year and focused on photovoltaics. Ten years ago smart people with calculators were predicting that corn based fuels could only supply a small fraction of our energy needs and that it would take a barrel of fossil oil to produce a barrel of ethanol or bio-diesel, but the PR machine at GM, Big Oil and Big Agriculture convinced the American people that it was wave of the green future. Now most sensible people believe what the scientist said 10 years ago. E85 has done what scientists said it would do, drive up the price of corn to unrealistic levels , starve the third world and do nothing for US energy needs. But for some reason big investments were made by Verasun and others. I think I need to line my hat with aluminum foil because it looks like genuine, workable alternatives to oil are hiding or disappearing but ideas like biofuels and lithium batteries, that reputable scientists have already told us can't drive the future are being hyped beyond belief. In 1964, my first car a 1958 VW beetle had a top speed of 85 miles per hour and averaged 40 mpg. Today the only car on the US road that beats that mpg is the $30,000 Prius. The base model Ford Focus gets 37 MPG in the US, which is pretty decent mileage. But it gets 59 MPG in Europe which is 60% better gas mileage! Why? Am I crazy, or are powerful people trying to sell me more gas? If EESTOR is real shouldn't they be working with GM instead of a puny golfcart maker like Zenn? Could Lockheed's interest be to keep EESTOR ultracaps out of the hands of our enemies (or out of the hands of people who would drive electric cars. Our enemies is us?)

[phosphate!!!]

before you say that lithium ion is not safe, you may want to research lithium iron phosphate, offered by valence technology, A123 systems, phostech, lithium tech, amongst others.

hard to believe someone so "up to speed" on large format battery technology apparently is not aware of lithium phosphate and its safety and performance qualities for PHEV and EV applications (as well as other large format apps)

[Jumper]

I believe this artical is total crap and it's author an obvious d--k. Remember the Pinto indeed! The total lack of insite and understanding by todays so called journalists is beyond belief. Hey pal, try doing some real research instead of recycling the crap you find in the New York Times, the network TV media and Wikipedia!!!

[Tony_V_3000]

ALTI already has their batteries in vehicles. Check the Phoenix Motorcars website. Currently, the battery has a range of 120 miles and can be recharged in about 7 minutes. The batteries have the capacity to go for 300,000 miles. I would like the author to explain why he says their valuation is based on dreams when the product is being incorporated into working vehicles.

[hitech-al]

Director of Axion ... what a joke ... shame on Seeking Alpha. Another lawyer with lots of credentials, a biased point of view, a clear interest in the declining battery technology he writes of and little awareness about the advances in li-ion technology. Future stored power is all about li-ion technology. I suggest that Seeking Alpha look to more informed writers on the subject of li-ion technology when planning future articles about stored power. And in this instance, perhaps an opposing point of view to that of Mr. Petersen, is in order in a forthcoming Seeking Alpha article.

[Mayascribe]

It bothers me greatly that the author of this article has not done his research. Yesterday, Ener1 (HEV) won the prestigious R & D 100 Award, from the Chicago Tribune. This "Oscars of Innovation" award has been around for years and is dedicated to choosing the best new product for excellence and innovative design.

Fact: Ener1 had an independent lab test its battery in a Toyota Prius. The battery increased the Prius' mileage from 49 mpg to 72.4 mpg.

Fact: Ener1 has a $70 mil contract with Think! vehicle in Europe; this city vehicle has a 110 mile range and late this year Ener! will begin shipping batteries...

Fact: ...from its Indianapolis plant, which has the ability to produce $450 mil worth of battery revenue next year.

Fact: Ener1's battery is safe and cool even when operating under 95% stress.

Fact: At the time of this writing ENER1's stock is up 12% today.

I have followed Ener1 now for almost a year. Everything I've read about this company, from its R & D, to its getting its balance sheet fit, to the independent lab testings, to the building of the Indianapolis plant, all the way through to yesterday's award from the Chicago Tribune has been nothing short of a budding success story.

Disclaimer: I own shares of Ener1 (HEV) and Sociadad Quimica y Mineral de Chile (SQM), the company that produces 60% of the world's lithium.

[Yankeefan07]

LTHU is a European company on the pink sheets that is in the wind, submarine, and defense technology sector; a Prius tested with their Li-ion batteries in California traveled 125 miles on one gl. of petrol. I expect the stock to explode since they have now entered into an MOU with Enersys (ENS) to handle their distribution issues. Keep an eye on LTHU (Lithium Technologies).

[VLNCanon]

I guess you haven't read the news. Toyota is going with lithium iron phosphate chemistry in their '09 Prius. Matsushita (Toyota's battery source) is building a new $951 million li-ion battery plant in Osaka, due to be operational by 2010.

This could spell a windfall for companies with strong patent portfolios in the LiFePO4 space. Valence, Phostech (division of Hydro-Quebec) come to mind.

[User 231560]

Great articles. Given John's comment on Lithium Scarcity I would be interested in hearing his viewpoint on pure play lithium producers and upcoming projects. I own Admiralty Resources which is highly speculative but appears to have claim to a large reserve of Lithium in Argentina. I have found others but they appeard to be way to pricy.

[leh]

Some very mistaken "facts" here in some of these responses:

1) Toyota is NOT going with lithium in the next gen Prius due out next year as initially reported last winter but is sticking with an improved NIMH pack for safety reasons. The company simply does not feel comfortable enough with lithium at this point to use it quite yet. The NIMH packs in the Prius have performed nearly flawlessly to date, so it's not hard to see why they would chose to stick with this proven performer until all the kinks are ironed out with lithium.

2) The nearly $1 billion dollar battery factory development recently announced by Toyota will be split almost equally between NIMH and lithium production at two different facilities.

3) Lithium is more than plentiful and the lithium shortage scenario has been shown to be nonsense.

4) ALTI's initial battery packs for the Phoenix had problems and have been recalled. I doubt Phoenix will survive given the loss of CARB credits and all the delays with getting their first vehicles running satisfactorily.

Re the author's credentials and credibility, he does not seem particularly informed to me in regards to the safety advantages attained by A123 and PHET with their lithium iron formulations. These batteries are bulkier and heavier than lithium ion and lipolys, but still much lighter than lead acid. Smith Trucks, a UK commercial E-truck maker, has recently signed a substantial contract with Valence for the latter to supply them with large lithium packs for their trucks. This is a huge vote of confidence from the marketplace as Smith is an old established company (unlike Phoenix) and has announced plans to build one or two electric truck plants in the US. Smith does use lead acid in their trucks but will offer lithium packs as an option for extended range.

The bottom line is that NONE of these various battery technologies is going away in our lifetimes and each has a place in the storage world. Lead acid formulations will likely continue to be the low cost preference for those applications where weight is not a concern. Toyota has proven small NIMH packs work beautifully in lightweight HEVs like the Prius, and lithium is on the horizon--and getting closer each day--for PHEVs, which require far more demanding, deeper batteries than the current hybrids.

[leh]

P.S. Eestor is unproven to date despite many breathless announcements by Zenn--along with endless delays and missed deadlines. I remain a staunch skeptic.

[User 50437]

Axion power has only 80% of the energy density of lead acid. This is going to facilitate the electrification of the automobile?!? ROFL

[thedivot]

This article is quite an amazing example of the conflicting and confusing information available on the internet. It's difficult to know who to believe as everyone has 'facts' for their argument. Reading the article and all the comments was really interesting but made me laugh. Who knows what to believe - everyone is so convinced they're right!
As far as MHO, I think this 'industry' is very cloudy at the moment. There is a race to find the right technology which will power hybrid cars which is what the stock market is looking for. Sure there are many other industries that will benefit from improved battery technology that will be good for the companies involved but the focus is on automobiles. All the different companies have a story to tell about their technology with a success story of some sort with a customer who has stepped forward and signed on to use their technology. Lithium-Ion, or whatever derivative of that, looks to be where all the development and potential is and the winner(s) gets to change the automotive world as we know it. That includes the car company that locks onto that technology first as well. Too bad there isn't a Battery ETF to invest in which would spread the risk!