Road Runner

Better Lithium-Ion Battery Plays than A123 Systems

Thanks for the good info on other battery companies in China.

PHEVs and EVs: Plugging into a Lump of Coal

John, Please address the issues I brought up instead of diverting the conversation.

On Sep 01 01:20 AM John Petersen wrote:
> RoadRunner, I write about facts as they are in 2009 and you want
> to talk about conditions as they might be in 2030. Current facts
> are fairly easy to ascertain and future conditions are not. As of
> today. speaking solely in terms of CO2 abatement, HEVs enjoy a price
> advantage of roughly $60 per ton over PHEVs and EVs. While PHEVs
> may get to a point where they are sitting on the zero line, that
> will not change the comparison with HEVs which will simply offer
> a larger advantage arising from a higher oil price. As PHEVs and
> EVs become cheaper, energy efficient solutions like HEVs become more
> profitable. The relationships are locked in place.
>
> For the last couple weeks I've been pretty technology agnostic. For
> purposes of this particular analysis the type of battery doesn't
> matter and the primary issue is "if we have a given quantity of batteries,
> what type of electric drive gives us the best bang for the buck in
> terms of (a) cost savings to owners, (b) contribution to fuel efficiency,
> and (c) CO2 abatement." The answers are the same if the batteries
> are NiMH, lithium-ion or my favored lead-carbon. PHEVs and EVs sound
> good in the telling but are an immense waste of resources.
>
> I look at the energy storage sector from the perspective of an investor
> who is trying to pick stocks that will outperform both the market
> and others in their sector. It takes very little experience with
> market dynamics to know that stocks swing from being "in favor" to
> being "out of favor" fairly rapidly. When that happens the out of
> favor stocks rise while the in favor stocks fall. Currently companies
> like Ener1 and Valence are maintaining market values that are several
> years ahead of their business fundamentals while the lead-acid sector
> has fallen to very low levels. As a result, Ener1 which has annualized
> sales of $30 million trades at roughly 1.5x the market value of Exide
> which has annualized sales of $2 billion. As the market comes to
> the realization that both companies have a bright future, Ener1 is
> likely to fall and Exide is likely to rise. That's simple value investing
> as practiced by Warren Buffett.
>
> While we're on the topic of Buffett, he bought his interest in BYD
> at a price of roughly 1.3 times sales and paid $1.12 per share. Since
> BYD has been profitable for years, it was probably a smart buy. Today
> BYD is trading at close to $6 because many investors think "following
> Buffet" is a good strategy. What they ignore is that paying 5x Buffet's
> price is a very high risk strategy. For their investment to double,
> Buffet's has to increase by 1000%. Given the events that have transpired
> over the last year, I wouldn't encourage anybody to buy BYD because
> it's already had a monster run-up in price and is likely to either
> remain flat if the business continues smoothly or fall off if it
> gets rocky. Warren will come out a winner in any event because he
> almost always does. The followers who pay a much higher price per
> share may not be as fortunate.

PHEVs and EVs: Plugging into a Lump of Coal

John, you said, "For those of us who like propeller-head technical issues, five to seven years is just around the corner. For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns." But, then you turn around and write an article called "How PHEVs and EVs Will Sabotage America's Drive For Energy Independence". Becoming energy independent is a multi-decade long-term goal.

You are being hypocritical. You are trying to scare people away from plug-in vehicles by saying that they will sabotage the long term goal of energy independence, but when someone, like me, challenges your reasoning on this, you blow off my argument because it supposedly is too long term to be investment oriented.

Second, my argument was not technically oriented, nor was it too long term. It was a direct challenge to the way you interpreted a McKinsey chart. You used that chart to argue that plug-in vehicles are bad for US energy independence. I argued that you misinterpreted that chart because you did not do your due diligence in understanding that chart.

John, your religious fervor for promoting the stock of Axion has led you to spread incorrect ideas about Lithium ion batteries and plug-in vehicles. You are cherry picking your information sources, misinterpreting data, and blowing off your critics through hypocritical arguments.

Luckily, car companies are ignoring your false warnings and charging ahead with plug-in vehicles using Lithium ion batteries. In the short term, plug-in vehicles don’t save money nor reduce carbon, but they are the basic technology, when perfected, that will do both.

And, about your comment, “For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns.”. Tell that to Warren Buffett.


On Aug 31 12:20 AM John Petersen wrote:
> Road Runner, we need to remember that Seeking Alpha is an investment
> site and the entire purpose is to get people in the ballpark and
> provide enough information to help them make good investment decisions.
> I agree that progress is being made on a number of fronts in terms
> of driving down technology costs. The rate of progress, however,
> is much slower than we've lived with during the IT revolution, so
> it's an entirely different metric.
>
> For those of us who like propeller-head technical issues, five to
> seven years is just around the corner. For investors who focus on
> the time value of money, five to seven years is a very long time
> to wait for first returns. It's all a question of the shoes you're
> standing in, which is why I try to focus on things that will be important
> over the shorter term and tend to put less value on long-term promise.

PHEVs and EVs: Plugging into a Lump of Coal

John, you said, "For those of us who like propeller-head technical issues, five to seven years is just around the corner. For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns." But, then you turn around and write an article called "How PHEVs and EVs Will Sabotage America's Drive For Energy Independence". Becoming energy independent is a multi-decade long-term goal.

You are being hypocritical. You are trying to scare people away from plug-in vehicles by saying that they will sabotage the long term goal of energy independence, but when someone, like me, challenges your reasoning on this, you blow off my argument because it supposedly is too long term to be investment oriented.

Second, my argument was not technically oriented, nor was it too long term. It was a direct challenge to the way you interpreted a McKinsey chart. You used that chart to argue that plug-in vehicles are bad for US energy independence. I argued that you misinterpreted that chart because you did not do your due diligence in understanding that chart.

John, your religious fervor for promoting the stock of Axion has led you to spread incorrect ideas about Lithium ion batteries and plug-in vehicles. You are cherry picking your information sources, misinterpreting data, and blowing off your critics through hypocritical arguments.

Luckily, car companies are ignoring your false warnings and charging ahead with plug-in vehicles using Lithium ion batteries. In the short term, plug-in vehicles don’t save money nor reduce carbon, but they are the basic technology, when perfected, that will do both.

And, about your comment, “For investors who focus on the time value of money, five to seven years is a very long time to wait for first returns.”. Tell that to Warren Buffett.


On Aug 31 12:20 AM John Petersen wrote:
> Road Runner, we need to remember that Seeking Alpha is an investment
> site and the entire purpose is to get people in the ballpark and
> provide enough information to help them make good investment decisions.
> I agree that progress is being made on a number of fronts in terms
> of driving down technology costs. The rate of progress, however,
> is much slower than we've lived with during the IT revolution, so
> it's an entirely different metric.
>
> For those of us who like propeller-head technical issues, five to
> seven years is just around the corner. For investors who focus on
> the time value of money, five to seven years is a very long time
> to wait for first returns. It's all a question of the shoes you're
> standing in, which is why I try to focus on things that will be important
> over the shorter term and tend to put less value on long-term promise.

PHEVs and EVs: Plugging into a Lump of Coal

John, I believe you incorrectly used the information in the “Global carbon abatement cost curve” chart, and consequently came to incorrect conclusions.

The McKinsey report you referenced, “Profiting from the low-carbon economy”, at www.mckinsey.com/clien... does not fully explain this graph so I had to find a better explanation. I found a better, though not complete, explanation at www.iiasa.ac.at/rains/... called “Pathways to a Low Carbon Economy”.

The flaw in your reasoning is that you did not notice that technology in the “Global carbon abatement cost curve” is “frozen” at 2005. Note the phrase “frozen technology
scenario (2005-2030)” on graph “Basic cost curve logic”. In other words, there is no accounting for major technological advances nor big drops in price. That, in my opinion, is why solar and plug-in vehicles have a positive abatement cost. Because solar and batteries are both experiencing huge technological and manufacturing innovations, I believe that when this graph is rewritten in the future, it will show a much lower cost for solar and plug-in vehicles, and it will eventually show a negative cost.

Another thing is the “Global carbon abatement cost curve” was calculated at $60 a barrel oil. In the “Pathways to a Low Carbon Economy” report, there is an updated Global carbon abatement cost curve” at $120 a barrel oil called “Effect of high energy prices”. It shows that the cost is almost $0 for plug-in vehicles, solar, nuclear, etc.. I believe that $120 is a good estimate for oil prices starting in 2011. Through, this could be a low price for oil if the dollar heads lower. Watch how much China lets their currency rise against the dollar.

One more thing. Your idea that a plug-in vehicle is just plugging into “a limp of coal” is only 50% accurate. Today, only 50% of electricity is generated from coal. But, in the “Pathways to a Low Carbon Economy” report, it states that “In 2030, 70% of electricity would be generated from low-carbon sources”. See “Key findings global GHG abatement cost curve v2.0” page.

I think McKensey put out this chart as more of a sales tool than a teaching tool. It is geared toward bankers telling them that there are big opportunities to make money if they get in early to the new CO2 abatement movement. McKinsey’s ultimate goal is to get banks to pay McKinsey more money to do deeper research. The information on this graph was left intentionally vague on purpose. I had to “read between the lines” to approach an understanding of what this chart means.

John, you should not have drawn hard conclusions from this graph. It’s not comprehensive enough of a chart and report for drawing such conclusions as stated in the “Pathways to a Low Carbon Economy” report, “The GHG abatement cost analysis ... cannot be used for ... Forecasting individual technologies ...”. This only makes sense since no one can accurately predict where fast moving technologies are going to take the world in 10 years or more. This chart is intended to create a baseline of understanding, and get people “in the ballpark” with their knowledge.

Why Pure Play Energy Storage Companies Could Double for Investors

There is a critical need to store energy so that alternate energy can become part of the "base" production capacity in the US and the world. Base production is the energy generation that is available 24/7. Currently, solar and wind are limited mostly to supplemental energy production, with coal and natural gas providing base load. So don’t underestimate John’s claim about the huge potential for battery companies. If they deliver on the promise of cheaper, higher energy density products, then their market will be expand greatly.

Here’s one tiny example. Alaska’s remote towns are finding TODAY that wind power is more economical for electricity production than diesel because, though Alaska has plenty of crude, it is very expensive to get diesel fuel to remote villages. Diesel there today (yes Feb 2009) is around $5 per gallon (ouch!). But, the one thing that is holding back wind from becoming an even bigger piece of electricity generation is unreliable winds. Cheap energy storage is needed to smooth out the peaks and valleys.

Hawaii is similar to Alaska, but not as extreme. It is trying to become an alternate energy economy with it’s great sun and wind resources. They are turning the once Pineapple growing only island of Lanai into a giant wind and solar farm. They will use undersea power cables to get that power to Honolulu on Oahu. Note that geothermal is mostly limited to the big island where the population is small. It is expensive to import fossil fuel to the islands so gas and diesel prices are high. Gas runs $.50 higher than the mainland (island lingo) national average. Energy storage is needed on Lanai to make full use of the undersea cables.

Then there is the giant Texas wind farm of T. Boone Pickens and partners. Along with hundreds of wind turbines will be a coal fired and natural gas fired plant. These are needed to offset uneven winds so the expensive power lines running to cities hundreds of miles away will be fully utilized all the time. Wouldn’t it be nice to replace the coal and natural gas plants with batteries or some other type of energy storage, and put up more wind turbines?

Why Pure Play Energy Storage Companies Could Double for Investors

John, Good reading and good points. (Are you surprised to hear that from me after our lively debate on Lithium Iron Phosphate vs Lead Carbon batteries?).

Yes - lots of small funding is much better than large funding. I've come across hundreds of possible significant technical advancements in the alternate energy sector in the last 5 years, but no one knows what will be the 5 to 10 winners that actually make a difference in volume production. When the government picks winners and heavily pushes them, like ethanol from corn (gasp), it often has bad consequences. Let the marketplace determine the winners, but give many companies and technologies a little push. I just saw where Tesla (the electric car company) is getting $250 million to help build a factory. That's great - enough to make progress, but not enough to push out competitors.

Lithium Unicorns and Alternative Energy Storage

John, LiFePO4 has much different manufacturing challenges than the other types of Li-ion batteries.

LiFePO4 is naturally very stable (thanks to the phosphate, PO4, which holds the oxygen atoms very tightly) so there is no concern with explosion like in other Li-ion batteries. Thus, design concerns, and thus manufacturing techniques, are very different in that aspect. The ultra stable feature of phosphate also makes for a naturally long life. The highly stable LiFePO4 material degrades very slowly compared other Li-ion materials, so there's a difference in design and manufacturing concerns.

On the minus side, LiFePO4 is a poor conductor of electricity unlike the other Li-ion materials. Thus some sort of doping (adding conducting materials into the LiFePO4) is required. This is an area of major research and innovation today for LiFePO4, with the solutions constantly evolving. Different companies attack this problem differently (thus the confusion and controversy with the patents; but that's a whole other story that will find its conclusion in the courts).

A123 uses a “nano” technology which is some sort of extremely fine particles. Nano technology today is a very difficult and error-prone process.

BYD uses an AyMPO4 material. The “Ay” means “alkali metal”. Lithium is an alkali metal. Thus some of the Lithium is replaced with a material of similar chemical characteristics. The “M” stands for Iron (Fe), or Cobalt (Co), or some other similar metal. Thus some of the Iron is replaced with other metals.

Bottom line is that LiFePO4, and its permutations, are so different in characteristics, and in design and manufacturing challenges, that it must be evaluated separately.

Lithium Unicorns and Alternative Energy Storage

NorthernPiker, Very good post. I appreciate the calculations you gave for the cost of the materials in each type of battery.

Lithium Unicorns and Alternative Energy Storage

John, This statement is totally inaccurate, "Li-ion batteries are a mature technology class. The major Japanese companies that have been making them for 20 years have already squeezed out the economies of scale. The best producers can hope for is a competitive price that will squeeze profit margins to the bare bones."

LiFePO4 (LFP) is brand spanking new technology. It was only invented in 1996. It has only been in mass production for about 2 years. The technology is still evolving at a rapid pace.

Please stop grouping Lithium Cobalt and Lithium Iron Phosphate (LiFePO4) together as "Li-ion" batteries. They are very different batteries with very different characteristics. The Lithium Cobalt battery is totally unsuitable for autos because of risk of explosion, shorter cycle life, high expense of Cobalt, etc. The Lithium Iron Phosphate is ideally suited for autos, and many other applications. The only weakness it has compared to Lithium Cobalt is it carries about 30% less energy, so it’s use in portable electronic devices is safe.

Lithium Unicorns and Alternative Energy Storage

I'm amazed there is even a discussion about peak Lithium gong on. There should be none. There is no peak Lithium as per calculations using the worst case scenarios available.

It takes about 1.4 kg of Lithium Carbonate (LiCO3) to make 1 kWh of Li-ion battery. The Volt has a 16 kWh battery, the BYD F3DM has a 13.2 kWh battery, and the Tesla has something around a 50 kWh battery. So let’s pick the bigger battery of 50 kWh for our calculations because that will be closer to the plug-in hybrids of the future. Note that this is 3x the size of the Volt battery and 4x the size of the BYD battery.

Lithium Carbonate now costs about $8 per kg now. I read that current technology can extract Lithium Carbonate from the ocean for $22 to $32 per kg. Let’s pick the largest number of $32 which assumes that the technology never improves and current cost estimates are somewhat low. This also assumes that land based deposits are exhausted. Thus we have a bad case scenario with Lithium Carbonate costing $32 per kg (4 times current cost).

Also, for argument, let’s assume there is no improvement in battery energy per kg of Lithium Carbonate. Now that I’ve picked numbers that are “worst” case, let’s calculate.

50 kWh battery needs 70kg of Lithium Carbonate (1.4 * 50). At $32 per kg, that costs $2240 (32 * 70) .

Thus $2240 is the worst possible cost of Lithium Carbonate raw material that I could conceive for a plug-in hybrid with a powerful 50 kWh battery. Still doable. Thus, there can not be a peak Lithium controversy!

Alternative Energy Storage: It's All About Price vs. Performance

John Peterson says "Li-FePO4 is a wonderful and robust chemistry, production cost at the factory is in the $1,300 per kWh range in the Sandia report. "

First, where in the Sandia report does it break out Li-FePO4 from Li-ion and say Li-FePO4 costs $1,300 per kWh? I don’t see it.

Second, the long term price of Li-FePO4 will drop dramatically because it is a spanking new technology with strong demand. Google LiFePO4 and you will find site after site how you can upgrade Prius’, motor scooters, boats, etc to LiFePO4. One site tells how you can cannibalize many DeWalt power packs to create an electric car.

The ultimate price, after supply catches up with demand and after the patents expire, depends on material costs, and they are very low for this battery. Don’t give me the “Lithium will be in short supply” argument either, because there are many untapped dry lake beds (like Nevada) that have good deposits of Lithium. Plus it will ultimately be extracted from the oceans.

You can put all your lawyer spin on this all you want, but you can not give anything reasonable about the future price of LiFePO4 batteries.

Alternative Energy Storage: It's All About Price vs. Performance

The chart above from the "July 2008 Sandia National Laboratories report" is very disappointing because it does not break out the different types of Li-ion batteries. The material costs of a Lithium Iron Phosphate (LiFePO4 - LFP) battery (the new battery in the BYD F3DM and Chevy Volt plug-in hybrids) are much lower than the Lithium Cobalt batteries in cell phones because Cobalt is expensive. The Lithium Iron Phosphate battery also lasts 4x plus longer than the Lithium Cobalt batteries so the lifetime cost is much lower.

This article only casually mentions the Lithium Iron Phosphate battery as a new technology with potential. Do a search on “Li-FePO4”. It is disappointing it is not included in the general analysis of the article broken-out from the Li-ion battery.

America Must Rebuild Domestic Battery Manufacturing Infrastructure

Don't clump all Li-ion batteries together! There are multiple types, but 2 stand out. The Lithium-Cobalt is the highest energy density and are used in cell phones. Lithium-Iron (LiFePO4) is not as high energy density but is far superior for vehicles. This is the battery in the Chevy Volt and the China-based BYD car F3DM. This is new technology just coming out of the lab. It has impressive characteristic that match well for plug-in hybrids. Keep your eye on this battery. A123 and Lithium Technology Corp make it in the US.