Lithium battery technology may become the next

Teams of scientists from San Francisco to Shenzhen are experimenting with new chemical processes to improve traditional Lithium Iron Phosphate Battery and trying to find new ways to store electrical energy for future use. Investors in these projects are beginning to worry that they may have chosen the wrong technology.

This has turned the debate about "stranded assets" on its head. Until now, the term has generally been used to refer to fossil fuel projects that may not be profitable due to tighter pollution regulations.

"If you suddenly want to move to a technology that delivers higher energy density, people are going to want to do it quickly, which may mean they'll have to reinvest in remanufacturing equipment, or worse, you may have to redesign the whole plant," said James Frith, an energy storage analyst at Bloomberg NEF.

Investment in startups developing new types of batteries rose to more than $1.5 billion in the first half of this year, nearly double the amount in 2017, according to CleantechGroup. Volkswagen Group, Hyundai Motor and the Renault-Nissan-Mitsubishi alliance have all invested in battery companies. Japan's New Energy and Industrial Technology Research and Development Organization announced it will invest $90 million in solid-state device research in collaboration with several universities and manufacturers.

Peter Carlsson, founder and CEO of NorthVolt, said: "There is a lot of money going into battery research that will eventually lead to technological advances. We are building a production platform that has the ability to develop and evolve." NorthVolt Battery, based in Stockholm, is spending 4 billion euros ($4.6 billion) to build a Lithium Polymer Battery manufacturing plant in the Nordic region.

Not all technologies succeed. Across the battery industry, thousands of different systems are being tested, including by large manufacturing companies, startups and universities. Even the lithium-ion batteries used in most electric cars and cell phones have different manufacturing processes. "There are different types of lithium electrons, different chemical reactions, and even in the chemical reactions they are composed in different ways," said TJWinter, principal manager of Fluence, a U.S.-based energy storage supplier. "It took us a long time just to screen the development project."

Competition in the battery industry is intensifying as automakers electrify more models and energy storage becomes more common in homes and businesses. According to Bloomberg NEF, demand for battery capacity will grow from 100 gigawatt-hours today to 1,784 gigawatt-hours by 2030. Approximately $16.7 billion has been spent globally on the installation of equipment for Conventional Battery plants, with an additional $42 billion of equipment expected to come online by 2022.

According to the IEA, lithium-ion batteries will remain an important power source for electric vehicles and storage devices for the next 10 years, and the organization said in its latest Electric Vehicles Outlook report that new technologies are likely to enter the market after 2025. As a result, existing lithium-ion technology may fall out of favor, and new projects may not meet the needs of existing companies. In either case, some investors may end up using batteries that are not economical. Jeff Chamberlain, CEO of Volta Energy Technologies Investment Fund, which focuses on next-generation storage technologies, said: "The scale of lithium-ion battery manufacturing around the world is huge. We see a lot of investors betting on technology for new manufacturing processes. We see this as a mistake, because right now we are making high-capacity batteries."

The process of getting batteries from the lab to the market is slow and expensive. To reduce the cost and weight of battery packs, scientists are replacing expensive metals like manganese and nickel with more abundant substances like sulfur and oxygen. Conamix, a New York startup, recently raised $2 million to try to make batteries that don't contain cobalt. Cobalt is a rare earth metal that is a key ingredient in charging, but it is mined in the war-torn Democratic Republic of Congo. Jeff McDermott, managing partner of Green Technology Capital Advisors, said other technologies "may not be able to scale because of the low price of lithium electronics. Lithium-ion batteries will undoubtedly put price pressure on other technologies. "There will only be a few technologies competing with lithium, not dozens, because battery technology needs to scale to reduce costs."

Equinor, Norway's largest energy company, has been screening energy storage startups for the past three years, but has yet to invest in a single developer. Bala Nagarajan, director of Equinor's internal energy venture capital fund, said: "Energy storage is a priority for us and there is still a need for technological improvements in the deployment of clean energy and electric vehicles. Is it possible that our future investments in storage technology will fail? The answer is yes.