Is it time to assume past Lithium?

The costs of Lithium, the first workhorse of vitality storage options at present, have dropped by over 60% previously 18 months. Amongst many different causes, that is attributed to a drop in EV demand globally as governments throughout US and EU began moderating EV associated subsidies. There was additionally an aggressive ramp-up of capability in China in the course of the Covid interval buoyed by the sturdy EV uptick which has now resulted in a provide glut. To present you a way of the affect of this glut, we now see that LFP (Lithium Iron Phosphate) batteries are already commercially accessible at sub-$100 per kWh costs. This was forecast to occur solely past 2026. At these costs, it’s doable for EVs to have capital value parity with standard fossil gasoline based mostly autos which is meant to be an enormous inflection level. 

On this planet of stationary vitality storage, the place Lead Acid batteries have dominated the roost for many years, Lithium based mostly batteries change into extremely engaging substitutes with a considerably longer life and superior efficiency. Frequent sense dictates that that is concerning the worst time to spend money on a brand new chemistry and that we should always fairly benefit from the continuing provide glut to drive the agenda of accelerating decarbonization in India. We’d nonetheless miss the forest for the timber in doing solely that and nothing extra.

It’s a well-known truth that almost all of the world’s lively supplies, probably the most vital elements inside a Lithium cell, are processed in China. Chinese language gamers are additionally deeply backward built-in with pursuits in Lithium, Nickel and Cobalt mines internationally. So, financially talking, we’re merely changing our petro-dollars to lithium-dollars and directing them in direction of China as a substitute of the international locations that offer oil and fuel. There are lively investments in cell manufacturing in India propelled by the current ACC-PLI incentives with over 50 GWh of capability deliberate over the following few years. Nevertheless, so long as the lively materials processing and the backward linkages relaxation with China or different international locations the end result will likely be broadly comparable. This may increasingly additionally get rid of the potential for utilizing commerce boundaries even when native cell manufacturing capability is totally established. India might want to do an analogous backward integration and arrange large capacities for lively supplies processing which can largely find yourself changing into a catch-up recreation with low odds of success.

Secondly, Lithium, similar to every other steel is a commodity which is able to undergo its personal commodity cycles. It’s a dangerous gamble to depart a vital agenda like vitality transition to the vagaries of commodity costs. Now we have had over 5 a long time and persevering with authorities intervention to insulate the economic system from an analogous commodity cycle affect of oil and fuel and it has been something however a clean trip.

Lastly, the electrification of the economic system will solely be as inexperienced as the facility sector that generates the electrical energy. Whereas there may be a variety of focus at present on EVs, the opposite, doubtlessly larger, downside to resolve is the greening of the era via renewables which requires a considerable amount of vitality storage capability to mitigate the intermittency. As an example, NITI Aayog has estimated annual demand of round 300 GWh of storage capability by 2030 of which about 60% would come from grid degree storage alone. There is no such thing as a different class, on a standalone foundation, that even comes near this requirement. That is pertinent as a result of it ought to be a vital resolution parameter as we consider the precise chemistries the place we select to speculate the nation’s restricted assets.

So, in abstract, we might do nicely to proactively spend money on a chemistry or set of chemistries which are fairly insulated from commodity cycles, may supply very engaging unit economics at scale, are nicely fitted to grid scale storage and don’t require aggressive vital mineral investments. There are a lot of promising candidates on the horizon and Sodium-ion is one such candidate.

Sodium-ion has nearly as lengthy a historical past of growth as Lithium-ion however didn’t take off earlier as Lithium-ion batteries have been extra compact permitting them for use in shopper electronics ensuing of their widespread adoption. Sodium-ion has nonetheless come a good distance from the lab over the previous few years. BYD, one of many world’s largest cell and EV producers, broke floor on a 30 GWh Sodium-ion plant in January 2024 validating its position in the way forward for vitality transition. Just a few weeks in the past, in June 2024, the world’s largest Sodium-ion grid scale storage of 100 MW / 200 MWh was commissioned in Qianjiang, positioned within the Hubei province in China. 

The rationale for the sudden curiosity in Sodium-ion and why it additionally makes a variety of sense for India is that it meets most of the standards we recognized earlier. For starters, Sodium is ample and cheaply accessible in India which eliminates the necessity for backward integration.  It additionally permits home provide chains and reduces the general value of cells. As an added benefit, Sodium cells use low value Aluminum collectors (as a substitute of the costlier Copper collectors required in Lithium) and the anode requires onerous carbon (as a substitute of the costlier Graphite required in Lithium and likewise managed largely by China). A key downside of the Sodium-ion chemistry is that it has a decrease vitality density in comparison with Lithium. Nevertheless for a lot of functions like grid scale storage and 3W mobility, this isn’t a deterrent. Lastly, the method of Sodium-ion cell manufacturing is sort of equivalent to Lithium-ion making it doable to make use of commercially accessible equipment and tools to scale up manufacturing.

The necessity for India to spend money on establishing native manufacturing capacities is inevitable. Nevertheless, leaving that call utterly to the market forces via a chemistry-agnostic PLI scheme has the peril of driving an amazing brief time period optimization and lacking the chance to construct a very self-reliant and thriving vitality storage trade. The Chinese language authorities took the crucial of driving investments particularly in LFP ensuing within the dominance of that chemistry at present. India would do nicely to construct a standpoint on the precise chemistry it want to guess on and take management of the narrative.

Creator: Venkat Rajaraman, Founder and CEO at Cygni Power