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Battery shortage supercharges search for lithium-ion alternatives

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Battery shortage supercharges search for lithium-ion alternatives

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A compressed air energy storage project in Ontario. Developer Hydrostor Inc. plans to break ground on several larger-scale facilities in Australia and California in 2022 and 2023.
Source: Hydrostor Inc.

The accelerating automotive transition to electric vehicles, while essential for reducing greenhouse gas emissions, could leave electric utilities far short of the batteries they need for their own decarbonization — unless alternatives to lithium-ion batteries emerge from research laboratories and small-scale demonstrations into full-fledged commercial competitors.

In the next five years, the transportation sector will need terawatt-hours of lithium-ion batteries to power a fleet of about 100 million electrified cars and trucks on the road, according to S&P Global Market Intelligence's latest forecast. Meanwhile, the lithium-ion supply shortage is already contributing to significant delays for energy storage projects and extensions of aging fossil-fueled generators in the U.S. For instance, in 2021, U.S. utilities and independent developers completed only about 57% of their planned capacity additions, Market Intelligence data shows.

The supply crunch is putting a new focus on alternative energy storage technologies that might be a better fit for some utility applications.

"There's been a lot of work at the [U.S.] Department of Energy that shows that battery storage will be critical to the president's goal around decarbonizing the grid by 2035. ... [But] the lithium-ion battery world, in general, is really mostly going towards the auto sector because [there are] better contracts," Jigar Shah, director of the DOE's Loan Programs Office, said in an interview. "And so a lot of the diversification is coming from the fact that utility-scale folks are just not going to get access to lithium-ion batteries on a regular basis going forward."

Building on considerable backing from investors, utilities, states and the federal government, energy storage alternatives such as iron-air and flow batteries, compressed-air, hydrogen and gravity-based storage are moving more toward deployment and industrial expansion. Some of these technologies are vying for a piece of today's standard four-hour market, while others are playing the truly long game of days or months of storage and many are targeting the middle ground.

The DOE's overarching strategy for unlocking the potential of long-duration energy storage technologies, which it defines as able to discharge electricity for at least 10 hours, hinges on slashing costs by 90% this decade. That would require a technological and manufacturing leap on par with the vast industrialization of lithium-ion battery and solar photovoltaic industries in previous decades.

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'Point of inflection'

A pack of upstarts including Energy Vault Holdings Inc., Eos Energy Enterprises Inc., ESS Tech Inc., Form Energy Inc., Hydrostor Inc. and Malta Inc. have taken up the challenge. Buoyed by billions of dollars of investment from marquee investors ranging from Bill Gates, Jeff Bezos and Charles Koch to Chevron Corp., The Goldman Sachs Group Inc. and Saudi Arabian Oil Co., they are plotting the rise of longer-lasting energy storage.

Their total addressable global market could grow to between 150 GW and 400 GW, or 5 TWh to 10 TWh, by 2030, according to a November 2021 report from McKinsey & Co. and the Long-Duration Energy Storage Council. The CEO-led industry group includes tech titans Google LLC and Microsoft Corp. and oil major BP PLC.

Such a scaleup from 5 GW/65 GWh of planned and operational capacity, not including conventional pumped storage hydropower, would require up to half a trillion dollars in investment, the report estimated, citing energy shifting, capacity provision and optimization of transmission and distribution as the primary uses.

"We do see long-duration energy storage at a point of inflection," said Luke Rose, head of governmental affairs at Massachusetts-based Malta, an Alphabet Inc. spinoff that is partnering with engineering and construction company Bechtel Corp. on projects offering several hours to multiple days of storage.

In October 2021, Malta signed a term sheet with NB Power, a provincial government-owned utility in New Brunswick, to develop a 1,000-MWh project by 2024. In January, it followed up with a technical assistance grant from the European Investment Bank for a 100-MW, 10-hour project in Spain, where molten-salt storage already has years of operating experience coupled with concentrating solar fields.

"This is not a science project; this is about deployment," Rose said.

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Toronto-based Hydrostor also is focused on a technology with initial commercial experience: compressed air. In January, the company received a $250 million commitment from an affiliate of Goldman Sachs to support the development of 1.1 GW/8.7 GWh of systems in California and Australia in the next few years.

"We all come from the power sector, and we know how risk-averse it is, for good reason," Hydrostor President Jon Norman said. Other than eliminating the need for natural gas, which is included in compressed-air storage projects in the U.S. and Europe, "we were trying to be as boring as possible," Norman added.

A handful of long-duration storage companies have debuted in public markets in recent years to help raise the necessary capital to fuel their growth, including Azelio AB, Energy Vault, EOS Energy, ESS Tech, RedFlow Ltd. and Zinc8 Energy Solutions Inc.

"We are still an early-stage technology which has a high, high potential to reduce costs not only in raw materials but also in your manufacturing processes and your logistics," said Joe Mastrangelo, CEO of zinc-based battery startup EOS Energy. The company is targeting opportunities from roughly three hours to 12 hours.

While EOS booked only $4.6 million in revenues in 2021, it has an order backlog of more than $200 million, representing nearly 1,000 MWh with over a dozen customers. Its largest order so far, announced March 9, is for up to 500 MWh in Texas, with deliveries anticipated to start in 2023.

EOS seeks to triple the current capacity of its factory in Turtle Creek, Pa., to 800 MWh by the end of 2022 to meet demand with help from a requested DOE loan guarantee.

Like many companies developing alternative approaches to energy storage, EOS touts the technology's greater operational flexibility, lower safety risks, reduced degradation and cost advantages over lithium-ion at longer durations.

Additional work is underway within technology giants such as Honeywell International Inc. and Lockheed Martin Corp.

"From our perspective, it's about beating lithium-ion at its own game," said Roopa Shortt, business development director for energy storage at Honeywell, which in 2021 unveiled a new flow battery to store and discharge electricity for up to 12 hours.

This year, Honeywell plans to deliver a 400-kWh unit to utility Duke Energy Corp. for testing at its Emerging Technology and Innovation Center in Mount Holly, N.C. The approach relies on two external tanks filled with a proprietary electrolyte to charge and discharge.

"I think there is a lot of space there for multiple battery technologies," Shortt said in an interview.

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'Within striking distance'

Despite such progress, storage innovators have struggled to compete with today's electrochemical elite.

That was evident in January when California Community Power, a group of local government-run community choice aggregators, announced a 69-MW/552-MWh lithium-ion battery project as the first-round winner of an ongoing search for energy storage assets offering at least eight hours of discharge. The second award, approved Feb. 25, went to a 50-MW/400-MWh lithium-ion system.

Part of the challenge is financial rather than technological, according to DOE's Shah.

"Right now, you cannot get affordably priced debt for anything but lithium-ion batteries, [and] if you don't have affordable debt then you can't win [a request for proposals] like this," Shah said.

That could change with help from the DOE, which recently restarted the loan program that helped launch Tesla Inc.'s electric vehicle ascent and establish utility-scale photovoltaic as a favored option for low-cost, carbon-free electricity. Storage accounts for the largest share of the $70.8 billion in loans requested from Shah's office as of Feb. 28, which includes lithium-ion and emerging technologies.

David Millar, managing director of resource planning and procurement at Ascend Analytics, a Boulder, Colo.-based software and consulting firm that ran the long-duration energy storage solicitation in California, is bullish on alternative technologies despite their initial defeats in the Golden State.

"Maybe if you ran it today you'd have different results," Millar said. "I think that is just how quickly things are changing."

Soaring prices for lithium-ion battery metals over the past year have at least temporarily halted the incumbent technology's rapid cost reduction, Millar noted.

"That does have the potential to restack the relative costs [and] benefits versus other technology types," Millar said. Chemistries that rely on less expensive, widely available feedstock materials, such as iron-, zinc- and sodium-based batteries, eventually will close the gap, in Millar's view.

"I think they're within striking distance," Millar said.

Such alternatives would benefit from regulatory innovation, Millar added, pointing to the California Public Utilities Commission's resource adequacy rules that give full credit to four-hour energy storage projects, favoring lithium-ion.

"If you start to lengthen that and make it six or even eight hours ... then that changes the economics. But right now, that's basically unvalued," Millar said.

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Iron flow battery developer ESS is working with utilities in Europe and the U.S.
Source: ESS Tech Inc.

New iron age?

Nevertheless, utilities continue exploring longer-duration options, including new pumped storage.

City Public Service of San Antonio, known as CPS Energy, announced a 15-year commercial agreement March 7 with startup Quidnet Energy Inc. for an initial 1-MW, 10-hour project in Texas relying on its novel pumped storage technology that could expand to 15 MW.

Duke Energy is considering a major expansion of its 1,400-MW Bad Creek Pumped Storage Project in Oconee County, S.C.

Another southeastern utility, Georgia Power Co., plans to work with Form Energy on up to 15 MW/1,500 MWh of its iron-air battery technology. Such multiday and other long-duration storage approaches "have the potential to fundamentally alter the energy landscape," the Southern Co. utility subsidiary said in a regulatory filing in January.

Form Energy has an agreement to debut its technology in a 1-MW/150-MWh project for Great River Energy in Minnesota in 2023.

A major advantage of the technology is its reliance on readily available iron, air and water, according to Form Energy CEO Mateo Jaramillo. "From a raw materials standpoint or even a finished goods standpoint, we don't face the shortages [of other metals] in the broader lithium-ion industry," Jaramillo said in an interview.

Many long-duration energy storage companies are looking to benefit from iron, either as an electrochemical ingredient or in the form of large steel structures in mechanical energy storage.

"Adding more electrolyte [to achieve longer duration] is cheaper than anything lithium-ion is likely to hit," said Eric Dresselhuys, CEO of Oregon-based iron-flow battery startup ESS.

The company, which is targeting projects requiring up to 12 hours of storage, counts U.S. utilities San Diego Gas & Electric Co. and Portland General Electric Co. and Italian energy giant Enel SpA among its customers.

Developers of lithium-ion batteries also are migrating swiftly into iron-based chemistries, choosing lithium iron phosphate, a type of lithium-ion technology, over nickel-heavy recipes because of soaring prices for the metal.

On a call with investment analysts in January, Tesla CEO Elon Musk said to expect "all stationary storage to transition to iron over time." Tesla is also shifting to lithium iron phosphate for its standard-range electric vehicles.

Form Energy's Jaramillo, a former executive on Tesla's energy storage team, is not too concerned about the resource competition.

"Iron is massively abundant," Jaramillo said.

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