Li-Ion’s Share
Principal
Li-Ion’s Share:
Manufacturing Tomorrow’s Batteries
By Kathryn Meng
damrong — stock.adobe.com
July 29, 2024
Rechargeable batteries are ubiquitous and power our lives in myriad ways, but to “electrify everything” we will need dramatically more of them, and that in turn means we will need cheaper and more environmentally friendly ways of manufacturing them.
Batteries are everywhere. Just count the lithium-ion (Li-ion) batteries around you. I have four within a six-inch radius: in my laptop, watch, phone, and charger pack. That last battery is a hero when my phone is running low on power and I need to book a cab (increasingly electric or hybrid, yet another Li-ion battery in the mix!) or show my train ticket (because public transit is still the greener way to travel). Batteries are increasingly essential in our day-to-day lives, and we cannot make enough of them. That’s not a euphemism – in the near-term, we will literally struggle to manufacture enough Li-ion batteries to meet our projected needs using current methods.
Today, commissioned manufacturing capacity falls short of projected 2030 demand for Li-ion batteries. Global Li-ion battery capacity is projected to reach 6.5 TWh by 2030, enough electricity to power the entire state of Massachusetts for ~6 weeks. To meet this demand, manufacturing capacity must scale up rapidly and will cost an estimated $650B. It is hard to stomach that level of investment without compelling financial returns; battery cell manufacturers can expect ~2 – 10% net profit margins, which can be further squeezed when raw materials costs spike and when facing downstream pressure from consumers seeking lower-cost goods. Further exacerbating the risk of margin erosion is the potential for oversupply. Battery cell manufacturers have announced plans for hundreds of new facilities with a cumulative nameplate capacity of over 10TWh. In order to meet growing demand, further enable the electrification of everything, navigate challenges with commodity cycles, and survive any potential oversupply situation, manufacturers must decrease their production costs as much as possible.
Manufacturers need innovations that enable them to produce cells at lower cost without compromising quality. Battery incumbents and new entrants have pulled the traditional operational efficiency cost-saving levers, like automating steps in electrode manufacturing and cell assembly processes to reduce labor and other costs. Vertical integration and larger-scale battery manufacturing facilities, so-called “gigafactories,” can facilitate economies of scale and decrease overall costs, but net margins are likely to remain below 10%. The incremental improvements in the manufacturing process over the last decade are still not sufficient to meet the needs of consumers. Manufacturers are looking for the step-function improvements they need to succeed in the coming decades.
Li-ion batteries are composed of electrodes – combinations of negatively charged anodes that attract electrons from a positively charged cathode – which are set apart by a separator and sandwiched by metals that “collect” the current as electrons flow through them, as illustrated below. R&D for alternative materials for each of these components, especially electrode materials, has attracted significant investment, and different materials will likely be adopted for distinct applications depending on performance (e.g., energy density), safety, and form factor requirements. Other battery chemistries and storage solutions outside of Li-ion batteries will be adopted, but we expect Li-ion batteries will continue to be a workhorse for rechargeable batteries.
Image adapted from Honest Energy.
Regardless of whether batteries are Li-ion or another chemistry, battery manufacturers will prioritize drop-in or seamless compatibility with existing manufacturing processes to reduce upfront cost requirements and to ensure they can leverage the advances and lessons learned of the past decade. Manufacturing batteries requires many discrete steps: active materials and binders need to be mixed, and foils need to be coated, calendared (rolled), stacked, welded, enclosed, undergo formation, and aged. These steps come with steep capital and operational costs. Which led us to the question:
Can superior manufacturing processes minimize production costs while preserving or improving battery performance, regardless of chemistry?
Though mainstream news focuses on batteries themselves, many manufacturing innovations are happening below the surface. From equipment manufacturers to university labs, RA Capital’s Planetary Health team has found novel approaches ranging from materials-saving solutions like 3D printed batteries (reduces input waste but throughput constrained) to substitutes for energy- and capital-intensive equipment (vacuum chambers to eliminate need for dry room steps).
Image adapted from Liu et al.
The best opportunities for manufacturers are to decrease energy consumption (operating costs) and minimize production footprint (capital costs). Technologies that eliminate the use of organic solvents and their associated costs fit this description. The most energy intensive steps of the cell manufacturing process are necessitated by the use of organic solvents. About 45% of the overall energy consumed to make a cell is associated with these steps. The use of organic solvents also comes with a significant physical footprint in the form of 100m-long drying ovens, which are necessary to recover the organic solvent most commonly used in the process, n‑methyl-2-pyrrolidone (NMP). NMP is subject to increasingly stringent regulatory requirements because it is toxic. Elimination of the use of organic solvents in battery manufacturing reduces capital costs, operating costs, and regulatory compliance requirements. Processes free of organic solvents are a win for people, planet, and profits. New approaches include water-based electrode production techniques and dry electrode production that is solvent-free.
Electrodes produced with dry processes are already in use. If you want to see batteries made by dry processing, just crack open your closest Tesla Cybertruck to peek at the 4680 cells that power it (come on, we know you want to). Tesla obtained its dry process through a 2019 acquisition of Maxwell Technologies. Tesla is using Maxwell’s technology in-house. The rest of the battery industry is also looking to eliminate the use of organic solvents. New companies are emerging to supply the broader lithium-ion battery market with dry electrode equipment that eliminates the use of NMP and can overcome some other scaling and production challenges such as heat melting binders, throughput, and cathode applicability. Incumbents like LG Energy Solutions and Saueressig (part of Matthews Engineering) have indicated work in the space. Volkswagen has announced intent to use dry coated electrodes harnessing technology from Koenig & Bauer AG; LiCAP and Dürr have teamed up on battery electrode manufacturing equipment; the Fraunhofer Institute for Material and Beam Technology IWS has developed a film-based dry coating method; AM Batteries has announced a joint agreement with Zeon to optimize binders for battery electrode manufacturing, and AM Batteries also announced a joint agreement with ATL to develop next-generation, lower-carbon footprint, and lower-cost dry-electrode manufacturing technology for lithium-ion batteries.
We are excited to see novel electrode production methods begin to make lithium-ion battery manufacturing better, faster, and cheaper.
Much more work is needed. Li-ion manufacturing is on a rapid growth trajectory driven by increased electrification. RA Capital’s Planetary Health team is exploring solutions across the value chain, from raw materials extraction and refining to pack production and the supporting software and financial services that enable deployment. If you are working on a solution that can help bring more of these batteries to market to meet demand while improving economics, reducing environmental footprint, and mitigating regulatory hurdles, we would love to hear from you.
RA Capital may own, buy, or sell the securities of companies mentioned in this article. Nothing within the article should be construed as investment advice or a recommendation to hold, buy, or sell any security.