The world is in transition between a lead-acid battery past, and a future in which lithium-ion batteries are poised to supplant lead-acid batteries and to displace increasing volumes of transportation fuels.
But will this year’s Covid-19 pandemic affect this transition? Today’s article explores the impact the pandemic is having on the battery sector.
Lead-Acid Versus Lithium-Ion
In a previous article — Lead-Acid Batteries Are On A Path To Extinction — I speculated that falling costs and better performance from lithium-ion batteries posed an existential threat to the 160-year reign of the lead-acid battery.
A trade association for lead-acid battery manufacturers responded to that article, essentially arguing that future battery demand would be so great that it would ensure that lead-acid batteries would still have an important role to play.
I subsequently examined the environmental pros and cons of these two battery types. One of the case studies in that article was Exide Technologies, a lead-acid battery manufacturing company. Exide had been in trouble with regulators previously over pollution from plants in Tennessee and California.
Now it seems that a combination of legal liabilities and stresses on its business from the ongoing Covid-19 pandemic has pushed Exide into Chapter 11 bankruptcy for the third time in 20 years. It’s not quite extinction, but the company is going to have to sell off North American operations in order to survive. Exide’s struggles will likely benefit the lithium-ion sector.
Covid-19 Impact on Lithium-Ion Sector
Meanwhile, the pandemic hasn’t left the lithium battery sector untouched. Although lithium batteries are used in many important medical devices — including the ventilators that have been critical during this pandemic — the largest area of growth has been in electric vehicles (EVs). But Wood Mackenzie recently projected that global EV sales will fall 43% this year due to the impact of the Covid-19 pandemic.
Monthly EV sales in China did fall by 39% in Q1 2020, but the International Energy Agency (IEA) is more optimistic about numbers for the full year. In its Global EV Outlook 2020, the IEA projects that the Covid-19 pandemic will cause a 15% contraction this year in the passenger car market, but they expect sales for passenger and commercial light-duty EVs will remain broadly at 2019 levels. They do add that a second wave of the pandemic or slower-than-expected recovery could cause a worse outcome.
China, which dominates global lithium-ion battery production, has seen its biggest lithium-ion manufacturers, Contemporary Amperex Technology Co. Ltd (CATL) and BYD, curtail production due to lack of workers and access to raw materials.
Industry Experts Weigh In
To better gauge the impact of the pandemic on the battery space, I spoke with several industry contacts. Lampros Bisalas is the CEO of Greek-based Systems Sunlight, which specializes in the development and production of lead-acid and lithium-ion batteries and energy storage systems.
Mr. Bisalas said that many customers in the industrial sector had ceased operations, which caused a 70% drop in demand for new orders. He expects the market to recover gradually. Nevertheless, he added that Sunlight continues to invest heavily in technology and R&D for technologies in the energy storage sector. The company is currently investing $10 million in a North Carolina facility and $3 million in a new R&D Center based in Athens, focused on lithium technologies. The company is also expanding operations in Europe through M&A activity.
“The recovery has been steady but slow with many investors still trying to identify how the pandemic will develop in the coming months. The continuous uncertainty will affect the industry for the coming months with only the absolute needs being served (with an estimation that the market will be at -50% demand for the year 2020). We see demand and this has been shown after lock downs started to be lifted and orders started pouring in. Governments try to help, and the focus in green energy will help investors recognize the importance batteries have and the long-term benefit from such green investments.”
I also spoke to Tim Karimov, President of California-based lithium-ion battery supplier OneCharge, and Alex Pisarev, the CEO of OneCharge about the impact they are seeing from the Covid-19.
Mr. Karimov said that despite opinions that the market for industrial EVs will contract 20 to 40% year-over-year, OneCharge hasn’t seen any slowdown in sales of lithium-ion batteries over the past few months. He added:
“We are cautiously optimistic about OneCharge revenue growth this year, but it is already clear that the lithium-ion segment share is growing much faster that we expected at the start of 2020. The need for the most efficient and safe power solution with a proven ROI puts more pressure on Operations Managers to take action and switch to the tried and tested (by the early adopters) lithium-ion technology.”
Mr. Pisarev stated that even though lithium-ion technology is now ubiquitous in our lives, industrial applications are still lagging behind because many users aren’t aware of the efficiency improvements from switching to lithium-ion batteries. However, that’s one reason he is optimistic about the market this year, as he believes we are in the midst of a rapid shift.
He cited Tesla TSLA +0.3%’s One Million Miles Battery, which is being developed in partnership with China’s CATL as another lithium-ion breakthrough that will help drive the market: “We may not be sure of how exactly the markets will develop in the next months,” he said, “but one thing is clear – lithium-ion will continue to replace inferior lead-acid batteries at an increasing speed.”
Systems Sunlight’s Lampros Bisalas agrees that the future looks bright, stating “The energy storage market continues to be propelled by disruptive and innovative technologies. The future is expected to be strong with high growth and continuous disruption by new technologies, AI, Machine Learning and cloud based solutions which will accelerate the integration of batteries into currently served Internal Combustion applications.”
So perhaps the current crisis will merely be a temporary blip — in contrast to the blistering growth of the lithium-ion battery space in recent years.