People have lost their faith in the presidency, quantitative easing, the social value of Twitter, and even the decline of France. Yet they still have a childlike belief in the electric battery industry.
Americans buy Tesla stock, with or without earnings or tax subsidies. China and Europe make powerful commitments to zero-emissions electric vehicles. California and Australia jostle to “lead” in using battery storage for grid reliability. Korean chaebol take on huge, lossmaking contracts to supply batteries for automakers.
This ideology seems immune to fires in mobile phones, fading laptops, or collapsing prices for second-hand electric cars. “All these problems could be solved,” the after-dinner philosophers intone, “with some breakthroughs in battery technology.”
Batteries, though, are not atomic bombs, integrated circuits, or penicillin. With a great deal of effort on the part of engineers, you get progress, not breakthroughs. That progress will not come at a pace that can change the reality that fossil fuels store a great deal more energy in a smaller space at a low cost, at least not within the next decade.
It is tempting to think that the performance of batteries can improve as quickly as that of the microelectronics, software, and display screens they power. As a battery engineer friend of mine says, though, “batteries are a smokestack industry”.
Mind you, they are a smokestack industry that is growing pretty fast, thanks in part to the public policy commitments made to the electric vehicle industry, particularly in China. According to Christophe Pillot, of Avicenne Energy in Paris, global lithium ion battery demand for vehicles will grow from $15bn in 2016 to $28bn in 2020, and $38bn in 2025. Even so, Mr Pillot projects that plug-in hybrid electric vehicles and electric vehicles will have less than a 2 per cent share of the global market by 2020.
Yet the performance of those EV batteries will, at best, grow at a much slower rate than their sales. Mr Pillot, whose forecasts have proven over time to be more accurate than those of industry evangelists, says: “This is not like semiconductors, it is chemistry, and improvements take a very long time. Looking at the past record, we can expect performance improvements of 5 per cent a year, not really more. And it is always a question of balance of lifetime, energy, and power. If you charge very fast, the lifetime will be very poor.”
Of course there will be new battery materials, and improvements in old materials. However, based on the industry’s record, it takes between 10 and 20 years to commercialise a new material. And the electrochemistry of the component for one new material has to be tested against that of the other components.
The prospective performance of new electronic devices can be reliably projected with computer models. Not so batteries. George Blomgren, an American PhD in physical chemistry who has been working on batteries for nearly 30 years, says devising models for batteries “is still a work in progress”. “In electronics you have a fixed lattice with electrons and holes, so it’s relatively easy. With batteries there are so many parts, and so much electrochemistry going on in three dimensions that putting it together in one model has eluded the field up to now.”
So as the Samsung Galaxy Note 7 battery fires proved, the rapid introduction of new battery designs is risky. As my battery engineer says: “Lithium ion batteries are so dangerous because they are so energetic. The way you make them more safe is by reducing their propensity to react, which means less performance and a long development and testing time.”
And, from the investors’ point of view, the gross margins are generally less than 10 per cent of revenues, which is not great compared to other “technology” industries. Large Japanese and Korean consumer electronics manufacturers were prepared to accept those thin profits as the cost of maintaining or building market share for their devices. American and European battery manufacturers stuck to specialised defence, space, and industrial applications.
Even now, as European carmakers are being forced away from their beloved diesel engine designs, they have chosen to procure battery cells from either Japanese or Korean manufacturers. That is an interesting implicit statement by a sophisticated group of industrialists. They are not betting their own development money on this generation of battery technology.
What if the automakers are right in the end, and we are pushing too fast for electric vehicle adoption? Then the billions spent trying for economies of scale using the technology visible today will be sitting as a sunk cost. I think of Baldwin Locomotive Works.
Baldwin’s vast Eddystone plant near Philadelphia was the Gigafactory of steam locomotives. It was the most efficient such plant in the world, which, along with impressive intellectual property and a skilled workforce, gave Baldwin market dominance as late as the early 1940s. But by 1949 there was no demand for steam locomotives. The Eddystone plant was shut down in 1956.
Baldwin was the best-in-class producer of an obsolete technology. The promoters of batteries for cars and the electric grid should keep its fate in mind.