It’s going to a wild ride in the lithium market. Global lithium demand could go from around 190Kt in 2015 (flat to down on the past couple of years) to maybe 340Kt by 2020, driven mostly be demand for batteries – both vehicle and storage.
Certainly the battery plants to use that much lithium will likely have built. Lithium [Li2CO3] prices have gone from less than US$6000/t in 2014 to $US7500/t in the March quarter this year to over US$10,000 /tonne in the June quarter.
It will take a lot of electric vehicle sales to fill up all the factories that have been built (see Fig 8 and Fig 9 below). It may well be that there is oversupply for a while in the pack market. That often happens in rapidly growing market. However, that overysupply tends to make the product cheaper to consumers as it sells below cost and that grows demand. The same thing happens in many markets, including the solar PV panel market.
In the longer term we expect the battery storage market to dominate over the electric vehicle market, but the requirements and chemistry may be different. Over the next five years it’s mostly going to be about how fast the EV market grows. That growth seems to be underpinned on both tightening CO2 standards in several countries (see Fig 5) and falling costs to the consumer.
Lithium is still only a small part of the overall battery market
Lithium still represents only a small share of the global battery market, but it’s where most of the growth and investment dollars are going.
The reason for lead acid market share is the car and truck ignition industry but also forklifts.
If we turn to the lithium cell market at the cell (not pack) level it was a about a US$15 bn industry in 2015, with the electric vehicle growing from next to nothing in 2010 to about US$5.5 bn last year.
The standard battery in the lithium market, up until now is known as the 18650 cell and its price has gone from about US$0.55/Wh in 2010 to about $0.38 Wh in 2015 which is a pretty good rate of progress in this analyst’s opinion. Cell prices are down 80% over 10 years but the biggest part of the price fall at the cell level for this technology may already be done. Avicienne (an excellent consultant on the global battery market in this analyst’s opinion) forecasts that pack costs for electric vehicles declined from $500KWh in 2014 to under $400 KWh n in 2015 and might get to $270 KWh by 2020. Giddy up!
Electric vehicles are currently perceived to be a more important market than stationary storage
The reason is that much of the world does seem to be introducing higher CO2 emission standards for electric vehicles. The following chart is taken directly from an Avicienne presentation:
Avicienne forecast that by 2020 energy storage will represent less than 5% of the total battery market. We hope that this proves to be wrong.
The lithium demand, supply and price
We turn back to Orcobore [ORE] for a look at the lithium market from a supplier’s perspective. ORE expect lithium demand to grows from about 195kt in 2015 to perhaps 350 kt by 2020. Not all lithium goes into the battery market (yet) and the number of suppliers is relatively concentrated (with China being a large part). There are at least two ways to extract lithium and Ore has gone down the more unusual path of using brine. The main path used at the moment is “Spodumene” ore mining, concentration, roasting and acifidfication.
As usual entrepreneurs (sometimes referred to as company management, sometimes as cowboys) get very excited when they see growth markets and build lots of capacity. The lithium battery market is no exception. The industry appears to be tripling its battery making capacity. Unless demand expands this fast battery prices will be under pressure. Still according to Avicienne the cost of factor expansion (per unit of annual capacity) has also declined sharply in recent years.
ITK (that’s me) thinks that EV’s need to become most of the market by 2035 if the world is to decarbonize by 80% and do no worse than a 2C-2/5C warming. Even so it will take a lot more than Tesla Model 3 and Chevy Bolt to fill up those factories. Our quick back of the envelope calcs suggest that even if both models sell 0.4 m per year (based on Tesla pre orders for the Model 3) it would still be less than 50 GWh per year. Of course in another 10 years after that there will be a big replacement demand for these batteries, but that’s a long time to wait.
The energy storage market will eventually be easily the largest in the world
Of course as exciting as the EV market is, if every car in the world was fully electric, global electricity demand would increase by only about 30%. We base that on a rate of say 18 KWh per 100 km for fully EV.
On the other hand if we assume that wind can achieve average capacity factors (due to taller turbines) and PV about 25% (for a very rough mix of distributed and single axis tracking ground mounted) there is still going to be an enormous demand for stationary energy storage by about 2035.
No-one (in my opinion) has a reliable way to forecast how the big the market will be as it depends heavily on Government policy as well cost reductions. In turn the cost reductions depend on the rate of industry growth. Right now industry forecasts are for something like a 10-15 GWh global market by 2020.
However, this is still trivially small relative to global electricity demand. We plan to do some work on how big the storage market needs to be in Australia for an 80% renewable generation target, but it’s a hard piece of work.
David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.
David Leitch is a regular contributor to Renew Economy. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.