The United Nations predicts that European renewable energy usage will double by 2027. Germany set a new record by generating 57.7% of its net power from renewables in the first half of 2023. One of the biggest barriers to a 100% renewable grid however, is the variability of renewables. Wind and the sun are not constant, and the windiest and sunniest areas are often far from many cities.
Grid-scale battery storage is crucial to solve this. These systems store surplus energy and can provide a stable electricity supply, keeping lights on when the sun’s not shining. Compared to small-scale battery storages, fit for homes, grid-scale batteries have much larger capacities (megawatt-hours or gigawatt-hours). They are connected to the grid and equipped with management systems to monitor and regulate how and when energy is charged or discharged. They ensure that electricity is available when demand is high and store excess energy when demand is low. This stable power supply helps balance the variability of a high renewables energy mix. At the forefront of its adoption is the UK, anticipated to be Europe’s largest market for grid-scale battery systems by 2030, with a capacity of 12.5 GW. One of our investment managers, Burhan Pisavadi, did some research on the physical requirements for a “perfect” grid-scale storage system, available here.
According to a Reuter’s article published this week, grid-scale battery storage systems are now priced competitively with gas-fired plants, which were previously used to provide a stable baseline. In the first half of 2023, 68 gas power plant projects were put on hold or canceled. Many of these developers have since submitted new plans to build battery storage sites instead. These economic shifts are a tailwind for broader production of grid-scale storage.
But grid-scale storage needs batteries, and a lot of them. Most battery cells, regardless of scale, use lithium-ions. Lithium is the ion of choice for a few reasons. Today, Li-ion battery technology has the highest commercially available energy density. Energy density is a measure of how much energy we can fit into a battery. As an example, lead acid batteries have quite a low energy density. The average lead acid car battery holds c400 Wh. The average EV battery holds 40,000 Wh. Lithium-ions can be 6x more energy dense than lead-acid batteries: An electric car powered by lead acid batteries would never get beyond a range of 20 miles. In addition to their energy density, lithium-ion batteries have good charge rates, allowing for fast charging, and they can operate in a wide range of temperatures. They also have other benefits: they’re really good at holding onto energy (without “leaking”), and they can be recharged and discharged thousands of times. It’s clear why lithium is the market leader for battery technology.
However, there are some downsides to lithium batteries. Lithium is an abundant element, with lithium making up 0.01% of the Earth’s crust. But, it is difficult to extract, with the cost of extraction averaging upwards of $3k per tonne of lithium carbonate (a precursor for lithium-ion batteries). Lithium extraction has significant human costs, including unsafe working conditions often faced by children in lithium mines. It is also spread out unevenly across the planet: Two thirds of the world’s lithium is in Bolivia and Chile. China has over a tenth of the world’s lithium, and their abundant resources plus decades of investment into production capacity have ensured they’re the market leader in lithium-ion battery production (with 79% of lithium-ion batteries made in China). This poses a geopolitical risk, especially as hawkish Western foreign policy has businesses decoupling their supply chains away from China. Lithium prices are soaring faced with increasing demand and a questionable supply.
Getting lithium is clearly a challenge. So is disposing of lithium-ion batteries contain metals such as cobalt, nickel, and manganese, which are toxic and can contaminate water supplies and ecosystems if they leach out of landfills. Additionally, fires in landfills or battery-recycling facilities have been attributed to inappropriate disposal of lithium-ion batteries. To address the environmental issues caused by increasing battery waste, companies are coming up with new recycling methods. Our portfolio company, Voltfang, is part of this effort. They help by repurposing used EV batteries into energy storage units. Despite these, challenges with supply chains and rising lithium costs persist, underscoring the need for diverse battery technologies.
Enter sodium-ion batteries. While they’re not commercially available yet, they resolve a lot of the issues of lithium-ion batteries:
- Abundance: Sodium is 280x more abundant than lithium. Everyone reading this will have sodium at home, in the form of table salt (sodium chloride). Furthermore, a precursor to sodium, soda ash, is easily found worldwide, with 47 billion tons identified in the US alone. Soda ash can also be synthetically made from salt and limestone. This allows for global production of sodium-ion batteries, reducing supply chain problems and price fluctuations associated with lithium-ion batteries. Sodium can also be extracted from desalination run-off, killing two birds with one stone.
- Cost: The initial cost estimates for sodium-ion batteries range between 40-80 USD/kWh, significantly less than lithium-ion batteries, which average around 120 USD/kWh. They are expected to be less expensive because sodium is cheaper and easier to extract and its abundance minimises supply side price volatility.
- Safety: Lithium-ion batteries have some safety concerns, with overheating, thermal runaway and expansion. You may remember the brief trend of exploding Samsung phones – a problem arising from the inherent chemistry of lithium-ion batteries. Sodium is far safer.
- Environmental footprint: These batteries are less toxic than lithium-ion batteries, as they do not require lithium, cobalt, copper or nickel.
So why aren’t sodium-ion batteries the market norm? So far, their energy density has been the problem. Any new battery technology has to compete with lithium’s energy density dominance. And that’s why Northvolt’s announcement of new sodium batteries that match lithium’s energy density is a big deal. These advancements are the key to a more sustainable, eco-friendly future. Northvolt plans to distribute customer samples next year and scale up production by 2030. Their R&D achievements themselves are laudable, but the proof that sodium-ions have a viable energy density will kickstart a new race for startups and scaleups to become the battery king of the future. Grid-scale battery storage might just be possible, and this sector is only just charging up.