Decarbonising the road – The rise of battery storage

Over the past decade, global lithium-ion battery production capacity has increased 10x to meet soaring EV demand. Technology and cost advances in the area of lithium-ion batteries, alongside policy support mechanisms and growing public awareness, have catalysed a revolution in electric vehicles (EVs). Despite this, the EV battery supply chain is facing ongoing struggles as demand from consumer, industrial and commercial energy storage facilities ever increase.

Road transportation makes up almost half of global crude oil demand and, as such, represents a critical area for decarbonisation. However, there is a long way to go yet as EV sales still represent only 9% of global passenger vehicle sales.

The European Commission’s mobility strategy calls for at least 30 million zero-emission cars and 80,000 clean-energy lorries on Europe's roads by 2030. As such, EV sales are expected to continue to increase sharply in the coming years, helped by policy support, battery density and cost improvements, more widespread charging infrastructure and increasing vehicle manufacturer uptake of EVs. Bloomberg New Energy Finance (BNEF) estimates that to achieve a net zero global fleet by 2050, zero-emission vehicles need to represent 60% of global new passenger vehicle sales by 2030.

The recent natural gas crisis resulting from Russia and Ukraine war exacerbates the emphasis on lithium-ion batteries to deliver a cost-effective and efficient revolution to decarbonising road transport. This will not only place a huge burden on battery raw materials – lithium, cobalt, manganese, nickel – but also electricity demand, requiring infrastructure and grid upgrades.

Renewable energy has a key contribution to make towards decarbonisation efforts. However, the problem with solar and wind is their intermittency, making them less suitable for baseload power supply unless combined with energy storage and/or more flexible generation technologies. As a result, energy storage is set to play a key role in decarbonisation efforts globally, providing the flexibility renewable power plants and grids require to generate reliable electricity.

Batteries have a massive role to play if we are to reach net zero and battery storage to integrate renewables into power grids is gaining traction and growing fast. However, most stationary energy storage systems being adopted are lithium-ion, which have significant limitations; limited discharge duration, poor ESG credentials, relatively high and rising costs and safety risks. They also place an additional strain on lithium-ion battery raw materials and supply chains, where significant cost pressures are already being felt. Improvements and/or alternatives to lithium-ion batteries need to be advanced quickly to allow both EV and future energy storage demand to be met.

We are still in the early stages of the development of the energy storage market for batteries and the landscape is evolving rapidly. Step changes in cost, energy, density, safety and sustainability are coming, and four UK listed companies are leading this charge – Gelion (GELN), AMTE Power (AMTE), Ilika (IKA) and Invinity Energy Systems (IES). All of these are either pre-revenue or in the early manufacturing scale up phase and have been hit hard in the recent tech/growth company sell-off. As the dust starts to settle around current market volatility, this pull back represents an attractive entry point for battery-minded investors with a longer-term horizon who want exposure to the strong energy transition structural growth theme.?

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