my country's lithium battery production capacity is rapidly increasing, but with this expansion, ensuring safety and quality is paramount. The Clean Energy Association (CEA) released its 2019 BESS Supplier Market Intelligence Program report, covering 40 suppliers to help buyers understand the industry. Below, we will discuss the current state of lithium battery development in my country and the factors that influence the safety and reliability of lithium-ion batteries.
Since 2010, lithium-ion battery prices have fallen by approximately 85%. According to CEA analysis, global annual demand for lithium-ion batteries is projected to exceed 2000 GWh by 2030. While the majority of this demand is expected to be used in electric vehicles, 5-10% will be allocated to stationary battery energy storage systems (BESS). Although other energy storage technologies better suited for long-term use and lower cost will be introduced as renewable energy penetration increases, lithium-ion appears to be the leading technology for now due to the large-scale benefits of its adoption by the electric vehicle industry, enabling low cost and standardization.
At the same time, there is a renewed focus on quality and safety, moving away from balance sheet-backed guarantees and reliance on a select few suppliers. From upstream battery quality control to more comprehensive due diligence, including system design and fire protection, these are becoming fundamental principles for battery companies and regulatory bodies.
Several types of lithium batteries
There are many types of lithium-ion electrochemistry (LMO, LTO, LCO, NCA, NCM, and LFP), but currently only nickel cobalt manganese (NCM), nickel cobalt aluminum (NCA, used only by Panasonic and TSLA), and lithium iron phosphate (LFP) have achieved large-scale energy storage systems.
Battery type and region are somewhat related. For South Korean suppliers, nickel-cobalt-manganese (NCM) is an important choice for BESS, with an estimated annual production capacity of 54 GWh by the end of 2019. In North America, TSLA's Gigafactory 1 has an annual production capacity of 34 GWh of Panasonic NCA21700 cylindrical batteries, which are mainly used in TSLA's electric vehicle products.
Chinese suppliers possess strong manufacturing capabilities for both nickel-cobalt-manganese (NCM) and lithium iron phosphate (LFP) batteries, and even some nickel-cobalt-aluminum (NCA) batteries, with production lines capable of relatively easy switching between chemical reagents. The chemical properties of LFP contribute to its safety, reducing the risk of thermal runaway. However, since energy density is the most crucial factor for expanding the application of electric vehicles, my country has seen a shift towards higher energy density NCM batteries. Even so, due to safety constraints, LFP batteries are mandatory in certain transportation sectors.
Currently, LFP remains a key choice for BESS (Battery Encapsulated Semiconductor) suppliers in my country, with some companies supplying LFP cells that have a longer lifespan than NCM cells. More importantly, LFP batteries are cobalt-free and have an inherently more stable cost roadmap. The instability of the cobalt supply chain is largely due to the fact that 60% of the global supply comes from the Democratic Republic of Congo, a key factor contributing to the recent price increase of nickel-cobalt-manganese (NCM) batteries.
The disadvantage of lithium iron phosphate (LFP) batteries lies in their lower energy density, but their advantages include more stable and lower-cost raw material prices, longer cycle life, and lower risk of thermal runaway, which gives them a place in energy storage. It is foreseeable that my country will pay more attention to LFP batteries, while South Korea will strictly adhere to the use of nickel-cobalt-manganese (NCM) lithium batteries.
In addition, lithium titanate batteries, which are not widely used, are considered as alternatives because they are only suitable for some special applications such as high charge and discharge rates and high cycle life. Many industry insiders believe that they are very suitable for use in fields with extremely high requirements for battery stability.
Safety and quality
Earlier this year, South Korea reported 23 fires at energy storage power plants, following a large-scale energy storage installation boom. The Ministry of Trade, Industry and Energy (MOTIE) imposed random restrictions on newly installed equipment and severely limited the operating conditions of existing facilities. Subsequently, MOTIE conducted a six-month investigation, which was released in June of this year. The investigation found that possible causes of the fires included inadequate protection, insufficient environmental monitoring, installation defects, and substandard integration. Furthermore, MOTIE imposed additional requirements on the manufacturing quality, installation, operation, and maintenance of batteries and personal computers, as well as fire safety.
Investors are paying close attention to the South Korean energy storage power plant incident because the South Korean BESS supply chain is considered one of the most technologically advanced supply chains globally. Following this series of events, investors have realized that energy storage is still a relatively nascent industry, thus necessitating independent oversight at all stages of production and integration.
CEA audit data reveals a more complex reality: at the battery level, defective coatings and folded electrodes can both pose fire risks and reduce battery life. Battery, module, and rack-level protection must be in place and fully functional during testing; otherwise, safety risks will arise.
The factory acceptance testing of the BESS system must be conducted independently, and the details, including both performance and security aspects, must be extremely thorough. The system design and warranty structure must be analyzed and evaluated by a third party to protect buyers from risks of security or performance issues and to help them understand the product's cost structure.
By 2019, the total installed capacity of my country's four major suppliers will reach 135 GWh, while that of the four major international suppliers will reach 119 GWh. By 2021, the total installed capacity is projected to reach 230 GWh and 250 GWh respectively. Meanwhile, my country's small battery suppliers will reach 140 GWh in 2019 and 227 GWh in 2021. Thanks to the rapid rise of CATL and BYD in the electric vehicle sector, Chinese manufacturers have joined the ranks of the world's four giants: Panasonic, LG Chem, Samsung SDI, and SKI.
Despite some skepticism that Chinese suppliers may not be as competitive as the four major battery manufacturers mentioned above, my country's R&D expenditure on lithium battery energy storage systems accounts for a high percentage of its revenue, demonstrating the importance it places on energy storage systems.
Over the next six years, BESS installations are projected to increase tenfold. Therefore, buyers must diversify their supply chains, learn to understand their complexities, and properly combine due diligence and oversight.
