The battery market is seeing unprecedented interest and investment. This comes from existing battery manufacturers, vehicle makers, chemical companies, energy suppliers and others, with many businesses moving outside their traditional comfort zones. However, amid all the positive announcements, return on investment has so far been slight. Companies, whether new entrants or existing businesses, face significant risks if they are to successfully carve out market positions.
While these risks vary depending on the companies’ positions in the value chain, victorious players will need to manage their way through complex ecosystems, pick the right technologies to back, secure necessary knowledge and intellectual property, and ensure that they can operate at scale in their chosen areas. This must all be done within a traditionally conservative and risk-averse industry. How can this be achieved?
One market, many applications
When creating a battery strategy, the first point that is vital to understand is that the market is made up of multiple applications, each with different and very specific needs. Factors impacting technology suitability for each application include power density, capacity, cycle lifetime, energy density, capital cost, charging time, reliability and safety. That means, in our view, that no single technology is likely to ultimately dominate the industry at large – and there is no ‘God battery’, as some pundits have asserted. The five main application areas are: starter, lighting & ignition (SLI), for vehicles with internal combustion engines; electric vehicles (EVs), including hybrids, plug-in hybrids and full electric; electronic devices; stationary battery energy storage (BES); and others (aviation, drones, power tools).
Amid all the talk of new technology and new applications such as EVs, the current biggest application remains starter, lighting & ignition (SLI) – the battery used within every vehicle with an internal combustion engine (ICE). And this broadly relies on the same lead-acid technology used within the first rechargeable battery, which was invented in 1859.
Innovation in Li-ion batteries is much more dynamic, but most capacity is in fairly well-established technology. Entering existing markets at this stage is certain to be expensive, and probably unattractive. The positive news for innovators is that there are important needs in many of these applications that are currently not properly addressed.
For those that can deliver on these opportunities, there is a promise of large and lucrative potential markets. Even though existing technologies, such as Li-ion, have seen rapid improvements in performance and cost, these are not sufficient to meet the requirements of the market. That means next-generation innovative technologies are required to deliver the step-change in performance such applications need. These may take considerable time and investment to cross the ‘valley of death’ (the time between the R&D stage and becoming commercially cost-competitive with current technologies). Therefore, organizations will need to take a long-term view of which innovations to back, payback times, and with whom to partner.
