Who Will Win The Half-a-Trillion Dollars Energy Storage Market?

Deep dive into the Multi-billion Dollar EV Battery Market and our firm’s first investment in the space.

Electric Vehicles (EVs) have emerged as a hallmark of sustainable transportation, by drastically reducing carbon emissions compared to combustion engine vehicles.

However, as their popularity surges, prospective green-minded consumers encounter two significant hurdles: the time-consuming charging and the steep purchase prices that accompany EV ownership. Besides, EV adoption adds challenges to the grid energy storage solutions.

The EV “Revolution” is a fact ─and it’s hungry for batteries

At the heart of this issue lies a crucial component of EVs: the batteries. Predominantly, EVs are powered by Lithium-Ion batteries, the demand in 2022 for Lithium-Ion batteries increased by 65%. Whilst it’s efficient, it imposes a substantial cost burden on manufacturers when compared to traditional Internal Combustion Engine (ICE) models. This, in turn, translates into higher retail prices, making EVs less accessible to the average consumer.

The preference for Lithium-Ion batteries amongst automakers lies in their longevity and superior energy storage capacity. But it’s not that easy: there are variations of Lithium-ion batteries from which the automakers need to carefully select to counter the two main problems. There are six popular Lithium-Ion combinations for the EV batteries for long lasting lifespan and cost efficient batteries. Lithium-Titanium Oxide has the longest life-span and is the safest amongst them all but are not scalable due to their low capacity. Lithium Ion Phosphate batteries on the other hand exhibit a perfect mix of safe battery chemistry, longer lifespan, and less cost. This enables us to use Lithium-Ion batteries at scale for EV batteries.

However, currently, automakers are still facing higher costs to produce EV cars. The reason lies in the design of the battery cell, which accounts for approximately 80% of the manufacturing costs, and is a critical factor in EV cars production. 

Inside the battery. Today. Tomorrow.

A battery cell consists of several key components: the cathode, anode, electrolyte, and housing. Among these, the materials for and the process of manufacturing the cathode and Anode represent 51% and 13% respectively. Hence, to reduce the cost, these materials play a vital role. 

With regard to the time-consuming charging, we might have to delve into the chemistry of the battery. Charging an EV battery efficiently involves managing electron flow and lithium-ion movement to prevent damage. Initially, charging is fast, but slows near full capacity to extend battery life and ensure safety. This is due to the need to preserve structural integrity within the battery and prevent overheating. EV management systems adjust reported charge levels to avoid extremes, ensuring durability and mitigating risks, explaining why fully charging takes longer than expected.

Yet, the idea of waiting 30 minutes for a charge is not particularly enticing. Thankfully, there are solutions in sight.

Graphene, a remarkable material, is revolutionising Lithium-Ion batteries (LIBs) by making them more efficient and capable of storing more energy. Imagine graphene as a super-fast highway for electrons, facilitating quicker and smoother travel between the battery's components. This not only reduces the battery's internal resistance but also boosts its power output. Additionally, graphene's exceptional strength enhances the durability of the battery's electrodes, leading to batteries that can be charged and discharged rapidly without losing performance over time.

Researchers, like Li and colleagues, have found innovative ways to use graphene's unique properties. They created flexible batteries that charge quickly and hold more power by combining graphene with specific materials for the battery's positive and negative ends, eliminating the need for traditional metal parts and other additives. This approach not only makes the batteries lighter and more flexible but also significantly improves their efficiency and lifespan. 

The prize is worth $500 billion this decade alone

The payoff for solving these issues? Huge. The global battery market is projected to grow more than four-fold between 2021 and 2030, from nearly $112 billion in 2021 to $423.9 billion by 2030, at a CAGR of 16.68% during the 2022-2030 period.

This rapid growth is driven by the increasing popularity of consumer electronics, the rising demand for electric vehicles, and the need for energy storage solutions to support the transition to renewable energy sources. Data suggests that lithium-ion batteries are expected to remain the dominant battery technology, with the lithium-ion battery market forecast to grow from $58.21 billion in 2022 to $293.24 billion by 2032. However, our research also indicates that other battery technologies like lead-acid, nickel-cadmium, and flow batteries will see significant growth to meet the diverse application needs across sectors like automotive, industrial, and power storage.

Currently, the fast-growing electric vehicle (EV) industry alone presents a significant market opportunity, especially given the dramatic 600% increase in lithium demand over the last eight years. Projections indicate that the global demand for Lithium-Ion batteries will reach 4,700 gigawatt-hours by 2030, and with an ongoing consumer shift towards EVs, the Lithium-Ion battery market in the automotive sector is poised to hit $95.3 billion by 2030, expanding at a Compound Annual Growth Rate (CAGR) of 17%. This scenario underscores a prime investment prospect, fueled by the transition to electric mobility and the pivotal role of graphene in advancing battery technology and efficiency.

To meet these market demands and carve their slice of the multi-billion dollar cake deeptech startups are taking different paths. Some are focused on replacing lithium-ion batteries with novel chemistries, others are set on using graphene and other materials to make EV batteries more efficient and extend these gains to different types of grid storage.

Who’s in the fight?

QuantumScape is one of the most famous players, given they are now a publicly listed company. They are working on solid-state lithium-metal batteries that use a solid-state separator to enable lithium-metal anodes. This approach offers an 'anode-free' design that forms the anode upon first charge, potentially boosting energy density to 800–1,000 Wh/L and significantly extending EV ranges from ~350 to between 400 and 500 miles.

OCSI AL's TUBALL, on the other hand, involves graphene nanotubes for both cathodes and anodes, enhancing conductivity and durability. These nanotubes form highly conductive networks that maintain connection even as silicon particles expand, promising vastly improved cycle lives to meet strict EV standards.

Sila Technologies introduces a graphite anode replacement with a nano-composite silicon that not only promises a 20% immediate range increase but also foresees a potential doubling of that gain with further development. This solution also improves battery charging times and reduces CO2 emissions during production.

The Bristol-based startup Anaphite presents a distinct solution targeting cathode. They’re pioneering the use of dry coating in Lithium-Ion batteries cathodes as well as graphene-enhanced cathode chemistry. Their world-first graphene dry coating is done by first preparing the homogenous powders that contain cathode active materials and advanced carbons, like carbon nanotubes (CNT) or graphene, and a binder, such as PTFE or PVDF. This mixture does not require any solvent, additives, or mixing: the powder is directly applied to the cathode through a dry coating process and it is then compressed through calendaring to enhance conductivity and density, and later cut into the precise electrode shapes. In the end, they assemble electrodes into cells, ready to be integrated into battery systems. With this process, Anaphite eliminates the need for wet coating: in turn reducing the time and cost associated with battery’s production. 

These start-ups are much needed in today’s time as the Electric Vehicles (EV) are expected to grow strongly in future. In 2022, EV sales increased in  the United States (US), the third largest market and Europe, the second largest market by 8% and 15%  from 2021 respectively. Emerging markets like India, Thailand, and Indonesia, collectively saw an adoption of EV increase by 300% in 2022 compared to 2021. The increase in adoption and demand for EV cars is driving the demand for efficient Lithium-Ion batteries. The Lithium-Ion battery’s demand grew by 65% in 2022. In last eight years, the demand has increased by over 600% 

Recently, there have been exploration of alternative solutions to Li-ion batteries, like Sodium Ion (Na-ion batteries). It can reduce the cost significantly as the material to make Na-ion batteries cost less but it does not have the same energy density as Li-ion. BYD has announced its Na-ion car, Seagull with a range of 300 KM. These batteries can work well for car owners that do not prioritise maximum range autonomy.

The future belongs to many

Exploring alternative solutions, like Sodium Ion (Na-ion) batteries or solid state Lithium-Metal batteries amongst others, is key in the ongoing quest for cost-effective and efficient energy storage, which may ultimately eat away at least part of the lithium-ion's dominance. However, there are key challenges in scaling up new battery chemistry beyond lithium-ion, these include lengthy development and commercialisation timelines, quality control and manufacturing issues, lack of industry-academia collaboration, and existing long-term investments in the li-ion supply chain ─with over $300 billion of investment in new lithium-ion battery gigafactories announced over the last four years. In contrast, enhancing existing lithium-ion battery technology, such as through the use of graphene, may be a more viable near and mid term solution to meet the urgent demand for improved battery performance and energy storage capacity, as graphene and other incremental improvements can be more readily integrated into the existing lithium-ion battery manufacturing ecosystem.

It is in this context that we decided to back European graphene pioneer Anaphite, who are carving their own niche by enhancing lithium-ion battery production with groundbreaking techniques and aligning with Silicon Roundabout Ventures' investment philosophy. Anaphite's approach not only promises to revolutionise EV battery efficiency and production costs but also positions it as a pivotal player in the sustainable transportation ecosystem. This strategic focus underlines our commitment to fostering technologies that propel the EV market towards broader adoption, offering a sustainable alternative for a greener future.

Overall, over the upcoming decades, we will see the energy storage market require multiple players to come up with winning technologies across the entire spectrum of battery technologies: as multiple solutions will be needed to scale and solve the huge electrification challenges we face globally.