Guest Post:
The rEVolution Feeding Frenzy and the Shadow Beneath: Lithium-Ion Batteries and the Next Leap Forward.
Finally, we come to an air abuzz with excitement for battery development and the ever-higher levels of G’s it promises for Electric Vehicles. EV start-ups are already flooded with cash, almost capsizing on the tsunami of crowdfunding and private placement for companies with vehicles not even in production yet. Unfortunately, those investors still paddling to catch the wake seem to have missed the correct timing to truly have a tubular ride.
Or have they?
Take the Oracle of Omaha’s prophesied arrival into the Golden surge; is His entry a late one? Or could it be that the true financial behemoths of our time simply move to an entirely different rhythm, sure-footed on a separate beat entirely when compared to the haphazard feeding frenzy of the Interesting Times we find ourselves in?
What then are they waiting for when it comes to integrating with the quantified surge of electrification and the critical components & commodities juicing it? What is the potential for Lithium if not the Electric rEVolution? What better timing for copper if not the mass electrification of mobility systems and their support architecture? Could it be that there is an even greater calling for them both, bubbling up just beneath the surface?
Let’s row away from the shores of speculation, and instead find the facts splayed across the newspapers of today.
2019 has shown us a Europe that has had its energy generation comprised of a greater portion of renewable energy than that of fossil fuels. In 2019, 37.5% of generation came from renewables, 34.3% from fossil fuels and 28.3% from nuclear. As of June this year, wind, solar, hydro and bioenergy generated 40% of the electricity across Europe, while fossil fuels generated 34%. (In the U.S., meanwhile, fossil fuels generated more than 62% of electricity last year, while renewables accounted for less than 18% - growth opportunities abound).
However, this rising mix of renewables causes unique challenges for grid operation in terms of volatility. Wind and solar in particular cause wildly fluctuating levels of energy generated and thus stress the grid in a novel manner. The opportunity for Li-Ion Batteries stems from the fact that as the share of ‘nu-renewable’ (non-hydro/biofuel) energy sources rise, a more flexible system of energy storage is called for to integrate potentially mercurial sources in a reliable manner fit for sensible grid structures. Li-Ion Battery storage systems have the unique ability of being able to quickly absorb, store and re-inject electricity in a timely manner.
In the United States, Federal Electricity Regulatory Commission Order 755 has mandated a separate compensation structure for fast-acting resources such as batteries as opposed to slower-acting, more conventional resources. This incentivises the use of battery storage systems to provide frequency regulation.
As always, the focus falls on California shores, where the state has stolen the claim of largest battery installation in the world from Australia in a battle of who can be the most sustainable of western coasts. San Diego’s Gateway Energy Storage project is about to double its 230-megawatt single-hour capacity by another 250mw. This overpowers Elon’s 100mw pet project in Australia by almost 5x its size.
For all their scope, however, Californian battery installations haven’t kept pace with power plant shutdowns, hence the grim headlines of third world rolling blackouts we’ve all been reading. Imagine the potential for one state alone, then, when it’s reported that as much as 15,000mw will be required to reach the state’s energy plans of 25gw of renewables by the end of the decade. These projects are acclaimed to be a gateway to multiple, large capacity projects projected to come online by the end of this very year.
Looking out wider, we see Queens of New York installing a 316mw system on the opposite coast. Wider yet - in terms of global potential - an industry report projects that the market for energy storage (Mobility, devices and stationary storage) will increase from the current 164GWh to 3,046GWh just over the next 15 years.
As we read in the World Energy report, the global power sector is indeed undertaking a major transformation. Increasing global recognition of emissions urgency is motivating deep decarbonization efforts across the board of global utility infrastructures. While we see European energy giants benefiting from national policies that are significantly clearer than those found over the pond in the United States, in American states we will see both clean and dirty grids skip a step and scoop up sustainability incentives by playing the renewables card of efficient energy storage. Perhaps there is wisdom in this because it is energy storage, in particular, that is highlighted, again and again, as the keystone of a resilient, stable and reliable grid.
Furthermore, the World Energy report highlights my particular belief that the next disruption will be found within modular, grassroots level energy storage solutions as opposed to larger and centralised utility-level systems. Indeed, we see that “modular smaller-scale energy storage solutions are growing at a faster pace than utility-scale”. The report finishes with a comforting;
“The inherent value of creative disruption should not be undermined. By acknowledging the reality of ground-level implementation of energy storage projects along with transparency in adapting with the change in physical structures all players will be encouraged to accelerate the deployment of energy storage whilst truly enabling less with more energy.”
Opportunities for market entry are abundant, thanks to the challenge of meeting varied cost and performance metrics for battery storage systems. The key is in the disparity in energy storage requirements. An example is two different scenarios below, battery ‘A’ for an electric vehicle and battery ‘B’ for stationary energy storage. A single system cannot be adapted to meet both sets of requirements. The need for a diversity of battery platforms beyond the current technology and the inability of existing technologies to meet all of the required performance metrics for a given application is a crucial incentive for new market entrants to develop and corner the market concerning a specific niche.
Why then, having reached the shore of reality, is Lithium as a commodity reacting so haphazardly to what should be its coming of age moment? I would turn to Kirill for comment here:
‘We could spend a long time discussing why the price of lithium now is an aberration, why it's not reacting at all during a very, very exciting stage of exponential growth in EV sales. What would be more constructive would be to understand what parties are really using this generational opportunity to build their “sugar business” in a time before Mr Buffett will buy his “Coca-Cola” in EV space.
It is the Chinese that are using the market’s hesitation to embrace the lithium industry for their advantage. Giants like Ganfeng Lithium are not afraid of short term aberrations in the marketplace, they have the discipline and mindset to see the real long term goal of dominating the EV space via control of its bottlenecks. They are building, step by step, the vertically integrated lithium business starting with the raw base materials for it.’
In spite of these setbacks, or precisely because of the opportunity presented by them, what should have been a crucial moment for the lithium market has instead become a strategic moment for China. Sensing weakness in the West’s market failure to adequately react to a falling lithium price, we start to understand the movements of giants like Ganfeng Lithium in the context of the wider picture I have painted.
Ganfeng Lithium, in particular, has always taken strategically timed steps to build up its lithium supply base. TNR Gold Corp, in turn, correctly appraised the movements of the first decade and began cozying up to the Chinese giant in 2009. Today, after many years of development and many millions of dollars invested in Mariana Lithium we hold an NSR Royalty on this project under Ganfeng Lithium management.
TNR Gold is directly plugged into the tubular wake of our times. We do not have to contribute any capital to the development of this project. Analysts, like Dr Ryan D Long, are already applying some of their valuations to our Royalty Holdings.
