How Is the Electrochemical ESS Industry Dominated by Lithium-ion Batteries?

Lithium-ion batteries will dominate the Chinese electrochemical ESS market by 90% by the end of 2022, surpassing other secondary batteries by a significant margin. To explain lithium-ion batteries’ dominance, the performance and commercialization of three of the most widely used ESS batteries—flow, Pb-acid, and lithium-ion—are compared in the following paragraphs.

Battery Performance

Lithium-ion batteries outperform flow batteries and Pb-acid batteries in terms of working voltage, energy density, and energy efficiency, as Table 1 illustrates. In addition, they offer a wider range of energy storage application scenarios and a longer lifespan. For instance, flow batteries take up too much room when developing energy-storage systems (ESS) with bigger capacities, while Pb-acid batteries’ poor energy density makes them less appropriate for power-type ESS, which deals with high voltage in a little amount of time. Lithium-ion batteries are therefore a superior choice for energy storage.

Additionally, the majority of ESS integrations involve facilities that generate renewable energy. However, the initial goal of promoting renewable energy sources is contradicted by the fact that lead, a heavy element found in Pb-acid batteries, may be harmful to both the environment and human health if not handled appropriately. Pb-acid batteries were less common even though they were less expensive because of their higher self-discharge rate, poor charge/discharge efficiency, and shorter lifespan. In contrast, flow batteries are not as commonly utilized in ESS as LFP batteries.

Amount of Commercialization

As soon as lithium-ion batteries became available, producers in Europe, South Korea, Japan, the United States, and China saw there was a market for them and hurried to get patents. Consequently, there was a spike in the quantity of patent applications in 2006. Nonetheless, most manufacturers choose to invest in China because to the unfavourable economic conditions in South Korea and Japan, as well as the restricted market demand and copyright laws in the US and Europe. China gave up royalties on locally produced and sold Lithium-ion battery patents in 2011, which greatly accelerated the development of the Lithium-ion battery market in China. With several producers using their products in electric vehicles, the nation held half of the world market for consumer lithium-ion batteries in 2015. China’s cathode materials and LFP batteries accounted for almost all of the global market share as of 2022. China’s competitive advantage in the business is strengthened by annual reductions in production costs brought about by mass production and ongoing technological developments.

Despite having longer lifespans and more charge/discharge cycles, flow batteries are still in the early stages of technological research and commercialization. As a result, compared to the other two batteries, the initial investment cost of the ESS based on flow battery is higher. Vanadium redox is currently the most often used flow battery. However, because of the high cost of vanadium and the gaps in the industrial chain, its initial investment is 1.5 times higher than that of a lithium-ion battery. To increase the flow battery’s applicability, numerous foreign businesses are currently funding, developing, and enlarging the flow battery industry chain. On the other hand, compared to lithium-ion batteries, the flow battery business chain has a larger and more intricate structure. For all areas, including electrolytes, BOM, and upstream raw materials, switching to a new one might take years. Flow batteries’ distinct characteristics and superior battery performance will secure their position in the energy storage industry once manufacturers have established the industrial chain.

Lithium-ion batteries have reached maturity at the same time as energy storage, making them the most popular battery in energy storage systems (ESS). In contrast, the flow battery is commercialized later and is still facing the obstacles of high costs and vast installation area, which leads to less uses in ESS.

Will the Popularity of Lithium-ion Batteries Last?

Because of its early commercialization, performance advantages, and mass production, lithium-ion batteries will continue to be the standard product for the next few years at a lower cost. However, the 2022 spike in lithium salt prices has prompted the commercialization of other potentially useful batteries. The market is aiming for longer energy storage durations than the two to four hours that it currently averages. Stricter regulations requiring the construction of long-duration energy storage systems (ESS) will increase demand and hasten the growth of a more developed flow battery supply network. Non-lithium-ion batteries are still in the early stages of research and development and are not yet commercially available. Given the recent drop in lithium salt prices, we think that lithium-ion batteries will continue to be the industry standard technology in the ESS market for the foreseeable future.

As for LFP and NCA/NCM batteries, they each have their advantages and are not entirely in competition. The LFP battery is low-cost, safe, price competitive, and is mostly used in peak shaving. We expects ESS based on NCA/NCM battery to achieve lower LCOS than that based on LFP battery, provided that NCA/NCM battery make technological breakthroughs in the future. However, due to their different characteristics, the application of the two will only be more diverged in the future.