The battery industry today encompasses a range of commercialized energy storage technologies, from pumped hydropower plants to lead-acid batteries – but none match the quality and performance of lithium-ion battery storage, which excel in terms of cost efficiency, energy density, and end-use flexibility and production volume.
Tyler Lancaster
Image: Energize Ventures
According to the Energy Information Agency (EIA), lithium-ion battery storage has reached more than 90% market share in the US, and I believe this will likely be the de facto energy storage technology from now on. Beyond the automotive sector, batteries power everything from consumer electronics to aerospace to grid and more. It is therefore all the more important to understand the evolution of the battery sector and its role in the transition to full electrification.
Looking at the overall market, clear parallels can be drawn between the development of the battery sector and that of the solar industry decades ago. For early technologists, investors, and users, the solar industry taught us important lessons that are applicable now as interest in the battery sector grows.
Battery technologies are now part of the puzzle to accelerate the energy transition, and in particular the software layer is expected to play a massive role in providing insights into new, sophisticated models of physical and chemical interactions, be it in electric vehicles or on the grid.
We saw this game in the solar industry and we are now bringing the same playbook to the battery industry.
By reflecting on the challenges that impacted the solar industry, battery materials manufacturers will be better equipped to scale these next-generation technologies out of the lab to have a real impact.
With the rise of the solar industry in particular, we have seen two challenges that the battery sector must now address and overcome in order to create a sustainable ecosystem for the long-term transition to 100% clean energy.
Optimization of the project design right from the start
With the excitement of new battery technologies emerging, companies must prioritize the overall design of the technology from the start to avoid bottlenecks across the board. In particular, battery manufacturers must consider the life expectancy of a battery based on the frequency of use and degradation, remaining life cycles, and other considerations to the end of life.
In the early years of the solar industry, we saw companies fall victim to poor initial project concepts that ultimately stifled potential growth. Firms that had overlooked the importance of project design came up with systems that were 10-30% oversized in terms of capacity and cost – sometimes in an attempt to fix errors in actual operation – which in turn made deployment more expensive.
Tracking the design from the start is essential to achieving the end goals, and the right software can provide the best real-time top-down visibility, making projects more configurable and scalable. As the battery sector continues to grow, hardware companies must look for software solutions that can cushion bumps along the way to keep up with fast-paced electrification goals.
Unparalleled asset maintenance
Another unprecedented hurdle in the solar industry is the intense maintenance required to keep the installed equipment in good condition. Before the global PV industry developed in full swing, companies assumed that the innovative solar systems at the time could conveniently produce electrons for their 20-30 year life cycles without maintenance.
In reality, many of these systems require replacement inverters, regular cleaning, and other operational and maintenance maintenance that were often overlooked initially. Analyst firm Wood Mackenzie predicts that operating and maintenance costs for global PV systems could reach $ 9.4 billion annually by 2025.
In the case of batteries, maintenance has become a clear but economically burdensome priority, as degradation rates from charging or discharging too quickly are higher than expected, which can damage battery cells, cause fires and destroy the end product.
While a battery life cycle varies by application, sectors that rely on larger battery systems such as EVs and grid-scale need clear, data-driven insight into the condition, performance, and eventual deterioration of the battery in order to keep all assets running.
The solution lies in the software
There is no such thing as a panacea for the energy storage sector, but battery technologies can certainly benefit from the increased visibility enabled by software. In the coming years, batteries – whether lithium-ion, lithium-metal or an as yet unattainable technology – will only develop in an increasingly software-defined manner, which requires groundbreaking chemicals and production techniques that enable higher energy density and competitive costs.
With software, what would traditionally take months or years to develop and test battery materials is reduced to just weeks or days. In addition, modern software will enable chemical architectures to be built in the cloud before they are integrated into physical laboratory tests. All of these advances will allow manufacturers to have more time to iterate and simulate thousands or millions of battery material combinations, resulting in significantly lower costs and shorter development times across the board.
A major driving force in the adoption of battery technology is cost; As we've seen decades before in the solar industry, tremendous strides are being made in the battery space to bring the hard cost down. A new influx of competitive materials and advanced manufacturing techniques have reduced waste, improved quality, and lowered hardware costs.
But how can we further reduce costs in order to achieve cost parity for EV or mains batteries?
With the increasing commercialization of lithium-ion battery cells, the costs will not depend on the battery cell or device prices, but on the “soft costs” that have inflicted threatening damage on the global PV market and account for up to 70% of the installed solar energy Costs. Similarly, the soft cost of lithium-ion battery systems could represent over 50% of total industry spending.
To gain significant market share, maximize operational efficiencies, and reduce those soft costs, we need to seek breakthrough technologies that streamline critical and innovative processes while remaining economical.
Today, the global battery market for electric vehicles, grid storage, and other use cases is around $ 77 billion and is expected to grow to $ 390 billion by 2025. As we've seen with the solar industry, a battery industry of this size can and will standalone, venture-backable software companies to further improve the battery ecosystem.
At Energize Ventures, we've been evaluating the battery and energy storage market for more than four years, waiting for the right time, the right technology, and the right team to invest. Now we see strong comparisons between the market sizes of the solar industry five years ago and the battery industry today.
In fact, the battery market continues to grow rapidly as companies spend 5 to 10 percent of installation costs on software. This means that we can assume that today's multi-billion dollar market will grow to a market of around 40 to 50 billion US dollars for software innovation only by 2030.
We are at a hub in the evolution of the industry as the level of market maturity and growth rate signal a tipping point for larger and more meaningful digital innovations to drive these formative renewable energy systems of the future. Right now is the height of the battery age and we are making great strides towards full electrification.
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Tyler Lancaster is a principal at Energize Ventures, a Chicago-based global alternative investment manager focused on digital innovation for energy and industry, where he drives investment activities and portfolio management.
The views and opinions expressed in this article are the author's own views and opinions and do not necessarily reflect the views of. contrary PV magazine.
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