Max Pacella
Investment Analyst
Equities
20 Apr, 2021

We’ve spent time discussing electric vehicles (EV) and the investable opportunities of their supply chain – but today we look to the technology which seeks to solve one of the largest problems our society faces today: power.

From phones and watches to electric planes, we are limited by the capacity of our portable power supplies.

Since the initial proposal and invention of the electric battery in the early 1800s by Alessandro Volta, the battery has provided humanity with increased mobility, increased connectivity and revolutionised the means by which we continue to electrify our global infrastructure.

Arguably, the battery has not significantly advanced since the invention of the commercial lithium-ion battery in 1991 – so the next advancements in battery technology may pave the way for a new power revolution, one bringing some of the most exciting investment opportunities in decades.

Let’s explore some of the up-and-coming technologies being developed around the world, the immediate investable opportunities and what usages we may see in the future.

Next Gen Lithium-Ion

Given that it is working off of an existing base, new generations of lithium-ion (Li-ion) batteries are set to developed the fastest and in the highest (amongst all the ‘battery revolution’ contenders).

The current state of Li-ion batteries is the product of decades of optimisation, chemical selection and mixes of different materials – the most common materials found in Li-ion at the moment are phosphates, graphite, titanium oxides and – of course – lithium.

Source: Energy Industry Review

The next generation of Li-ion batteries will be driven by recent discoveries of new ‘disruptive active materials’, which would allow batteries to store more lithium in each electrode – the current and most likely candidate for large-scale production is the inclusion of a nickel-rich cathode, focussed on allowing more energy capacity within the battery.

In terms of investable opportunities, companies which have scale and a low cost of production for Li-ion technology are likely to be best placed for the emergence of next generation technology – which generally means the largest manufacturers.

Tesla’s (TSLA) ‘Gigafactory’ is still in construction, with the aim of producing its own Li-ion batteries at a large scale/low cost, which would flow on to the affordability of their cars. They are currently doing this in conjunction with Panasonic (ADR:PCRFY), one of the largest battery manufacturers globally.

Source: Bloomberg

Another major player is BYD Co (OTCMKTS:BYDDY:), a Chinese manufacturer and (in 2019) was the world’s third largest battery manufacturer. BYD currently holds supply agreements with Toyota and their own auto marker division – they also have a significant R&D division which is focusing on next gen Li-ion.

Solid-State Batteries

Two of the challenges that Li-ion face, even for next generation developments, are capacity and recharge time. Li-ion will likely meet the very pinnacle of its capacity constraints with this next generation of technology and the technology is known for over-heating issues when charging.

Solid-state batteries are positioning themselves to be the solution to both of those problems.

In contrast to traditional battery construction, where ions move from one electrode to another via a liquid medium, solid-state batteries use a solid compound which still allows conductivity of lithium ions. The trick so far has been finding solid electrolytes which allow efficient conductivity without high resistance.

To come back to answer the two challenges for Li-ion; the solid electrolytes are non-flammable and therefore do not have the heating issue when trying to quickly charge the battery, and have a higher voltage capacity/higher density which allows for lighter batteries with longer life per charge.

Source: Business Korea

The best-known name in the industry for solid-state batteries is QuantumScape (QS:NYSE), an American research house which is pioneering solid-state technology – investors include Bill Gates, Kliener Perkins and Volkswagen (VWAGY:OTC), the latter of which invested USD $300 million last year.

Source: Bloomberg

Toyota announced in December that it was introducing solid-state battery technology into its EV range, planning to be the first company to sell an EV with this technology within the next few years. This is alongside the Japanese government announcing a 2 trillion yen bill to support decarbonising technology, including research into the development of new batteries (particularly solid-state).

Another, albeit smaller player, is Solid Power – unlisted at the moment, Solid Power have partnerships with Hyundai, Ford and Samsung, all of whom participated in a $20 million capital raising round in 2018.

The aim of this company is to develop a functional and automotive-ready solid-state power cell by 2023-24 – at which point it will hand over its commercial-scale production over to its partners.

Lithium-Silicon/Sulphur

Finally, we have Lithium-Silicon and Lithium-Sulphur batteries, not quite in the same realm as next generation Lithium-Ion as they use chemical processes and active materials outside of the usual construction for a general Li-ion battery.

Most importantly, there are no ‘host structures’, but rather the anode is consumed and reformed as the battery either discharges or is charging – rather than a permanent anode sitting inside the battery during all states.

To avoid going into a chemistry lesson I don’t fully understand myself, the basic reason behind this new structure is a greatly increased energy density – up to 400% higher than a traditional Li-ion battery. This directly benefits the battery life and limits ‘self-discharge’

Another benefit is that silicon and sulphur are much more abundant than certain other active materials – with a cleaner process to extract from the ground, thereby making these batteries more environmentally sustainable.

The current problem facing researchers is the fact that these batteries degrade much faster overtime.

Panasonic, Samsung and Tesla are all major contenders to either develop or commercialise this technology in the near future – as well as a newer name to this note, Toshiba (6502:TYO).

Source: Bloomberg

Oxis Energy, a UK-based researcher and manufacturer, is also at the forefront of developing Lithium-Sulphur technology, however for the moment this company and technology is not listed, being housed in the Culham Science Centre in Oxford.

Amped Up

It can be said without hyperbole that the next revolution in battery technology will change the world as we know it – from changing the way we travel, to the means with which we interact with the world around us.

There are multiple paths to this battery revolution, each with new investment opportunities, and new businesses which may step up to be market leaders in the next decade.

As with any emerging technology it is important to understand the advantage of a new technique or construction, in order to know what you are buying and why.

There is a wide body of literature about the emerging battery technologies which you can access, and we will revisit this topic as new actionable information is released to the market.

If nothing else, perhaps the Energizer bunny will get a new look once he starts drinking sulphur and silicon.

The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.