Environment Blogger

DRIVEN BY an ever-more environmentally aware customer base and increasingly rigorous global emission regulations, the world market for hybrid vehicles is predicted to increase to over 11m vehicles a year by 2020, around 23 times the market size in 2008.

One result of this surge in demand – and customers’ expectations that the new generation of hybrids go further and faster – will be a need for superior battery technology.

The cost, weight and limited capacity of conventional batteries have impeded the development of electric vehicles with acceptable speed and range for decades. While not without their limitations, lithium-ion (li-ion) batteries are lighter and have a higher output than lead or nickel-metal hydride batteries. However, although well established in small devices, such as laptop computers, mobile phones and power tools, large li-ion units’ tendency to overheat has prevented their use by carmakers until recently.

As new designs have become available, however, li-ion has become a viable option. US oil majorExxonMobil and Japanese chemical group Asahi Kasei have both developed a battery separator film to help thermal runaway. ExxonMobil claims its film will enable designers to develop smaller and more powerful batteries.

German marque Mercedes-Benz is expected to launch a lithium-powered hybrid version of its S-class car later in 2009. Elsewhere in the automotive sector, the shift from nickel-based batteries to li-ion is expected to gather pace in the next two or three years.

The potential for increased revenue and the opportunity to invest in technology widely seen as both environmentally worthy and future-proof has resulted in something of a gold-rush in the sector.

In the US, the impact of President Obama’s twin goals of supporting the US economy and putting 1m new plug-in hybrid or electric vehicles in service by 2015 seem set to a create a bright green future for both suppliers of lithium and the li-ion battery industry.

US specialty chemical firm Rockwood Holdings is a major player in new battery technology. “The Obama administration has a stimulus package. There’s about $175m-250m €125m-180m for suppliers of advanced materials – like us. We are applying for funds to expand the facilities that we have in North Carolina and our lithium ponds in Nevada,” says Tim McKenna, vice president, investor relations and communications.

DOW FORGES AHEAD WITH THIS LITHIUM STOCK IN MIND
US-based Dow Chemical will build a new battery manufacturing plant in Midland, Michigan, subject to final agreement on funding and joint venture (JV) terms. The 800,000 square foot (74,322m2) facility will produce enough batteries based on superior lithium polymer technology to power 60,000 new generation electric and hybrid vehicles per year, creating more than 800 new jobs. Production is expected to begin in 2011.

Dow’s $600m (€433m) project, to be known as KD Advanced Battery Group, is a JV with Kokam America, the US affiliate of South Korean lithium technology firm Kokam and energy-focused investment firms Townsend Ventures and SAIL, both US.

Ravi Shanker, Dow’s director for ventures and business development, says the company had been looking for the right partner for the venture for some time. Kokam is an established business that supplies batteries for radio and remote control in hospital machinery and defense applications.

The initiative will receive a tax credit valued at $44.6m over 15 years and a battery cell tax credit valued at $100m. The funding, from the US Department of Energy, will go a long way to help the state and US economies meet their employment, energy and environmental targets.

Three other companies also won state tax incentives for battery manufacturing, according to state development organization The Michigan Economic Development Corporation, with a total of $1.7bn in investment to help create around 6,700 jobs.

Funding will also go to independent, Milwaukee-based, li-ion supplier Johnson Controls, and to LG Chem-Compact Power, a partnership between Korean-based LG Chem, its US subsidiary Compact Power (LGC-CPI) and General Motors.

In addition, US li-ion designer and manufacturer A123Systems plans to invest more than $600m in initial coating, cell manufacturing and pack assembly. The company forecasts that the proposed project could create more than 5,000 new jobs. A123Systems has signed up to a development and manufacturing agreement with compatriot carmaker Chrysler to supply batteries for the car its ENVI product line.

Upstream from the battery manufacturers, the firms that supply lithium also have reasons to be cheerful. Lithium is usually mined from rock, but deposits are found in brine ponds, too. Although there are some deposits in China, most of the world’s reserves are in the Andes mountains of Chile, Argentina and Bolivia – the Chilean company SQM is the largest producer of lithium worldwide.

Rockwood Holdings and compatriot specialty chemical firm FMC are the other key players. Rockwood is a major supplier of lithium from brine lakes in Chile and from a mine in Nevada, US, through its German subsidiary Chemetall.

With a 50% global market share for lithium and 30% for the lithium carbonate used in battery manufacture, Chemetall produced 27,000 tonnes of lithium last year, and forecasts that production will increase to a potential 40,000 tonnes by 2015. Lithium for the manufacture of all kinds of batteries, including laptops and other consumer products, is thought to have made up around one-third of Rockwood’s $3.4bn revenue last year.

McKenna believes that the automobile industry will start to supply large quantities of li-ion hybrid cars by around 2011. “The car industry is very clear that it believes electrification is essential to reduce dependence on oil,” he adds. Rockwood has already expanded its lithium capacity in Chile to prepare for the anticipated increase in demand.

While automobile energy policy will undoubtedly be beneficial for Rockwood, SQM and FMC, commentators are already drawing attention to potential pitfalls.

ENVIRONMENTAL HURDLES
The impact on the environment of increased mining and processing of lithium has yet to be fully examined. But there can be little doubt that an increase in almost any kind of industrial process is likely to lead to higher carbon emissions, even if they are offset by the reduced use of fossil fuels.

With lithium supply, analysts believe that, in the short to medium term, there should be no problem, although ramping up production from brine ponds is a slow process.

Lithium supply is controlled by a small number of well-established companies and therefore likely to be stable, but it is, like the oil it is predicted to replace, a diminishing resource. Some observers are looking further ahead to an oil-free future where all automobiles will have been replaced by electric vehicles, and they see trouble.

Lithium reserves, they claim, will be unable to support the demands of the production of 60m electric vehicles a year, with the potential appearance of political and economic tensions around availability, control and supply, which could look very similar to those that currently surround oil.

Despite the downturn in the global economy and the meltdown in the automotive sector, Japan’s Toyotahas massive advance orders for the third generation version of its Prius hybrid, while Honda’s Insight is also selling well. Lexus has luxury hybrids on the market already, while Mercedes-Benz will launch its later this year.