Energy storage is becoming a hype

Energy storage is becoming a hype - huge impact on the demand for graphite, lithium and cobalt

http://www.cdfund.com/en/blog/energy-storage-is-becoming-a-hype/

Besides Tesla’s ambitious plans to build a huge factory for the production of its batteries, Chinese carmaker BYD last week unveiled a similar production target. Apple and Google, in addition to the traditional car manufacturers, also have big plans for electric vehicles (EV), and we can thus safely speak of an emerging hype.

Tesla has already begun construction of its gigafactory, a factory where all the batteries for its EVs are to be built. It is now clear that Tesla is not only eying the market for car batteries, but also that of larger batteries for local or regional storage of wind and solar energy. Tesla’s goal is to reach 35 GWh of energy capacity by 2020.

Last week, Chinese automaker BYD (10% owned by Warren Buffet’s Berkshire Hathaway) announced it seeks to pursue a level of production similar to Tesla’s: 34 GWh by 2020. These two projects alone will triple global lithium battery production in 2020. LG Chem and Foxconn have less ambitious plans, but will add another 23 GWh of production. On top of this, mainstream automakers also seek the accelerated rollout of EVs. In addition, Apple has begun poaching Tesla employees and a concept of the iCar is already doing the rounds. Google has also shown a strong interest in the world of EVs, although they are more likely to be interested in developing the software for future driverless cars.

Given these developments, a very strong trend in energy storage is emerging, much stronger than the previous efforts that focused only on the electrification of cars by established car manufacturers using traditional business models. The current trend, however, is fueled by the ongoing declining costs of solar and wind energy as they follow Moore’s Law, and the entrance of high-tech companies with entirely different payback and distribution models.

Tesla’s impact on raw materials needed for the production of batteries by itself is enormous. World graphite production will need to rise 152% from today’s level, 50% for lithium, and 17% for cobalt. Taking BYD and the other battery manufacturers’ plans into account, this impact almost triples. Given the production constraints in the market for graphite and cobalt, we expect the realization of the plans will have a major impact on the prices of these commodities.