Forwarded from Elliot Wave Technical Analysis
Batteries will prove a high-growth industry as green transformation accelerates
The adoption of electric vehicles and energy storage systems to absorb excess energy from renewable energy sources have accelerated demand for lithium-ion batteries creating an emerging high growth industry that will last for decades.
The last 15 years have catapulted the battery industry into a technology race, as batteries are being deployed into more and more products, including smartphones, electric vehicles, tablets, bicycles and industrial applications. The old battery industry came from a focus on the lead-acid batteries used in cars, industrial applications, households etc. towards lithium-ion batteries that are now at the forefront of the mobile electrification trend.
ELECTRIC VEHICLES AND GREEN ENERGY ARE DRIVING THE BATTERY REVOLUTION The two main drivers of the adoption of lithium-ion batteries are electric vehicles and energy storage for capturing excess energy from renewable sources. Until recently, the demand for lithium-ion batteries came from consumer electronics such as laptops, cameras, smartphones and other devices, but these applications require less energy density and thus the demand function has only slowly pushed down the costs of lithium-ion batteries. However, the revolution in electric vehicles started by Tesla has accelerated demand for higher density and volume of lithium-ion batteries, driving down costs through economics of scale.
The adoption of electric vehicles and energy storage systems to absorb excess energy from renewable energy sources have accelerated demand for lithium-ion batteries creating an emerging high growth industry that will last for decades.
The last 15 years have catapulted the battery industry into a technology race, as batteries are being deployed into more and more products, including smartphones, electric vehicles, tablets, bicycles and industrial applications. The old battery industry came from a focus on the lead-acid batteries used in cars, industrial applications, households etc. towards lithium-ion batteries that are now at the forefront of the mobile electrification trend.
ELECTRIC VEHICLES AND GREEN ENERGY ARE DRIVING THE BATTERY REVOLUTION The two main drivers of the adoption of lithium-ion batteries are electric vehicles and energy storage for capturing excess energy from renewable sources. Until recently, the demand for lithium-ion batteries came from consumer electronics such as laptops, cameras, smartphones and other devices, but these applications require less energy density and thus the demand function has only slowly pushed down the costs of lithium-ion batteries. However, the revolution in electric vehicles started by Tesla has accelerated demand for higher density and volume of lithium-ion batteries, driving down costs through economics of scale.
Forwarded from Elliot Wave Technical Analysis
With lithium being a core component of the lithium-ion battery, the price of lithium is obviously playing a role in the cost of a battery pack. Lithium had a stable price during the years 2009-2014, but with the acceleration of electric vehicle production, supply was tight and the price soared 220% from early 2015 to mid-2018. This incentivised huge investments into lithium mining and as supply has improved the price has collapsed 60% since the peak. The price of lithium today is only 18% more expensive than in early 2009, translating into a low 1.5% annualised compounding of prices. Lithium miners are not likely to capture the dominant part of the revenue stream from the revolution in batteries and as such lithium miner stocks are not expected, in our view, to be the most interesting play.
Forwarded from Elliot Wave Technical Analysis
The cost of a lithium-ion battery pack has declined from almost $1,200/kWh in 2010 to $176 in 2018 and $156 in 2019. BNEF (Bloomberg New Energy Finance) expects the price to drop to $62/kWh in 2030. The cost reductions will come from economics of scale driven by electric vehicles and energy storage for renewable energy production, and BNEF expects the global lithium-ion battery market to reach almost $120 billion in annual revenue in 2030. Electric vehicles, the main demand driver for batteries, are set for a revolution in the coming years. According to BNEF, the number of electric vehicle models will reach 500 globally in 2022, with the sales volume increasing from 1.7 million in 2020 to 26 million in 2030, before reaching 54 million in 2040 and representing 58% of all new car sales. These long-term forecasts tend to overshoot as technological progress is difficult to predict. As such, progress could be much faster with regulatory forces adopted by many countries being the biggest determining factor. By 2040 the increase in electric vehicles will have displaced oil demand by 17.6 million barrels per day, which is around 17% of pre-Covid-19 daily oil demand. The electricity demand in 2040 from electric vehicles is expected to rise by 1,964 TWh, translating to around 5% of global electricity demand. China is centred around the production ramp-up. But recent cost analyses show that Indonesia has a cost lead over China due to lower labour costs and easy access to nickel and cobalt (the two metals account for 22% of the battery pack costs), although it comes with a higher carbon intensity in the electricity used for battery production. The future will tell us whether Indonesia can seize the moment, but as it is likely to be a technology race in advanced chemistry, we think China will come to dominate this industry.