Lithium News

Data centre managers still have their misgivings over the practicalities of demand-side response and energy storage.

Riello UPS’s Leo Craig argues the perceived risks are far outweighed by the potential rewards and claims its time operators learn to take advantage of the benefits of lithium-ion UPS battery storage.

Reports reveal that more than three-quarters (77%) of mission-critical organisations have an interest in participating in demand-side response (DSR), but only if it doesn’t negatively impact on its core activities.

Both parts of that statement are unsurprising. With the National Grid facing increased pressures, data centres are obviously open to the argument for a more flexible and reliable electricity network.

But when you’re dealing with sites and server rooms that demand 100% uptime, there’s clearly a natural reluctance to do anything which might weaken that must-have resilience.

As a rule, mission-critical sites such as data centres are naturally risk-adverse. And they have good reason to be so, particularly when energy-related failures can cost a business around 17% of their annual turnover.

It’s also a truism that few organisations want to be seen as ‘guinea pigs’, they want to see the hard evidence that new technologies and processes work before throwing their weight fully behind them.

It’s up to those of us who support the benefits of using uninterruptible power supplies (UPS) and batteries in data centres not just as a standby power system but as a means to generate and store green energy to champion this cause.

We need to highlight success stories. We need to offer practical solutions to the perceived problems. And we need to keep making the environmental and economic arguments.

From Lead-Acid To Lithium-Ion

Sealed lead-acid (SLA) batteries, also known as valve-regulated lead-acid (VRLA), have long been the go-to option for data centre operators. They’re reliable and relatively inexpensive, particularly their initial purchase cost.

But they’re far from faultless as optimum performance requires a temperature-controlled environment (20-25°C) with lots of energy-intensive air conditioning.

They need lots of maintenance and because their impedance increases over time – which reduces their capacity – SLA cells must be replaced fairly frequently.

Lithium-ion (Li-Ion) batteries are becoming an increasingly viable and attractive alternative.

Compared to SLA, Li-Ion provide the same power density in less than half the space.

They can operate safely in much higher temperatures (up to 40°C), recharge much faster, and have up to 50 times the cycle life.

Over the lifespan of a Li-Ion battery block (which can be between 10-15 years), lead-acid cells would in all probability require replacing two or even three times.

So although the initial cost of lithium-ion would still be higher than SLA, the total cost of ownership (TCO) over a 10-year period could be anywhere from 10-40% less.

Of course, this doesn’t mean that suddenly every UPS installed in a data centre will use Li-Ion batteries.

But in an increasingly competitive industry, it’s fast becoming an option that offers data centres an all-important edge.

Lithium-ion cells deliver the same power in less space, and as they can operate at higher temperatures could even remove the requirement for a separate battery room.

With commercial property costs high and likely to remain so, these potential floorspace and air conditioning savings will undoubtedly prove popular with data centre operators.

Add in the improved environmental performance and potential revenue streams offered by DSR, income that could be used to pass savings onto customers, and we could be looking at a significant competitive advantage.

Learn More About Li-Ion UPS Batteries

Riello UPS works closely with leading battery manufacturer Yuasa and has partnered on several recent projects using their Li-Ion cells.

Their Senior Technical Coordinator Peter Stevenson answers some of the most common queries asked about lithium-ion batteries and their use with uninterruptible power supplies.

What are the main advantages of using lithium-ion batteries with a data centre UPS?

Li-Ion batteries are about 25% of the volume and weight of an equivalent SLA battery, so that’s a big benefit in settings where space is limited.

They’re far less sensitive to temperature fluctuations, so for example, Li-Ion batteries operating at 30°C will have a longer life than an SLA functioning at 20°C. In many environments, this means fresh air cooling systems can be used, rather than expensive air conditioning, which is a significant plus in terms of total cost of ownership.

It’s also easier to predict the ageing of lithium-ion, reducing the risk of rapid loss in performance that is sometimes seen with SLA.

Finally, Li-Ion batteries typically provide up to 50 times as many deep discharge cycles as SLA. While this isn’t hugely significant in a traditional UPS, this could change if the rapid growth of solar and wind generation means a UPS’s role evolves from purely providing emergency power into an energy storage system that can generate revenue on a daily basis.

But are there any disadvantages to using Li-Ion instead of SLA?

The main and obvious disadvantage is the initial cost. Even though massive investments in automated manufacturing processes have resulted in significant cost reductions for Li-Ion over the last 20 years, the basic raw materials are still expensive compared with lead-acid.

Recycling is also an issue too. There’s still much work required to reproduce the well-developed and cost-effective recycling of lead-acid cells.

Are Li-Ion batteries in a UPS safe? Aren’t they a greater fire risk as seen with all those Samsung Galaxy Note 7s bursting into flames?

Li-Ion batteries employ a wide range of chemistries and structures, so they can be optimised for different applications. The batteries used in mission-critical systems use much more robust chemistry and packaging than the ultra-light cells found in hand-held devices.

Is battery monitoring important with Li-Ion?

An advanced battery management system (BMS) is mandatory for high-voltage Li-Ion applications because each cell must be individually monitored and controlled using electronic circuits to maintain balanced states of charge.

Similar BMS are optional with SLA batteries, and although preferable in large-scale applications, they would incur significant additional capital costs.

Why haven’t data centres fully embraced the energy storage potential of lithium-ion batteries yet?

It’s more a case of ‘seeing is believing’. Examples of success in other industries will hopefully give increased confidence to the power protection sector in the next few years. The deployment of 20-megawatt grid-connected energy storage systems, which are now fairly commonplace using Li-Ion, should also provide encouragement.

Powering Ahead To The Future
Even the most conservative estimates suggest there’s currently more than 4 gigawatts of electricity stored in Li-Ion UPS batteries in the UK. That’s enough energy to power roughly 3 million typical homes.

Considering we’ve only just scratched the surface of the potential of battery storage, the future possibilities are huge. We need to do all we can to persuade more facilities with critical power protection systems in place about the benefits of both lithium-ion UPS batteries and demand-side response.

And this doesn’t just apply to data centres, it relates to other sites with on-site backup power generation too, essential infrastructure such as hospitals or utilities. If these sorts of organisations buy into the economic and environmental advantages, we’ll all reap the rewards.

German carmakers are increasingly going EV. Volkswagen alone has plans for as many as 80 EV models across its brands by 2025. Also by that year, annual production of EVs should hit 3 million vehicles. But there is a small problem with these plans: they might not be competitive enough. Okay, it’s not a small problem; it is potentially a very big one, and it concerns all German carmakers with EV plans. The root of the problem is in the batteries.

German carmakers have been buying batteries from China and South Korea so actively that German battery makers have scrapped plans for local battery factories, deepening an already heavy dependence on imported products. Bosch, for instance, last year said it planned to splash US$23 billion (20 billion euro) on building battery production capacity of 200 GWh by 2030. Just two months after this announcement in February this year, the car supplier major said it no longer would pursue these plans.

“For Bosch, it’s important to have a technical understanding of cells. We don’t have to make them ourselves,” Electrek quoted Bosch executive Rolf Bulander as saying at the time. Yet a lot of other people in the industry and the country’s Chancellor apparently beg to differ.

In the spring, Angela Merkel said that developing local production capacity for EV batteries was a good idea as it would add value to German carmakers’ products. But more importantly, experts believe that local production will be a safeguard against potential attempts at arm-twisting from foreign suppliers—always a possibility with extreme dependence on imports—and it will also allow the local carmakers to be in control of research and development that could make their cars more competitive.

Batteries are one of the costliest components of EVs, which is why their impact on the final price tag is so crucial. “Cells can be a major technology differentiator and cells are the by far most costly part of the battery pack,” a materials science professor from the University of Muenster told The Verge. Martin Winter added that local production of battery cells would greatly affect German carmakers’ chances of success in the booming EV market.

Unfortunately, Winter notes that the development of this production capacity will be “costly and painful.” It is, however, necessary in order for local carmakers to make sure they can take full benefit of future breakthroughs in battery technology that can change the face of the EV market. This is a solid reason for taking the pains and the costs of developing local battery factories: there is so much innovation in batteries right now, that breakthroughs are only a matter of time.

Asian battery suppliers seem to be acutely aware of this, so they are now setting up battery factories on site, The Verge notes in an analysis of the topic. One of Germany’s biggest lithium-ion battery suppliers, Chinese CATL, plans to build a battery factory in Thuringia. BMW has already inked a deal to buy US$4.7 billion worth of batteries from the company’s new facility even though it has its own battery production plans.

Continental is also eyeing battery production in Germany as is Tesla. While it’s true that proprietary battery research would be a best-case scenario, perhaps in the present circumstances, Germany’s automakers could make the best of what they have: at least some local production capacity, even if not all of it German. It’s better than nothing, after all.

Chinese battery giants can win the recycling race. Metals recovered from spent car cells could be worth more than $20 billion a year within a decade, according to Berenberg research, driven by demand for ingredients like lithium and cobalt. Established recyclers have a head start, but with half of the world’s electric cars sold in the People’s Republic, local manufacturers like Contemporary Amperex Technologies and BYD, can pull ahead.

Competition from the world’s largest auto market, though, is tough. China has subsidised green cars and promoted companies like $22 billion battery manufacturer CATL. It also has volume on its side: Beijing wants sales of new energy vehicles to touch 7 million by 2025, up from 500,000 in 2017. To kick-start recycling, regulators have also made automakers responsible for the disposal of old cells: they typically then call on local suppliers like CATL or Warren Buffett-backed batteries-to-cars conglomerate BYD. Finally, a drive to impose uniform standards could make it easier to achieve automation and economies of scale fast.

For Beijing’s battery champions, there’s a double pay-off. They can charge for the safe disposal and secure raw material for their growing factories – CATL and BYD target a combined 110 gigawatt hours of capacity by 2020, equivalent to more than three times Tesla’s gigafactory. The opportunity to secure ingredients like cobalt is especially attractive: prices have doubled in two years and supply is concentrated in the Democratic Republic of Congo. That access could give them an edge over behemoths like Panasonic.

CATL has invested in a local recycler, while BYD says it is opening a facility in Shanghai this year. China is revving up for a recycling race. Rivals best brace for a scrap.

As global demand for lithium hits overdrive, Albemarle Corp is investing millions of dollars to engineer specialized types of the light metal for electric car batteries, part of a strategy to remain the niche market’s top producer.

The pivot comes as battery makers such as Panasonic Corp, the sole battery supplier to Tesla Inc, increasingly demand more purified versions of lithium that can help boost electricity storage and increase a battery’s charge, shaping Albemarle’s strategy, according to sources and documents reviewed by Reuters and confirmed by the company.

Once used primarily as a pharmacological treatment for bipolar disorder, lithium has become one of the world’s most in-demand commodities thanks to the rising popularity of electric vehicles powered by lithium-ion batteries.

Roughly 500,000 electric vehicles were sold globally in 2016, a figure that is expected to jump sevenfold by 2022, according to estimates from the U.S. Energy Information Administration.

Albemarle’s strategy, which includes developing a battery research center near its North Carolina headquarters, is aimed at setting it apart from its major competitors, including Chile’s SQM and China’s Tianqi Lithium Corp.

Albemarle has historically sold basic types of lithium under short-term contracts, much like rivals. Now, the company is diverging from rivals and developing dozens of lithium products that can help boost electricity storage and increase a battery’s charge.

“What we are doing is not a moonshot, but rather just good engineering,” Albemarle’s lithium unit head, Eric Norris, said at a private dinner earlier this summer attended by State Street Global Advisors, Goldman Sachs Group Inc and other top shareholders, according to two sources.

As more lithium production comes online in the Americas and Asia, concerns about oversupply are high, making a push into specialized lithium a crucial step for Albemarle.

“Lithium is much more a specialty chemical than a mined product,” said Joe Lowry, an independent lithium industry consultant. “It’s definitely not a commodity because it’s not a fungible good.”

Albemarle is now trying to use its technical know-how and clout to forge customer partnerships that it hopes guarantee profit for decades.

“If every new lithium project that’s been announced does come online, that could cause market oversupply,” said Deutsche Bank mining analyst Chris Terry. “There’s a lot of bearishness in the market and differentiation is the key to success.”

R&D

By treating the metal with various chemicals and other processing steps, lithium’s chemical structure can be rearranged to boost electricity storage and increase charge, which Albemarle hopes will make it even more indispensable to battery makers and the electric car industry, Norris told the investor dinner.

“Battery requirements are becoming more stringent and there is a definitive move toward higher energy density batteries,” Albemarle spokeswoman Hailey Cobb said.

Longer term, Albemarle is studying so-called “solid state” batteries, which contains no liquid and theoretically can store more electricity than the lithium ion battery, Norris told investors.

While solid-state batteries are not expected to replace lithium ion batteries as the industry standard, they are seen as a promising technological evolution. And importantly for Albemarle, they will consume even more lithium.

So far, Wall Street is rooting for Albemarle’s success. Seventeen of the 22 analysts that cover the stock recommend buying it. As an average, that same group thinks the stock should be trading 33 percent above current levels, according to Thomson Reuters data.

Albemarle agrees and earlier this month said it would double its stock buyback for the year to $500 million.

RELATIONSHIPS

The global lithium business is dominated by Albemarle, SQM, Tianqi and FMC Corp, which is spinning off its lithium division this fall as a stand-alone publicly traded company.

SQM has stated publicly a goal of supplanting Albemarle as the world’s biggest lithium producer by the next decade, which Albemarle says is not a concern.

“We are not interested in being the largest; we are concerned about meeting the needs of our customers and being the most profitable lithium company in the world,” said Hobb.

But some on Wall Street are spooked, with shares of Albemarle down 25 percent this year.

“Lithium has become the centerpiece for the future of the company,” said Chip Skinner, a portfolio manager with the Royce Funds, which holds Albemarle shares. “But supply and demand still matter.”

To help retain its crown, the U.S. company is moving customers toward long-term contracts of a decade or more, far longer than the three- to five-year contracts it currently signs. The contracts have an option to reset pricing every year, in contrast to SQM which favors shorter contracts and typically charges spot market prices.

Albemarle also poached former General Electric Co battery scientist Glen Merfeld this spring, and is hiring deputies for Merfeld to help oversee the new battery center.

Norris told large investors that the shift to long-term contracts, which would have a base price guaranteed, could be as long as a decade or more in some cases and secure Albemarle’s 40 percent profit margins, regardless of market forces.

“Lithium is a relationship-based business, and Albemarle is betting that brings it success in the long-run,” said Chris Berry, an independent energy metals analyst based in New York.

A year ago, when China indicated it would eventually phase out fossil fuel cars, the news boosted investor confidence in domestic electric vehicle makers, who already count on the world’s largest market. BYD, the Warren Buffett-backed electric-vehicle maker, saw one of its best performances since it listed in 2008.

That was short-lived. BYD was hit hard when China last year began tightening subsides for electric vehicles, which will be replaced by a system of credits instead. First piloted in 2010 (link in Chinese), the subsidies helped BYD pivot from being a battery maker and phone assembler to China’s biggest electric-vehicle manufacturer.

The drawdown in subsidies saw the EV maker log a nearly 20% decline in net profit in 2017. Earlier this year, the company warned that net profit for the first half of 2018 could drop more than 80% compared with last year. The company is set to announce those numbers today. (The story will update with the results.)

Starting out as a battery maker for phones in 1995, BYD only rolled out its first EV model in 2008. It appeared to have its ear to the ground—the following year China announced plans to encourage the use of electric vehicles. In a decade China went from a few thousand sales to some 770,000 last year. BYD sold 110,000 of those or about 15% of the total. (China lists these sales as NEVs, or new energy vehicles, a blanket term for fully plug-in and hybrid models, and buses as well as cars.)

BYD received 4 billion yuan ($590 million) in government grants and subsidies from 2013 to 2017, according to its financial statements.

Now China plans to completely phase out subsidies by 2020. That will include bringing an end to a sales tax exemption that offered to buyers since 2014.

Without the subsidies, higher NEV sales could actually mean more losses, said Angus Chan, a Shanghai-based analyst at Bocom International, citing the higher research and development cost of NEVs. BYD is targeting some 170,000 sales this year. “It’s a matter of if the firm can shift the costs to customers,” he said, “But it’s looking hard for BYD as many players are entering the EV market.”

The electric car market also faces new foreign competition thanks to China’s announcement this year that it will ease manufacturing rules for makers of electric cars. Tesla is already in the process of setting up a factory in China that could help reduce the cost of its cars—although in its case those gains might be offset by tariffs from the trade war with the US.

Nor can BYD rely on its fossil-fuel car sales to help. Conventional cars are still a huge market in China, with nearly 29 million (paywall) in sales last year, but sales overall have been slowing. While BYD sells more conventional cars than EVs, last year it only recorded 245,000 in regular passenger car sales (pdf, p. 12) in 2017, a big drop from the year before. For comparison, Shanghai-based state-owned SAIC Motor, the top passenger vehicle car maker, sold more than 2 million units (link in Chinese) in the same period.

What about public transport, a growing part of its business? This was also good money, with local governments able to get subsidies for electric bus purchases that could amount to half the purchase of a 2 million yuan ($300,000) bus, said Chan. In the southern tech hub of Shenzhen, where it’s headquartered, BYD supplied more than 80% of the electric buses for its all-electric fleet. But these subsidies will also go away by 2020, which is perhaps why BYD has been working hard to expand sales overseas.

Among its efforts to diversify, BYD has launched monorail projects at home and overseas since 2016, but in China construction has already run into regulatory hurdles and it will be years before its Brazil monorail impacts its earning statement. Meanwhile, BYD has recently started selling batteries to other car makers but companies are likely to be cautious working with a rival car manufacturer because battery models can provide a lot of clues to a model’s development, Chan said.

Even for phone assembly and handset components, a long-term and relatively stable business that still contributes nearly 40% of the firm’s total revenue, there are headwinds. China’s smartphone sales last year recorded their first drop (paywall) since 2009, and that’s not going to help phone hardware makers, noted Chan.

General Motors Co.’s GM -0.98% plans to ramp up electric-vehicle production in China were set back after the auto maker determined the Chinese-made batteries it intended to use failed to meet its own performance and safety standards during testing.

GM was set to enter production next month on its plug-in hybrid Buick Velite 6, a local variant of the Volt, with a pure-electric version due to follow early next year.

That launch schedule has now been postponed, with internal tests showing the battery, supplied by A123 Systems, didn’t meet GM’s own quality standards, according to a person familiar with the situation. EV batteries are complex components that can’t easily be switched, spelling lengthy delays in getting the Velite 6 into production.

A GM spokeswoman declined to comment on the situation, but said the company still intends to launch 10 EVs in China by 2020. However, that target was announced over a year ago, long before the battery supply problem arose.

A123 Systems didn’t respond to a request seeking comment. The Livonia, Mich.-based company was bought out of bankruptcy by Chinese auto-parts giant Wanxiang Group Corp. in 2013, and it operates a battery plant in the eastern city of Hangzhou to supply the China market.

Auto makers operating in China are scrambling to fulfill a Chinese government order requiring them to start building electric vehicles next year. Without a battery, GM is one of those in danger of missing Beijing’s target.

China’s timetable is “difficult to achieve” for longtime manufacturers of gasoline cars being forced to make the rapid switch to electric, said Jing Yang, an associate director at Fitch Ratings. “The situation is different company by company,” she said, with some players well set to meet the target, and others floundering.

Though seen as an EV market leader in the U.S., where it sells the Chevrolet Bolt and Volt electric cars, GM has had difficulty translating that advantage into success in China, the world’s biggest EV market.

GM originally planned to use batteries from South Korea’s LG Chem Ltd. But in 2016, China mandated that auto makers must use batteries from a list of approved suppliers, all of which are Chinese. China-owned Volvo Car Group, however, is an exception: It is allowed to use batteries using LG Chem-licensed technology in its locally built cars.

Auto makers cite the exclusion of foreign batteries as an example of Chinese government protectionism that handicaps both foreign battery firms and the auto makers they supply, while handing advantages to local rivals. Those complaints are among the factors fueling the U.S. trade actions against China.

China’s Ministry of Industry and Information Technology didn’t respond to a request for comment.

The Chinese are on course to buy more than 1 million electric vehicles this year—nearly all of them built by local auto makers. Riding the boom are fast-growing Chinese battery suppliers such as BYD Co. and Contemporary Amperex Technology Co. , now among the world’s biggest lithium-ion battery companies.

In its rush to develop battery technology, China risks shortcomings in quality and safety performance, said Thomas Barrera, president of LIB-X Consulting, a battery consultancy based in Long Beach, Calif.

“There are concerns with the quality of Chinese-manufactured cells and batteries,” he said. “Chinese cells are very attractive because they’re inexpensive, but people may not realize that these cells may not have gone through the necessary qualification testing before going to market.”

China’s EV policies have created a dilemma for foreign auto makers: they are obliged to build electric vehicles and use Chinese batteries, but they can’t compromise their global standards and use components in which they lack confidence—especially batteries, which have a history of catching fire.

While most foreign auto makers have publicly expressed confidence in their ability to meet the EV quota, few have explained in detail how they will achieve a target requiring electric vehicles to make up roughly 3%-4% of their 2019 output.

Some are making tangible progress. On Monday, Nissan Motor Co. started production of its first made-for-China electric car, while Volkswagen AG unveiled its first pure-electric car for China in April.

Ford Motor Co. —which began developing electric vehicles later than rivals such as GM—currently has one plug-in hybrid model on the market in China, and plans to launch its first pure-electric car by the end of 2019.

GM launched its first Chinese pure-electric car, the Baojun E100, last year. It has sold more than 22,000 units of the budget EV—which starts at about $6,900—despite only making it available in a handful of locations so far. However, GM, which builds roughly 4 million cars in China a year, would need to build about 100,000 E100s next year to meet the quota, assuming other models fail to come onstream.

There is a backstop for auto makers that miss the 2019 target: the regulations allow them to transfer EV credits earned in 2020, and use them to make up any 2019 shortfall. If they are still noncompliant, auto makers will then be forced to buy EV credits from rivals through a credit-trading system which the authorities have yet to articulate in detail.

Auto makers bringing electric vehicles to market early can benefit from generous subsidies, but those are due to end in 2020.

“Traditional auto makers will no doubt struggle to remix their portfolio to EVs,” said Bill Russo, the founder of Automobility, a Shanghai consultancy. And without subsidies, the struggle to build enough electric vehicles will soon become a battle to make the costly machines profitable, he said.