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Hill: All right welcome back to Energy Cents, an IHS Markit podcast focused on topics that lie on the intersection of energy and finance. This is Hill Vaden and I'm here today with Chloe Holsinger, an expert on batteries within IHS Markits climate and clean tech team. How are you Chloe?
Chloe: Hey Hill, I'm good! How are you?
Hill: I'm doing all right and you joined us from Boston today is that right? Chloe: Yep, yep!
Hill: And you have just bought a house during the peak of kind of the housing crisis? Chloe: I did luckily we got in, into the city
Chloe: So, hopefully during a lull in housing prices that now seems to be going up as people start to go back to the city
Hill: Cause everybody wants to leave the city Chloe: They used to now everywhere is crazy
Hill: So are you moving from out of the city into the city then?
Chloe: Yep, suburbs to really downtown, so walking distance to IHS Markit, which will be really nice.
Hill: That's great! I live in the city in Houston as well and so I read all the headlines about all these people leaving the city, but I think they're gonna move back.
Chloe: Yeah, I mean I love the city. I love Boston. There's so much to do downtown whether it's seeing people or hypothetically going to concerts once those start up again. Being able to walk everywhere and not have to take an Uber or worry about driving and parking you know it's gonna, it's gonna be nice.
Hill: [00:02:06] And they will be, that's what I think people you know all these people you see Manhattan is the most often in the headline maybe just because you know you look in the New York Times, but when there's no broadway, there's no basketball games, there's nothing to do it's easy to say I'm going to go out into the burbs and then all of a sudden there are those things and people are going to end back. I think the death of the city has been prematurely written. I think folks will be back.
Chloe: Absolutely! Totally!
Hill: Well we are here today...congratulations on the first time home buy. I remember, I regretted it the second I did it and probably for the first year of ownership of my first home. Congratulations! It worked out for me and I hope it works out for you.
Chloe: Thank you. I think my fiance pretty much had the exact same reaction that you did.
Hill: Yeah, I think that anytime you write a big check there's like buyer's remorse no matter what it is
Chloe: Yeah it's a bit shocking
Hill: It's unbelievably shocking; yes. Shocking is maybe an awkward segue into a discussion on batteries, punished segue. So you and I have been trading emails and conversations for the past week or so talking about you know all of what's going on today in batteries and you know as was mentioned before the call that there's a lot of a chemistry and you know my familiarity with batteries is you know I see what's going on in the headlines. I'm very familiar with the Energizer bunny and I hope that he has kind of some sort of return to prominence now the batteries are popular again. He or she, I'm not sure which gender the bunny chooses to identify themselves as but you've been working with batteries for a while having right out of graduate school. You were with like an underwater battery technology company?
Chloe: [00:04:00] Yep! Yep! I was a mechanical engineer for open water power where I built a lot of the prototype systems that were used in demonstrations that eventually led to the company's acquisition by L3 Technologies, which is a defense contractor and so we were really developing aluminum water batteries for undersea applications primarily for defense applications such as drones, buoys, sensors, those types of things. It's not really a huge market in the private sector for underwater batteries except for perhaps offshore oil and gas, but yeah, I joined there right out of grad school. I got really lucky and that it was a great combination of my two very different academic degrees in terms of marine chemistry and undergrad and mechanical engineering in grad school, so yeah very different [laughter] [overlapping conversation] [00:00:00] job I kind of fell into batteries by accident, but I've been there, been here ever since.
Hill: Now It's one of the most popular topics at IHS. I would say between batteries and solar and hydrogen, some of the green technologies and the stuff that I guess has been catching our attention recently is a lot of the coverage around coverage and enthusiasm around solid state batteries as a potential evolution from lithium ion. Can you maybe kind of set the scene a little bit of what's what, why the fascination with solid state batteries and how a solid state battery differs from what's available in the lithium isle?
Cloe: Sure, so I'll start with going backwards; start with a definition. So a solid state battery really all that means is that you take out the gel or liquid electrolyte and you know today's incumbent lithium ion batteries, that gel or liquid electrolyte is typically flammable. [00:06:00] So that's really a lot of the safety issues with today's lithium ion batteries is the electrolyte and then replacing that with some kind of solid material whether that's a polymer or ceramic, but in any solid state battery case you know that solid material is non flammable, so you are dramatically improving the safety of a lithium ion battery by switching to a solid electrolyte. Now a lot of the enthusiasm around solid state batteries has historically been centered around the ability to pair a lithium metal anode with that solid electrolyte, so today's batteries use a graphite anodes which is super cheap and really readily available and they were great, but a lithium metal anode would dramatically improve the energy density of a lithium ion battery. So by using a lithium metal anode and the solid electrolyte, you would improve both safety and energy density, which is a pretty uncommon combination of traits within the lithium ion battery technology world.
Hill: So why then, why the lithium? What prevented, what has or is preventing the solid state battery from getting to market ahead of lithium ion? Why was it lithium ion, so because it's today 95, 98% of the market right?
Chloe: Yes, and it's also important to note that solid state batteries are just another kind of lithium ion battery, so it's really just the you know, it's not even really the next evolution of lithium ion battery, because there are other different materials being commercialized that are ahead of salt state batteries, but solid state batteries are really you know a couple, couple steps beyond what today's lithium ion batteries are [00:08:00] and a lot of companies are really excited about these batteries because of those two qualities. The energy density and the safety, which can really open up some some new markets potentially, so energy density by improving that factor you in a vehicle application would have much better vehicle range so you would be able to go longer between charges for your vehicle and today a lot of people still say range anxiety is one of the key barriers for them in terms of committing to an electric vehicle. For safety you know this is one of the things that gets talked about regularly. You see some article about some battery catching fire or stationary or electric vehicles, so any improved safety is always welcome, but it's particularly important for applications like electric aviation. So, if you're in a electric helicopter for example you know you're going to really want a much safer battery that you feel confident about.
Hill: And they're lighter to, right, the solid state?
Chloe: Yes yes definitely. [overlapping conversation] [00:09:17] Hill: I'm sorry?
Chloe: That's also good for aviation.
Hill: And driving too, right? Cause I think the batteries in a Tesla or whatever today are about a third of the cars body weight, right?
Chloe: Yes! So hypothetically you could use a smaller battery to get the same kinds of ranges a smaller solid state battery to get the same kinds of ranges that you're getting today in today's Tesla or electric vehicle or whatever, but then you know that battery would certainly be lighter but you would also have a shorter range. Whereas a lot of automakers that are looking at using solid state batteries are looking to basically have the same volume of battery [00:10:00] the same volume and weight, but that particular battery would then be able to have a much longer range than today's vehicles. So it's a trade off, you aren't going to have a lighter battery and better range. You get one or the other.
Hill: And so what's the hurdle? Why such enthusiasm around solid state battery? Is it simply a matter of cost or is there some technology that is still needing to be perfected before they become more mainstream?
Chloe: Honestly, it's a lot of technology development for any new battery chemistry or battery material you need many many years of development before that material is ready for use in a commercial vehicle, so lithium metal anodes are actually a really good example of that and that some of the very first lithium ion batteries developed used lithium metal anode, so these things have been around for decades, but they have this really tricky issue of forming these branch like dendrites which can really punch through anything, including a solid electrolyte and that those dendrites can cause battery shortages and potentially fires, so that's the main reason why you don't see lithium metal anodes today even though they've been around for a really long time and a lot of the technology development over the past few years has been focused on bringing these solid electrolytes to be compatible with lithium metal anodes, really understanding how you can operate that type of battery in order to prevent dendrite formation and increasing the cycle life of these batteries. So every new battery chemistry you tested in a lab to a very small scale sell that cycle 10 cycles or something [00:12:00] 20, 50 cycles and for an electric vehicle you really need a battery that can cycle 1000 times without too much degradation.
Hill: A cycle meaning with the recharging? Each recharging is going to the performance of the battery?
Chloe: Yes, yes! In recent years it's been, there's been a lot of focus on technology development. Really we're still kind of in that phase, but a lot of technology developers are starting to transition to thinking about mass production of their cells. That's really an entirely different problem compared to technology development. Figuring out how to make a battery that can go to 800 or 1000 cycles and has excellent energy density and safety, that's great, but then being able to make that battery reliably hundreds of thousands of times is a whole different ball game and so that process of scaling up operations and production and building production lines that can handle that as well as accommodate this brand new technology, that's no small feat.
Hill: Well and so when we look in the middle, I was looking at-I think you published a report maybe two weeks ago or something on solid state batteries and your forecast has today's lithium ion battery losing market share you know in a nice curve out to 2030 as the advance lithium ion battery comes into play and starts to take a majority of market share before the solid battery comes in later. What's the difference of this advanced? Where does that fit into this equation, that this advanced lithium ion?
Chloe: Sure! So that advanced lithium ion is really a catch all phrase that we're using to include some of these silicon anodes, [00:14:00] which can be pure silicon or you know high silicon percentages or on the cathode side that would be high nickel cathodes, high manganese cathodes would fall into that-we would say that today's LFP batteries would probably fall under the definition of conventional lithium ion batteries. So those particular tags, those really refer to the chemistry itself. Now in addition to the chemistries of these batteries and how they're evolving and changing there is also quite a bit of innovation and development on cell design and packed design as well and that is really happening concurrently with a lot of this chemistry development. So even though conventional lithium ion would include LFP batteries, thinking back on those forecasts we might want to even increase that, that market share since there has been so much development on LFP battery pack structures and now these packed structures are able to achieve very competitive energy densities at the pack level to NMC and NCA batteries, which are really the more common vehicle battery chemistry right now.
Hill: Okay, is this group of players developing these technology the same where if I'm making a lithium ion battery today that I'm also working on the advance and whatever else or do you have specialists within each sector that is going to lose market share at the expense of someone else's technology?
Chloe: I would say very unhelpful answer of both. So there are some players that are pursuing a wide variety [00:16:00] of different strategies and chemistries and technologies and then there are some that are very committed to particularly one technology, so start ups for example are 100% focused on really there one technology. There one solid state battery technology. Maybe their solid electrolyte is compatible with a variety of different cathode chemistries or anode chemistries, but they are focused on their electrolyte or certain automakers, so Toyota for example is easily by far the largest patent holder of solid state battery patents in the world. It's not even close. It's Toyota and then everybody else is kind of clustered at a different end of the graph.
Hill: Are these all practical patents? Are they getting in front of technology for potential business preservation or extension in the future or these kind of quote unquote real patents that they expect to execute within the next x number of years?
Chloe: I would expect it's probably both. There is so much-Toyota could be quite a big player in the solid state battery space but there's not really too much that's known about their particular battery chemistry. They're planning on coming out with an announcement later this year and the next year as well with more details about their solid state battery chemistry, but right now Toyota is a bit of a dark horse in this race, which is very different than companies like Solid Power or Quantum Scape that publish all of this data on their battery performance. Toyota hasn't done any of that so we're really all just pretty eager to see what they're working on.
Hill: [00:18:00] Well, the other two companies you mentioned, Quantum Scape and sorry what was the other one?
Chloe: Solid Power
Hill: Solid Power. These are battery companies not car companies Right? Chloe: Yes
Hill: It's Toyota, should we be looking at someone like Toyota as a battery company?
Chloe: That's an excellent question. I think many technology analysts do view Toyota as a bit of a battery company. Toyota also has a partnership with Panasonic. Panasonic would be the one to actually manufacture those Toyota batteries.
Hill: Panasonic is also manufacturing the Tesla batteries, right? Chloe: Yes, yes
Hill: They seem to be partnered with I think what Honda, Toyota, Tesla and was Nissan the other one?
Chloe: Yes, there is Tesla is not in that particular partnership consortium but there are a group of I think 20 something Japanese companies announced a consortium to develop solid state batteries together in a collaborative manner back in 2018 I want to say and that kind of collaboration towards a shared technology goal. We haven't really seen that kind of similar partnership network in the US, but Japanese companies, European companies have also chosen the strategy for battery recycling. It can be a very effective method for making sure that you are developing a technology with the market and with production line.
Hill: Is there from a business perspective where is the IP in something like that? Is Panasonic teaching all of its partners the same things and therefore they can go out and find another partner? I mean where's the market power in a relationship like that?
Chloe: [00:20:00] I would assume it's very complex. [laughter] It's not something that I am intimately familiar with, I am much more familiar with U.S. attitudes towards intellectual property, but they are interesting strategies towards approaching some of these long-term technology ventures that take many years, if not decades to really develop and commercialize.
Hill: Well then you were mentioning the US. I think the partnership, I'll call it a wheel from your report where the US car manufacturers were kind of individually partnered on a car manufacturer to battery rather than the consortium in Japan. Are those partnerships more ring fence where whatever GM is doing with its partner Ford is not going to benefit from and vice versa?
Chloe: That's the idea and that you're going back to some of that security of IP. A lot of these automakers are trying to distinguish themselves from all the other electric vehicle car makers by having some kind of fancy cool battery technology and maybe this battery technology is going to be in luxury vehicles and maybe it's targeting 2030 as a commercialization timeline, but regardless hypothetically maybe it's exclusive to just GM or just Ford or making sure that these particular automakers can use that as a lever in getting people to choose their vehicles over other vehicles. It does though, if you're only partnered with one particular solid state battery developer then you are pretty committed to that particular technology succeeding and you don't really have a very diversified portfolio to draw from if that particular developer ends up taking longer than you expect [00:22:00] or needs more money or if they run into and somehow unsolvable technology issue you're pretty stuck with what you got.
Hill: And is the advantage then the battery rather than the car? That if you and I are partnered and you're the battery and I'm the car once you develop your battery and I start buying that battery from you, what am I? Is it just distribution that I'm bringing to that table? It's almost as if the car companies could end up as kind of boxes for other people's IP, but they're not benefiting from the proprietary nature of the actual battery technology itself.
Chloe: Yes, so I think the other important partnership here is the cell manufacturers. So, over the past few years we've seen Europe for example put billions of dollars towards supporting local cell manufacturing facilities. Norfolk alone has raised many billions of dollars from european government entities whether from the countries themselves or local governments or the european union. It takes a lot of funding to build a cell manufacturing facility and that's not something that is available as a strategy for many startups. That is a ton of capital and those skills in terms of scaling and operating those types of production lines, most technology developers would rather keep developing technologies rather than operating these giga factories and then on the other side the automakers themselves, if they have the same kinds of issues. Do they really want to operate their own cell manufacturing facilities and put all of that money towards [00:24:00] just cell manufacturing rather than all of the other different components that go in the car? Automakers are also dealing with a variety of other megatrends around vehicle ownership. There was a really good seminar during CERAWeek last month where one of our consultants talked about C.A.S.E. which is Connectivity, Autonomy, Shared Mobility and Electrification as really the main trends in the vehicle industry right now and so automakers are not only navigating electrification, but all of these other different aspects. So committing fully to just cell manufacturing, they maybe have other things to do. Tesla really wants to be a cell manufacturer, that's something they wanted to do for a long time, but there really aren't too many companies like Tesla.
Hill: And so Volkswagen seems to have and you mentioned North Fork, a slightly different approach than Tesla or Toyota. We previously mentioned it and Volkswagen I'm right, I maybe describing this poorly, but they are exclusively partnered with Quantumscape from the perspective of Quantumscape, but also working with Norfolk's who acquired Q Berg?
Chloe: Yeah, so that is a very interesting partnership diagram. I'm not entirely sure, just to clarify if Quantumscape, Volkswagen relationship is exclusive. Quantumscape might be looking for other automotive partners and Volkswagen might also be able to work with other particular technology developers, but it's really interesting because Quantumscape and Q Berg are both startups that came out of Stanford and they're both using lithium metal anodes. They have different electrolytes strategies. [00:26:00] Quantumscape is using a solid separator and a little bit of liquid electrolyte and Q berg is just using their own kind of liquid electrolyte. I'm sure they have particular additives that they use in it, but because they both use lithium metal anodes they are able to achieve very similar cell level energy densities, so it's going to be very interesting to see how Quantumscape and Q Berg really grow over these next few years. Since Norfolk will certainly be helping Q Berg accelerate their manufacturing production lines.
Hill: They totally own Q berg now, right? Chloe: Yes, that is a full on acquisition.
Hill: And Volkswagen, I think Volkswagen and Bill Gates were the two big investors in Quantumscape before the stack IPO type thing last year two years ago or something?
Chloe: Yep, particularly Volkwagon I think put a few $100 million towards Quantumscape. So the Volkswagen relationship with Quantumscape is very tight.
Hill: But Volkswagen also has exposure to this Norfolk QBerg thing, right? So I guess from the Volkswagen perspective they've got exposure to similar technologies from an end user's perspective, the end result, but it's the way that each firm, Northfolk and Quantumscape is getting there that's the difference?
Chloe: Yeah! I think it's also worth mentioning that Volkswagon had their power day about a month or so ago, basically announced that they want to use LFP and high manganese cathodes for about 80% of their fleet and then the last 20% [00:28:00] would probably be some more luxury specialty types of batteries and Quantumscape and I'm sure Q berg as well are primarily using some pretty expensive materials and it's still in my mind remains to be seen whether or not solid state batteries will be isolated in use into the luxury electric vehicle segment or if over time they'll be able to reduce their costs and move into other vehicle segments, but for sure at least in the near term or near term for cell state batteries. So around 2030 when they start to enter the market, they'll just be used for luxury electric vehicles and 2035 to 2040, who knows?
Hill: And you say luxury electric vehicles, is that intentional? I think some electric vehicles are selling down market and or maybe not as luxurious as some of the others. Should we be looking at solid state batteries in that sense, that it's going to be the high end of an electric market rather than call it the base end?
Chloe: Yeah, that's how I've been thinking about it more recently. Those base end models automakers are really interested in making sure that they provide batteries that meet all the basic needs, but costs are really king here and if solid state batteries remain pretty expensive then they'll stay isolated for use and expensive vehicles, but for an economy car, LFP might be a really good option.
Hill: So what are you, as you look at the space today, what are you watching [00:30:00] and I think we saw two or three announcements this week and then obviously I think there was an announcement this week from someone on stopping making conventional fuel cars by 2030 or something, so all the movements are in the direction of an electrified fleet. In terms of the technology and in terms of things to become more mainstream, what are the catalyst for the signpost, so we need to keep an eye out for?
Chloe: Yeah, I think going back to that range anxiety issue. I think one of the things that I'm watching most closely is how companies develop their EV Charging strategies and Volkswagon has their own regional strategies for the Americas, Europe and China and Tesla has its supercharger network, but I'm curious to see how those EV Charging strategies evolve over time. A lot of these rely on currently on offering fast charging abilities, but it's a little unclear how many people, how often people would really actually need fast charging if you're just going to be charging at work at home. Do you really need to pay extra for a 30 minute charge? Maybe; Maybe not and it can be pretty expensive to build and operate those charging networks. So I'll be curious to see how those evolve and develop, since there will be a relationship between the EV charging strategy and the battery strategy.
Hill: Do you anticipate a sort of consolidation where we were talking about Toyota as being a car company or battery company where those companies today we refer to as car companies are increasingly seen as battery companies or will each specialize in work more through the partnership angle?
Chloe: [00:32:00] I think it will probably be more of the partnerships angle. As I mentioned before there are really a lot of different mega trends and factors for car companies to be thinking about and accounting for over the next couple of decades and I don't really think that many of them will want to really dedicate all those resources towards developing a particularly new or specialized battery technology with Tesla and Toyota being the exceptions and there will be other exceptions as well.
Hill: Volkswagen, you call an exception?
Chloe: Yeah, I think I'm curious to see more of what Volkswagen talked about at its power day particularly around better recycling and its unified cell design as well as its high manganese cathodes. Volkswagen talked about so many different things at its power day that I am really interested in seeing more details on those, but there are also these various different electric vehicle startups that are looking to have their own particular batteries. Rivian advertised a solid state battery engineering position a few weeks ago. Neo has obviously a very strong battery team, so we'll see how those particular efforts pan out as well.
Hill: Well, this is maybe a good place to leave it, because I think there's a lot to watching this space and you mentioned recycling a handful of times which I think becomes a more important part of a question. If one can increase the number of charges per battery that perhaps can mitigate some of the need for recycling or if the costs have been recycling increases to the point you know that maybe that solid state battery becomes more attractive outside of the luxury vehicle or glass [00:34:00] so well I hope that you will come back and talk to us about some of these things in a future podcast, but thank you very much for joining today. Congratulations on your new home again and we'll do this again soon.
Chloe: Thanks so much Hill. It was a pleasure. Hill: Thanks Chloe
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