‘Déjà vu, all over again’ in the battery industry

Ray Kubis, long-time battery veteran and chairman of Gridtential Energy, says we need to bear in mind some of the mistakes of the past as they are bound to happen again. This is his view:

“The title quote was one of many simple classics by a special personality, Yogi Berra, who also played very good baseball for the New York Yankees for many years.

In my opinion, the phrase applies to lessons being re-learned frequently in the energy storage business over the past 20 years, often with ever bigger numbers and more serious consequences. I refer now to the two most recent examples: Samsung’s recall of phones and Aquion’s bankruptcy filing.

Without wanting to chill any enthusiasm for further energy storage innovation, let me offer an opinion to potentially reduce the risk of learning familiar and expensive lessons again in the battery industry.

  • Though lithium-based batteries have achieved impressive, higher standards in energy density over the last 25 years, their safety hazards remain very real, with huge consequences when something goes wrong in design, assembly, controls, usage, or collection and return after use.
  • Long after recalls for Sony laptops, a fleet of cars dramatically burning in New Jersey and the grounding of the magnificent new Dreamliner jet design from Boeing, there was the really expensive (>$5 billion) global recall of Samsung phones.

We have also recently seen a high profile bankruptcy (chapter 11) in the US, this time by Aquion, the maker of so-called saltwater batteries. These designs have been promoted aggressively worldwide, promising ever greener, cleaner energy storage solutions.

The company raised nearly $200 million, before announcing a stop of production and layoffs for 80% of its staff.

Behind these events are some very smart people from Carnegie Mellon in Pittsburgh, Silicon Valley and South Korea, and a lot of money and experience.

These expensive events were not by inexperienced engineers, operators, or investors.

Aquion, no less than Bill Gates following the bright folks at Kleinwort Benson, jumped in to invest in the innovative claims and plans of the bright scientists from Carnegie Mellon.

And Samsung is not a struggling start-up from an emerging country with developing management, supply chains, and controls — rather, it is one of the three largest and best producers globally of lithium based batteries.

Not many companies can rival the engineering and financial support behind its battery unit, even before explaining its capability in chip-making, electronics, or other ventures.

So, what are the two lessons being re-learned?

In the field of energy storage, do not expect (like Aquion’s strategy) to go it alone successfully and quickly (meaning under 10 years) with truly different cell design concepts (including electro-chemistry changes) with a plan to go all the way through to production, marketing, distribution and final solutions in diverse applications by yourself.

Managing cell design, safety, commercial scaling of supply chains and manufacturing for good costs, understanding complex and different applications, achieving customer confidence (to launch a vehicle or plane or other platform) – all of these factors work against timely commercial success.

There are other industry examples where disruptive new technologies have successfully gone from great design to sustaining success alone, resulting in high usage and profitable sales.

Yet in energy storage, the track record of going it alone has been really different and expensive. The following are a few examples of major “go it alone” strategies before Aquion. These technologies “worked,” yet these companies did not achieve commercial success.

  • Ovonics in the 1990s with their nickel-metal hydride (NMH) development and large new plant in Ohio
  • Sodium nickel chloride batteries in Switzerland
  • Even GE with sodium nickel, also in the US less than 10 years ago
  • Others with nickel-zinc
  • Many lithium start-ups including Ballard, A123, Sakti3, et al

Some of these, like sodium nickel and Sakti3 (solid state lithium) might yet achieve commercial success, yet the timelines are notably different than envisioned by many investors.

Why did all of these companies not mature to significant commercial success in their highly promoted efforts? Their products generally worked in the labs and also in pilot applications, or, in the case of NMH and select lithium companies, matured successfully through other already existing battery or major user companies.

And, again, these companies were led by bright scientists and managers, with a lot of money invested, so it was not lack of talent or funds.

Was it over-promising on performance? Thomas Edison had a famous, critical quote about energy storage devices:

“The storage battery is, in my opinion, a catchpenny, a sensation, a mechanism for swindling the public by stocks companies. The storage battery is one of those peculiar things that appeals to the imagination, and no more thing could be desired by stock swindlers than that very selfsame thing…. Just as soon as a man gets working on the secondary battery it brings out his latent capacity for lying.”

Though there are probably 20+ companies and claimed breakthroughs in recent years where this saying might apply, the companies above all had serious, committed, experienced people, and yet their company’s results in batteries came up short, regardless of the big opportunities in the large and growing markets for energy storage products.

A number of hurdles may explain why we keep seeing the go-it alone strategy fail:

  • Customer adoption of new energy storage technologies goes much slower than optimistic developers believe, generally because of the risks seen in the market of so many earlier claims.
  • Advanced lead batteries and now even advanced lithium batteries have reached tremendous scale in efficient supply chains, and production for each now has efficient design variations allowing them to supply across almost all of the large battery market sectors. This often only leaves niche or emerging applications for new companies with notable subsidies required to get pilot or trial sales.
  • Competing new developers may underestimate the steady technical/performance/cost improvements of lithium and advanced lead batteries. It may be ‘incremental only’ improvement, yet it is steady and cumulatively pretty impressive.

Laboratory tests for extended cycle life, done by all developers, regardless of their rigor, cannot begin to match the variation of duty or work cycles that happen in the field across different applications, or match the unintended abuse by power supplies, chargers, and consumers.

  • So ultimately, delays and economic challenges to compete profitably with advanced lead or lithium batteries wear out the patience and bank books of investors or sponsors.

Safety Issues

Turning to the safety issues with lithium-based batteries (of almost all electrode combinations and sizes of the energy packs), they continue to surprise producers and users regardless of their scale and experience.

The causes of the problems can be explained afterwards, and the fixes, or new, better solutions, are claimed or announced almost weekly. Yet, more than 15 years after the first recalls, dangerous and expensive events keep occurring and, in my opinion, will continue to happen.

It is fair to acknowledge two of the biggest users, Apple and Tesla, have had fewer problems than most, given their designs, supplier selections and controls. This could help other users by example to lower the risk and potential size of future events.

Yet further events are to be expected. And clearly, lithium-based batteries have challenged the existing battery industry to improve faster and facilitated great product advances across many applications and industries.

Yet without detailing the expensive product recalls we have seen over 15+ years as evidence of the risks, clearly the task of assuring safe products is something every airline, shipping company, and original equipment user of any battery technology is trying to better understand.

Even last month, one of the original inventors of the lithium-ion version of batteries claimed another breakthrough assuring safe future lithium-based batteries with a solid-state structure. Even Google’s chairman jumped right out to support the breakthrough. Maybe it will mature, yet across the entire supply chain of lithium batteries I expect we will continue to see periodic serious accidents, fires and recalls.

It is not just in new product launches. As products come back due to end of life or due to damage before end-of-life use, accidents are being seen more often, including injuries to people, burning trucks and warehouses, and recycling center incidents as these products make their way to landfills worldwide.

Some are claiming recycling and reuse of materials, yet I believe it will be 10 to 20 years (if then) before recycled lithium battery materials will be used again. By contrast, lead-based batteries are nearly 100% recovered with nearly all the lead finding its way back into high-quality new batteries continuously through an efficient recovery and recycling chain that is a prime example of the sustainable or circular economy advocated by the EU, and the EPA in the US.

The lesson is simply that more real problems have to be expected across the full supply chain for lithium batteries. Engineers specifying their use can mitigate the risk, as I acknowledge Apple and Tesla have done pretty well so far, but the real costs of using lithium batteries have to now include the probable returns, recalls and product liability costs of these batteries, whether paid by the battery producer, OE user, consumer or insurance companies.

Another view by some providers and users of lithium batteries is that fires will happen given the nature of lithium-based battery electro-chemistry, but their control systems should enable safe consumer exit, shutdown or other limitation on the fire risk.

I am not sure how many cars, garages, homes and warehouses will have to burn before consumers and insurance companies force safer energy solutions or even insist on a waiver of your insurance coverage. Yet I expect this will come, and clearly the Samsung experience has further dramatically conditioned regulators, airlines and consumers about the risks of lithium batteries even in the smallest of energy packs within cell phones.

Additionally, the stored energy content of some emerging applications for lithium batteries are 100 or 1,000 times the capacity of that in the cellphones that prompted the recent concerns, implying the problem when things go wrong could be that much more dramatic.

To paraphrase Winston Churchill: those who do not study history are bound to repeat it.

It is in that spirit that I add to the debate about strategy and investing in energy storage solutions. Like so many I am still cheering, hoping and investing for more promising battery advancements to help address many challenges in developed and emerging markets for our generation and those who follow.

Full Disclosure

Though many battery companies may be good investments in the growing markets for energy storage solutions, I am invested in only two companies in the battery business. They are BYD of China, which makes a lot of lithium-based batteries in addition to electric cars, buses and other products, and Gridtential Energy, which is a technology start-up licensing silicon-joule bi-polar technology, which combines treated silicon wafers with lead plates to deliver unique performing products.

Also, I serve as chairman of Gridtential Energy and as a director to EcoBat Technologies, which is the world’s largest recycler of lead batteries.