You currently have a battery in front of you. You probably carry a battery with you all day, every day. Soon you’ll likely be driving one around. Batteries are everywhere, and only becoming more prominent.
A battery is essentially a way of storing energy to be withdrawn later. Chemical batteries are generally what is being referred to when using the term battery (in the context of energy), and it is the chemical battery market that is being referred to in this article.
There are four main types of batteries: lead acid, lithium ion, nickel metal hydride, and nickel cadmium. You have probably heard of lithium ion batteries as this is what is used in durable consumer electronics (smart phones, laptops, smart watches etc.), and electric vehicles (EVs). However, the majority of the market share is in lead acid batteries (29.5 per cent in 2019). These are used for uninterrupted power supplies (UPS), automobiles (like car batteries), amongst other critical applications. UPS is used commonly in the healthcare, oil and gas, and chemical sectors. This article won’t discuss the various properties of these batteries but will cover their uses and markets.
The four main types of batteries applications can be broken down into three sectors: automotive batteries, industrial batteries, and portable batteries.
Automotive batteries constitute a large proportion of the market due to their use in electric vehicles (EV), as well as battery applications in non-electric vehicles. Portable batteries are most common within consumer electronics, and industrial batteries are used in UPS, industrial machinery, and also in off-grid and grid energy storage systems.
So why is the battery market interesting?
One of the main reasons is the continuing growth of the EV market. EV sales continue to increase and developed countries’ government mandates and subsidies are continuing to encourage further growth. For example, the U.K.’s Green Plan will prevent the sale of petrol/diesel-only vehicles from 2030. Similarly, the U.S. aims to have at least 50 per cent of all new passenger vehicles sold to be all-electric or hybrid by 2025. Furthermore, the growing middle-class in China is pushing sales of EVs further, with electric-car production also increasing in China.
In 2010, there were less than 20,000 electric vehicles globally – in 2019 this figure was at 7.2 million. It is still dwarfed by comparison to the overall passenger vehicle market and is still heavily reliant on government subsidies and support to boost these sales. However, as demand increases and the market grows, there will be space for technological innovations and improvements to minimise the differences between combustion vehicles and electric ones. Batteries will remain vital to this market. The U.K.’s first giga-factory is set to start production in 2023 following a £2.6 billion investment into the site. Other U.K. battery-based businesses are also seeing more investment. This was recently showcased by Zenobe, with a recent £150 million investment from M&G. Notably, these are just a couple of examples in the U.K. Investment in the market on a global scale is huge!
Additionally, renewable energy is becoming the norm; heavy investment into renewable energies globally also requires investment in energy storage technology and infrastructure relying on batteries. As renewable energy becomes cheaper than fossil fuels, growth in renewable energy and energy storage continues and so the demand for batteries will too - more battery manufacturing, lithium mining, and increasing sales will be sure to elevate the value of the industry. There are plans to scale-up solar farms and build new battery plants in the U.K. over the next few years to facilitate the increase in renewable energy production, and to decentralise the grid, (energy to be produced nearer to the energy consumers rather than produced in few locations and spread through the national grid) indicating that there is already growth and investment in this market. Furthermore, there are already existing major projects in Pacific-Asia to improve and connect residential battery energy storage and change the electric energy infrastructure of these countries to accommodate new energy technologies. From this, it’s clear that there are massive projects in the early phases of development, or that are planned, all over the globe., Whether it's governments or private companies, we are now heavily utilising batteries and battery technology, technologies at the forefront of a new, more sustainable future of energy production.
Lastly, lithium prices have been low these past few years, driving certain companies out of the market and reducing profits and growth in mining. However, now it seems the prices are stabilising from their recent lows as lithium-related equities have rallied over the last month (e.g. from Oct 30, 2020, Albermarle stock price has grown 93 per cent and Pilbara Minerals stock has grown 300 per cent vs S&P500 growing fifteen per cent) - pricing in optimism for lithium prices and the lithium production industry. This indicates the expectation for future growth and investment opportunities, and is backed by growing battery sectors such as the EV market and energy storage markets.
In terms of investing, there are opportunities at various levels within the industry. These opportunities include mining, manufacturing, and financing. It is an exciting time for this sector, and investors should be keeping a close eye on it.