The Need for Alternatives to Lithium-Ion Batteries in Stationary Energy Storage

by Sidd Mallannagari

The electricity generation sector contributes 30% of US and about 25% of worldwide CO2 emissions making it a crucial target towards net zero goals. While wind and solar power are the most affordable renewable energy options, their intermittent nature creates challenges. Energy storage plays a key role in addressing this intermittency with the International Energy Agency (IEA) estimating that to meet net zero targets non-hydropower energy storage will have to increase from 87GW in 2023 to about 1200 GW in 2030. This rapid increase in energy storage is essential to manage the variability of wind and solar power. It allows excess energy produced during periods of high generation (like daytime for solar) to be stored and used during times of low generation (such as nighttime when solar isn't producing). This ability to shift energy from when it's generated to when it's needed is key to supporting the transition to renewable energy sources.

Our current reliance on lithium-ion (Li-ion) batteries to meet energy storage needs presents 3 major limitations.

Potential supply shortages.

One of the main risks is that the demand for lithium and other critical materials used in Li-ion batteries is exceeding supply and is expected to last through the next decade. According to McKinsey, the global demand for Li-ion cells will grow 6X from 2022 (~700 GWh) to 2030 (~4700 GWh). Albemarle the world's largest lithium producer is forecasting a shortage by 2030 as are other industry players and analysts. The US Department of Energy’s (DOE) critical minerals assessment has rated the supply risk of lithium, nickel, cobalt, graphite and copper, all used in Li-ion batteries as critical between 2025-2035 (see Figure 1). This supply shortage will negatively impact stationary energy storage as the needs of EVs will take precedence given the market power and market size of the automotive industry and the value premium of mobility over stationary energy storage. The lack of adequate build-out of stationary energy storage will lead to curtailing of wind and solar and continuing use of fossil fuel power plants to meet the nighttime energy demand.

(Figure 1)

Supply chain security concerns.

Beyond demand outstripping supply, the security of Li-ion supply chains also presents significant risks. The sources of supply and processing of Lithium and other critical minerals are highly concentrated according to the IEA (see Figure 2). The concentration of supply and processing for lithium and other critical minerals, coupled with geopolitical tensions, heightens the vulnerability of Li-ion supply chains, which are essential for the energy transition in key markets such as the US, Europe, and India.

(Figure 2)

Challenges for longer duration storage.

Levelized Cost of Energy (LCOE) is a widely used metric to compare the economics of energy technologies. The LCOE of utility solar in the first half of 2023 was ~$45/MWh, onshore wind was $42/MWh and Lithium-ion based batteries was $155/MWh as reported by BNEF. Li- ion batteries, though 3 times as expensive as solar or wind, are cost-effective for short durations of a few hours primarily due to two value streams unique to shorter durations below ~8 hours of storage.

The first is grid services to maintain demand-supply matching for very short time horizons ranging from a few seconds to about an hour. The second is energy arbitrage in which the energy storage system charges (buying electricity) at the low-price hours of the day and discharges (selling electricity) at the higher price hours.  This energy arbitrage is not available for longer durations and the cost of Li-ion is too expensive to be profitable beyond 8 hrs (see Figure 3). 

(Figure 3)

Increasing electrification of energy needs and deployment of intermittent solar and wind power will increase the need for longer duration storage. Analysis by the Long Duration Energy Storage (LDES) Council indicates that newer technologies being developed for longer durations would be more cost-effective than Li-ion for durations beyond 6-8 hrs.

It is a $4 trillion marketplace for LDES. This is a huge opportunity, and that's even a conservative number. If we're going to scale to this, we have a long ways to go."

- Julia Souder

The supply constraints of critical Li-ion materials, the security of the Li-ion supply chains and the lack of profitability of Li-ion-based storage for the coming longer duration needs are driving the development of alternatives.

The US Department of Energy's Long Duration Storage Shot initiative exemplifies the push for more cost-effective and secure long-duration energy storage solutions. This initiative aims to develop technologies that can store energy for 10 hours or more at a cost of $50/MWh or less by 2030. By exploring alternative chemistries, mechanical or thermal-based solutions, or combinations thereof, we can create a more secure and sustainable future for energy storage. 

Some of the solutions in various stages of development are Sodium-ion, Nickel-hydrogen and Zinc-ion based electro-chemistries, redox flow batteries, compressed air energy storage (CAES), gravity-based storage as well as hydrogen-based energy storage.

Energy storage is a key enabler of the decarbonization of the energy sector which is critical to our net zero efforts. The need for developing innovative, cost-effective energy storage solutions based on secure supply chains presents a tremendous opportunity to entrepreneurs, investors, governments and the broader climate tech community. Let's seize this opportunity.

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