C&B Notes

Collapsing Costs in Battery Manufacturing

The lack of advancement in battery technology continues to limit progress in other dependent fields.  A MIT-born start-up is trying to reinvent the lithium-ion battery through manufacturing-driven innovations.

There may be a way to revolutionize batteries, he says, but right now it is not in the laboratory.  Instead, it’s on the factory floor.  Ingenious manufacturing, rather than an ingenious leap in battery chemistry, might usher in the new electric age.  When it starts commercial sales in about two years, Chiang says, his company will slash the cost of an entry-level battery plant 10-fold, as well as cut around 30% off the price of the batteries themselves.  That’s thanks to a new manufacturing process along with a powerful new cell that adds energy while stripping away cost.  Together, he says, they will allow lithium-ion batteries to begin to compete with fossil fuels.  But Chiang’s concept is also about something more than just cheaper, greener power.  It’s a model for a new kind of innovation, one that focuses not on new scientific invention, but on new ways of manufacturing.  For countries like the U.S. that have lost industries to Asia, this opens the possibility of reinventing the techniques of manufacture.  Those that take this path could own that intellectual property — and thus the next manufacturing future.

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Manufacturers are secretive, but analysts say a lithium-ion battery pack costs an average of roughly $500 per kilowatt-hour, a measure of the energy a battery can store.  That’s four times the price needed to compete directly with gasoline.  Only about 30% of that $500 is the cost of materials.  The largest portion, 40%, goes to manufacturing.

Battery factories themselves are typically cavernous buildings the size of aircraft hangars.  They contain assembly-line machines dozens of yards in length, often stacked one atop the other.  The cost for an entry-level plant is more than $100 million.  In Midland, Michigan, XALT runs one of the most efficient and modern lithium-ion plants in the US. But, built with $300 million in federal and state grants and credits, it is also sprawling — just under a quarter of its 400,000-square-foot (37,000 sq m) facility is devoted to the equipment, a space the size of six soccer fields.  Tesla is embarked on the mother of battery plant buildouts, a $5 billion lithium-ion factory in Nevada.

Such costs not only make batteries expensive.  They also stifle innovation. Who, even with a promising new idea for a better battery chemistry, can build or borrow a $100 million plant to try it out? Chiang’s goal is to bring production costs down below $100 a kilowatt-hour.  That would allow startup plants to be built for much, much less, unleashing innovation.  And it would also create a genuine contest with gasoline.

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Chiang and Wilder are about to embark on a third round of investment, seeking $20 million to $30 million.  They would spend the money to scale up to production of a new machine that makes a cell every two to ten seconds.  This machine, to be available for sale in two years, would be for stationary electric batteries — used to power businesses, neighborhoods and utilities, rather than cars.  The machine would have a capacity of 79 megawatt-hours a year and produce any kind of lithium-ion battery for a cost of about $160 per kilowatt-hour.  By 2020, Chiang says, that will be down to about $85, 30% below where conventional lithium-ion batteries — whose cost is also dropping — may be by then.  But most importantly, the machine would be priced at about $11 million.  Hence, the startup cost of getting into lithium-ion battery manufacturing would plummet.  “It’s so far out of the paradigm, you just don’t believe it,” said Wilder.

If 24M creates this machine, and if it can sell it into the market — an entirely different question — it will clearly shake up big industries, including stationary and electric car batteries, not to mention utilities.  How quickly is anyone’s guess.