The costs of Lithium, the first workhorse of vitality storage options in the present day, have dropped by over 60% up to now 18 months. Amongst many different causes, that is attributed to a drop in EV demand globally as governments throughout US and EU began moderating EV associated subsidies. There was additionally an aggressive ramp-up of capability in China in the course of the Covid interval buoyed by the robust EV uptick which has now resulted in a provide glut. To present you a way of the influence of this glut, we now see that LFP (Lithium Iron Phosphate) batteries are already commercially obtainable at sub-$100 per kWh costs. This was forecast to occur solely past 2026. At these costs, it’s attainable for EVs to have capital price parity with typical fossil gasoline based mostly automobiles which is meant to be an enormous inflection level.
On the planet of stationary vitality storage, the place Lead Acid batteries have dominated the roost for many years, Lithium based mostly batteries turn into extremely enticing substitutes with a considerably longer life and superior efficiency. Frequent sense dictates that that is concerning the worst time to put money into a brand new chemistry and that we must always quite take advantage of the continuing provide glut to drive the agenda of accelerating decarbonization in India. We might nevertheless miss the forest for the timber in doing solely that and nothing extra.
It’s a well-known reality that almost all of the world’s lively supplies, essentially the most vital elements inside a Lithium cell, are processed in China. Chinese language gamers are additionally deeply backward built-in with pursuits in Lithium, Nickel and Cobalt mines the world over. So, financially talking, we’re merely changing our petro-dollars to lithium-dollars and directing them in the direction of China as an alternative of the nations that provide oil and gasoline. There are lively investments in cell manufacturing in India propelled by the latest ACC-PLI incentives with over 50 GWh of capability deliberate over the subsequent few years. Nonetheless, so long as the lively materials processing and the backward linkages relaxation with China or different nations the outcome will probably be broadly related. This will additionally eradicate the potential for utilizing commerce boundaries even when native cell manufacturing capability is absolutely established. India might want to do an identical backward integration and arrange large capacities for lively supplies processing which can largely find yourself turning into a catch-up recreation with low odds of success.
Secondly, Lithium, identical to another metallic is a commodity which is able to undergo its personal commodity cycles. It’s a dangerous gamble to go away a vital agenda like vitality transition to the vagaries of commodity costs. We’ve had over 5 a long time and persevering with authorities intervention to insulate the financial system from an identical commodity cycle influence of oil and gasoline and it has been something however a easy experience.
Lastly, the electrification of the financial system will solely be as inexperienced as the ability sector that generates the electrical energy. Whereas there’s a variety of focus in the present day on EVs, the opposite, probably greater, drawback to resolve is the greening of the technology by renewables which requires a considerable amount of vitality storage capability to mitigate the intermittency. As an illustration, NITI Aayog has estimated annual demand of round 300 GWh of storage capability by 2030 of which about 60% would come from grid degree storage alone. There isn’t a different class, on a standalone foundation, that even comes near this requirement. That is pertinent as a result of it ought to be a vital determination parameter as we consider the particular chemistries the place we select to take a position the nation’s restricted sources.
So, in abstract, we might do nicely to proactively put money into a chemistry or set of chemistries which are fairly insulated from commodity cycles, might provide very enticing unit economics at scale, are nicely fitted to grid scale storage and don’t require aggressive vital mineral investments. There are a lot of promising candidates on the horizon and Sodium-ion is one such candidate.
Sodium-ion has virtually as lengthy a historical past of growth as Lithium-ion however didn’t take off earlier as Lithium-ion batteries have been extra compact permitting them for use in client electronics ensuing of their widespread adoption. Sodium-ion has nevertheless come a good distance from the lab over the previous few years. BYD, one of many world’s largest cell and EV producers, broke floor on a 30 GWh Sodium-ion plant in January 2024 validating its function in the way forward for vitality transition. A couple of weeks in the past, in June 2024, the world’s largest Sodium-ion grid scale storage of 100 MW / 200 MWh was commissioned in Qianjiang, positioned within the Hubei province in China.
The explanation for the sudden curiosity in Sodium-ion and why it additionally makes a variety of sense for India is that it meets most of the standards we recognized earlier. For starters, Sodium is considerable and cheaply obtainable in India which eliminates the necessity for backward integration. It additionally permits home provide chains and reduces the general price of cells. As an added benefit, Sodium cells use low price Aluminum collectors (as an alternative of the costlier Copper collectors required in Lithium) and the anode requires exhausting carbon (as an alternative of the costlier Graphite required in Lithium and in addition managed largely by China). A key disadvantage of the Sodium-ion chemistry is that it has a decrease vitality density in comparison with Lithium. Nonetheless for a lot of purposes like grid scale storage and 3W mobility, this isn’t a deterrent. Lastly, the method of Sodium-ion cell manufacturing is sort of an identical to Lithium-ion making it attainable to make use of commercially obtainable equipment and tools to scale up manufacturing.
The necessity for India to put money into establishing native manufacturing capacities is inevitable. Nonetheless, leaving that call fully to the market forces by a chemistry-agnostic PLI scheme has the peril of driving an ideal brief time period optimization and lacking the chance to construct a very self-reliant and thriving vitality storage business. The Chinese language authorities took the crucial of driving investments particularly in LFP ensuing within the dominance of that chemistry in the present day. India would do nicely to construct a viewpoint on the particular chemistry it want to wager on and take management of the narrative.
Writer: Venkat Rajaraman, Founder and CEO at Cygni Power
