BREAKTHROUGH BATTERIES Powering the Era of Clean Electrification BY CHARLIE BLOCH, JAMES NEWCOMB, SAMHITA SHILEDAR, AND MADELINE TYSONROCKY MOUNTAININ STIT U TE“This years Nobel Prize in Chemistry rewards the development of lithium- ion batteries. We have gained access to a technical revolution. The laureates developed lightweight batteries of high enough potential to be useful in many applications: truly portable electronics, mobile phones, pacemakers, but also long-distance electric cars. The ability to store energy from renewable resources the sun, the windopens up for sustainable energy consumption.” Sara Snogerup Linse, Nobel committee for chemistryAuthors New York City; the San Francisco Bay Area; Washington, D.C.; and Beijing.ROCKY MOUNTAININ STIT U TETable of Contents Executive Summary . 6 Introduction .10 Batteries To 2025: Li-Ion Dominates the Market . 17 Beyond 2025: The Transformational Potential of Next-Generation Battery Technologies .30 Implications for Regulators, Policymakers, and Investors .45 Recommendations .55 Appendix A: Emerging Technology Assessment & Scenario Development .58 Appendix B: Use Case Analyses .75 Endnotes .79Executive Summary 1Executive Summary Advanced battery technologies are poised to dramatically change our lives, sooner than many market actors realize. Recent rapid improvements in lithium-ion (Li-ion) battery costs and performance, coupled with growing demand for electric vehicles (EVs) and increased renewable energy generation, have unleashed massive investments in the advanced battery technology ecosystem. These investments will push both Li-ion and new battery technologies across competitive thresholds for new applications more quickly than anticipated. This, in turn, will reduce the costs of decarbonization in key sectors and speed the global energy transition beyond the expectations of mainstream global energy models. Self-reinforcing feedback loops linking favorable public policies, additional research and development (R&D) funding, new manufacturing capacity, and subsequent learning- curve and economy-of-scale effects will lead to continued cost declines and exponential demand growth. Through 2025, advances in technology and manufacturing will keep Li-ion batteries at the forefront of electrochemical energy storage markets. Emerging innovations will improve all aspects of Li-ion battery performance, with costs projected to approach $87/kWh by 2025. 1These rapid improvements and cost declines will make battery-based applications cost competitive with both stationary and mobile applications in the near term (Exhibit ES1). For example, these changes are already contributing to cancellations of planned natural gas power generation. The need for these new natural gas plants can be offset through clean energy portfolios (CEPs) of energy storage, efficiency, renewable energy, and demand response. 2Natural gas plants that move forward are at high risk of becoming stranded assets, and as early as 2021, some existing power plants could be more expensive to continue operating than least-cost CEP alternatives, depending on gas prices. On the electric mobility front, low-cost Li-ion batteries will contribute to a rapid scale-up of demand for smaller (e.g., two- and three-wheeled) EVs in fast-growing markets like India by 2023, as upfront capital costs drop below those for internal combustion engine vehicles. A similar shift, due to capital cost competitiveness, will occur for personal and commercial EVs in the US market after 2025.Diversifying applications will create opportunities for new battery chemistries to compete with Li-ion. Solid-state batteries such as rechargeable zinc alkaline, Li-metal, and Li- sulfur will help electrify heavier mobility applications. Low-cost and long-duration batteries such as zinc-based, flow, and high- temperature technologies will be well suited to provide grid balancing in a high-renewable and EV future. High-power batteries, which are best compared on a $/kW basis, are well positioned to enable high penetration and fast charging of EVs.Total manufacturing investment, both previous and planned until 2023, represents around $150 billion dollars, or close to $20 for every person in the world. i BREAKTHROUGH BATTERIES: POWERING THE ERA OF CLEAN ELECTRIFICATION | 7 iBased on BNEF battery manufacturing capacity data. Capital cost of electric two-, three-, and four-wheelers in India is cheaper than internal combustion engines (ICEs) CEPs with batteries compete with existing gas turbines in the South, West, and Northeast of the United States. Larger-bodied electric vehicles, popular in the United States, become competitive with ICE vehicles on a capital cost basis Estimated Competitive Thresholds for Advanced Battery Technologies to Displace Incumbent Technologies Li+ ion Li-metal Li-S Zinc based Flow High Temperature )business models become competitive vh ) v Total cost per mile of four-wheel electric vehicles becomes less than internal combustion engine vehicles w Clean Energy Portfolios (CEPs) with batteries will become cheaper than new natural gas generation (CC & CT) EXHIBIT ES1 8 | ROCKY MOUNTAIN INSTITUTE But markets for advanced battery technology will not be a winner-take-all opportunity for Li-ion batteries. Despite the anticipated trajectory for Li-ion cost and performance, technology limitations and tradeoffs will likely persist. Unlike the market development pathway for solar photovoltaic (PV) technology, battery R&D and manufacturing investment continue to pursue a wide range of chemistries, configurations, and battery types with performance attributes that are better suited to specific use cases. Solid-state technology, in particular, is poised to massively disrupt the storage industry by unlocking new opportunities for cheap, safe, and high- performing batteries, including non-lithium-based chemistries.Emerging, large market opportunities for such alternative battery technologies that are at or are nearing commercial readiness will reinforce diversification of the increasing investment, regulatory, and policy support for transportation electrification and stationary energy storage. As early as 2025, and no later than 2030, RMI expects non-Li-ion battery technologies to have made significant commercialization steps through demonstration and early-stage deployments in long-duration energy storage, electrification of heavy transport (e.g., heavy freight and short-duration aviation), and battery-integrated approaches to EV fast-charging infrastructure. Battery technology ecosystem actors should think comprehensively and strategically about a near- term future in which diverse technologies support an increasingly wide range of battery applications. Capturing the massive economic opportunity underlying the shift to controls- and battery-based energy systems requires that planners, policymakers, regulators, and investors take an ecosystem approach to developing these markets. Regions that fail to develop such ecosystems will sacrifice economic gains to their global trading partners. As Li-ion battery costs and performance continue steadily improving, ecosystem actors may be tempted to assume the long-term dominance of Li-ion batteries across applications. However, market actors should consider how to capitalize on near-term economic opportunities from Li-ion without sacrificing progress or truncating opportunities for nascent applications where new technologies are better suited. Regulators and policymakers must look ahead to understand just how quickly lower-cost batteries will accelerate the transition to zero-carbon grids and open new pathways for mobility electrification. The rate of change in the battery space, measured in terms of both falling prices and diversifying performance attributes of new technologies, is outpacing the adaptive capacity of the electricity sector to integrate new solutions. Dramatically lower storage costs will disrupt conventional assumptions about optimal grid architectures and open a rapidly widening array of opportunities for delivering energy services. Utilities and their regulators must build scenarios based on forward price curves to assess the possible implications of falling prices for batteries and renewable power in order to minimize the risks of investing in assets that could soon be stranded. The synergies now emerging from the smart combination of renewable supply, storage, and demand flexibility will require new methods of planning and analysis as well as revamping traditional utility business models. In the mobility sector, alternative battery technologies will open up new market opportunities for longer-range EVs and electric heavy transport, as well as provide new options for the cost-effective build-out of DC fast- charging infrastructure. EXECUTIVE SUMMARY BREAKTHROUGH BATTERIES: POWERING THE ERA OF CLEAN ELECTRIFICATION | 9Massive investments in battery manufacturing and steady advances in technology have set in motion a seismic shift in how we will power our lives and organize energy systems as early as 2030. Over the past 10 years, a global ecosystem has emerged to provide a foundation for rapid innovation and scaling of these new technologies (Exhibit 1). This ecosystem includes: Large and Diverse Private Investments: Venture capital investments in energy storage technology companies exceeded $1.4 billion in the first half of 2019 alone and have continued to increase. 3This money flows increasingly from acquisitions as well as non-traditional sources, including venture capital funds targeting risky and early-stage technologies (e.g., Breakthrough Energy Ventures), consortia of utilities targeting later-stage commercialization (e.g., Energy Impact Partners), and a growing number of incubators and accelerators. 4 Ambitious Government Support: Government support for early-stage research and development (R&D) continues to drive new innovations. As countries and major cities set ambitious goals for electric vehicle (EV) adoption, programs to support domestic battery manufacturing have followed. 5 Strategic Alliances: A diverse array of playersvehicle OEMs, oil and gas majors, and battery manufacturersare forming strategic alliances with companies working on alternative battery technologies in efforts to gain a competitive edge. Diversifying Global Manufacturing Investment: These incentives and the anticipated exponential growth in EV adoption have led to massive investments in lithium-ion (Li-ion) battery manufacturing capacity, which is expected to more than triple to 1.3 TWh by 2023. 6More than half of this capacity is in China, but countries in Europe and other parts of Asia have announced their own investments in an effort to compete, many with new lithium battery chemistries. Introduction 1BREAKTHROUGH BATTERIES: POWERING THE ERA OF CLEAN ELECTRIFICATION | 11 Chinas state council proposed the rst set of goals for NEV production and deployment United States implements federal tax credit for EV purchases China New Energy Vehicle (NEV) subsidy expanded to private vehicles Li+ ion price (historic and projected) European Battery Alliance is launched India announces goal of 100% EV sales by 2030 Volkswagen settlement provides $2 billion for North American EV charging infrastructure The Japanese government created a new research entity: Consortium for Lithium Ion Battery Technology and Evaluation Center China venture capital EV investment exceeds $6 billion California sets goal of 5 million zero emission vehicles by 2030 France, Germany seek approval for state-backed battery cell consortium Lithium-ion battery suppliers are poised to reach at least 1,330 GWh of combined annual manufacturing capacity by 2023 Daimler and VW commit to not developing any more ICE cars India approves National Mission on Transformative Mobility and Battery Storage Cumulative Li-ion Battery Demand (Actual and Predicted) Representative Timeline of Li-ion Battery Market Development for EVs 2009 2010 2017 2018 2019 2023 Cumulative Li-ion Battery Demand (GWh) EXHIBIT 1