The Great, Fake Lithium Supply Scare

“But there’s not enough lithium for all those batteries- and now you’ll switch dependency to a few lithium supplier countries!” That is the claim less informed journalists and hacks often make when they need a counter point to balance their first article on the emerging, electrified transportation sector. Why do we care? Because if true would significantly affect the battery, transportation, grid storage and electronic appliance sectors. Let’s try a fact check:

1) Claim: Dependency on 2-3 countries for lithium (similar to oil dependency)
Fact: False. This table from the USGS best answers this claim:

Country	Reserves (000’s ton Li)	Reserves Base(000’s ton Li)
Argentina	2,000	2,000
Australia	170	220
Bolivia	NA	5,400
Brazil	190	910
Canada	180	360
Chile	3,000	3,000
China	540	1,100
Portugal	NA	NA
USA	38	410
Zimbabwe	23	27

Plus, ore deposits in these plus other countries bring the total to over 17.1 million tons of reserves.

2) Claim: Lithium is the sole material these sectors must have to advance.
Fact: Yes and no. Shorter term most known batteries for next gen autos and electronics will use lithium (bar the also popular nickel metal hydrides.) Longer term- let us not ignore 15 start ups that are readying ultracapacitor break throughs, 27 manufacturers and 29 other companies that have recently developed ultracapacitor technologies plus 52 research institutions working on advancing ultracapacitor technology. We do concede however that lithium will play by far the largest role for at least the next 15 years.

3) Claim: All of the suppliers in the world won’t be able to keep pace with demand & thus prices will skyrocket.
Fact: There are an estimated 17.1 million tons of contained Li in reserves worldwide. In 2008, total global demand was 100,000 tons and of course projected to grow significantly. Lithium can be recycled. Do the math with your own assumptions and it appears we have a few years before supply concerns arise. One may even want to account for new, future reserves of Li to be discovered.

Additionally- advances in nanotechnology as noted here, here and here are making the current battery chemistries that do incorporate lithium much more powerful, economic and robust.

Let’s make money: 77% of lithium carbonate currently comes from 3 companies which are SQM of Chile, Germany’s Chemetall and FMC of the USA. Talison Minerals, a private Australian firm, is the largest spodumene producer and accounts for about 23% of global contained lithium. However, only 15% of this production is sold into the lithium chemical markets via Chinese lithium carbonate converters. (Special thanks to Dundee Capital Markets for the above research, “Lithium- Hype or Substance?” October, 2009. )

Conclusion: If you are bullish on the technology advancing, you likely believe the improved economics offered by advanced lithium batteries will enable stronger investments in the related sectors of grid storage, consumer electronics, military applications and of course transportation. The sky is falling claims should not play a role in any related investment decisions.

Clean Invest Poll

(Check all that apply)

Silicon and the Solar industry – a Boston Consulting Group assessment

Phillip Gerbert and Holger Rubel (both Boston Consulting Group) published an interesting review of the Solar sector and its strategic position both in the pre-2009 years and its outlook for the next decade. A research piece by JPMorgan’s Gokul Hariharan, Shoji Sato and Carrie Liu comes to their support although takes a more holistic, if not biased view.

The key observation remains: despite the phenomenal energy we could generate on the back of the sun, the costs to do so remains restrictive. Today, the authors claim, only 0.1% of the energy mix comes from solar; by 2020 it may be as ‘high’ as 2%. There is the issue of moving variables, Phillip and Holger elude to, but not explore further. Anxillary industries such as the electric vehicle and smart grid companies, may come as helpful support. Ceteris paribus, and if all parts move in the right direction, the path to solar may be faster then expected as the perceived benefits to both companies and society starts to accelerate in the eye of the beholders.

The Venture Capital industry is pumping significant amounts of capital into the solar sector (in fact, the bulk of all renewable investments goes towards solars technologies) which should reap some rewards in the next 3-7 years, subject to vintage years.

Source: The Boston Consulting Group

Focusing on the supply side constrains, the silicon spot price reached a peak at $400 whilst long-term contract deals were struck at a fraction of the price. However, whenever the economic rent is too good to be true, entrepreneurs as well as corporates enter the market and ramp up capacity. Sounds like a typical China-syndrome: becoming a market leader irrespective of the long-term implications whether the supply-demand balance is sustainable. The consequence, margins drop off and firms struggle to survive.

The McKinsey chart below shows that Chinese corporates are significantly ramping up the capabilities in the silicon supply chain. Again, the credo of ‘lets become world leader’ is an interesting one. We had a meeting with a CEO of a Chinese company who proudly presented to us that they had a achieved their goal of being #1 in their industry. He could not answer the question what vision and objectives the firm would focus on from now on. Equally he did not see the issue of now being the one to chase and he did not yet know what industry leadership abilities he had to prove. The silicon industry may walk down a similar path.

An interesting presentation on the silicon industry put together by Wacker Chemie can be found here. Wacker Chemie is one of the leading suppliers of silicon and they have a number of business units that deliver products to the solar industry.

Todays news on MEMC (dropping 17% in intra-day trading) may be a sign for significant struggles ahead. The jury is out when the solar market will take a turn. Meanwhile, we continue to think that investors struggle to extract sustainable returns of the sector. A possible route to see significant total returns may be to back leading VC players who are able to spend significant resources filtering through the many start-ups that are trying to commercialize low-cost solutions. However, patience may be key at this stage.

Path to Greener Flight – Part 1

An industry notorious for lacking the highly sought after “green badge”, commercial flight has been one of the guilty pleasures of the present required to rely on the questionable effectiveness of carbon credits to maintain face. The typical one-way transatlantic flight generates around 1.2 tonnes of carbon dioxide per passenger, the equivalent to 4,000 miles of driving in a 35 mpg car[i]. Despite this ugly figure, aviation makes up 12%[ii] of CO₂ emissions for transport and only 2-3% of the total[iii]. Pressure is building up for a greener image based on greener credentials. There is no one golden ticket to this end, but improvements can be made with a combination of new and upcoming technologies.

In a world with physical limits, the miracle of modern flight is made possible with a delicate balance of capacity vs. mass, pressure vs. friction, speed vs. structural strength, and distance vs. energy storage. If we seek a greener form of air travel, we are in effect tilting the balance in favour of new materials combining greater strength, lower friction and density, with forms of higher energy storage with less waste products (at least while airborne). This combination will result in aircraft that can carry a greater number of passengers further, faster and with fewer pollutants.

Material science has been developing at a staggering rate in the last century and is only getting faster. The most noteworthy of recent discoveries is the fabled carbon nanotube. Nothing more than a rearrangement of the fourth most common element in our universe[iv] and chemically identical to graphite and diamond, this substance can offer much to aviation. The combination of very high electrical conductivity with strength of around 100 times that of steel[v], it offers a lot in weight reduction. If the 135 miles and two tons of copper wiring in a Boeing 747 were replaced by carbon nanotube cables (nanoribbons) an 80% weight reduction could be achieved[vi].

If nanotube composites are used for the structural components, even greater weight savings can be made. Bayer MaterialScience[vii] have developed an aluminium/carbon nanotube composite with tensile strength comparable to steel at less than half the weight. This would considerably lower the 200-300 ton weight[viii] of a Boeing 747, providing huge fuel savings. In seeking to increase the current hull strength of an aircraft we need look no further than MIT. Engineers there have pioneered a process now known as nanostiching[ix]which can create materials 10 times stronger than current aerospace materials with more than one million times their original electrical conductivity, thereby mitigating much of the danger from airborne lightning strikes.

A lighter, stronger hull will definitely improve efficiency of flight. The real problem however lies with how the aircraft is powered, namely the form of propulsion and energy storage. To date only chemical forms of energy storage have a high enough energy density to sustain commercial flight. This comes at the cost of emitting huge amounts of waste gases at cruising altitudes. This is a trend that will not be broken without some impressive breakthroughs in battery technology, nuclear energy generation or wireless energy transmission.

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[i] http://www.timesonline.co.uk/tol/travel/holiday_type/green_travel/article673044.ece [ii] Stern Report Annex 7 [iii] Working Group III Report, IPCC May 2007 [iv] http://en.wikipedia.org/wiki/Carbon [v] http://en.wikipedia.org/wiki/Tensile_strength [vi] http://www.xconomy.com/boston/2008/03/26/nanocomp-wins-air-force-grant-to-make-carbon-nanotube-wiring-for-aircraft/ [vii] http://www.bayermaterialsciencenafta.com/news/index.cfm?mode=detail&id=ABE84C28-A44C-DF70-B3CC3344CC3CE224 [viii] http://en.wikipedia.org/wiki/Boeing_747-8 [ix] http://www.eurekalert.org/pub_releases/2009-03/miot-mc030409.php

FloDesign high efficiency Wind Turbine based on Jet engine technology

Adding to my colleagues post below, I thought we should show the full video relating to Flodesign. It is a novel design concept making use of jet engine design. Has Kleiner found another gem here? Agree with Brett that the design could face some challenges. Putting it on buildings et al may create some form of kinectic energy perhaps?

more about “FloDesign high efficiency Wind Turbin…“, posted with vodpod

Breaking new wind

An expert in the aeronautics industry during World War 2 probably could be forgiven if they believed that fighters such as the P-51 Mustang or an RAF Spitfire were close to being the fastest and most advanced planes technologically possible. That is, until the Luftwaffe introduced the world to the jet engine turbine system. Similarly for Wind Energy- how else can the basic 3 blade turbine be engineered to improve on cost and performance? Isn’t there only so much you can do to a technology that is relatively basic?

Well- much like the WW2 Fighter plane analogy- wind energy is now entering the jet engine age.  Welcome FloDesign Wind Turbine. The Massachusetts based start up firm has recently emerged onto the public eye with their patented technology that allegedly is 3-4 times more efficient than traditional wind turbines. See informational video here:

Traditional blades tend to push wind away and cause a complex turbulence condition- which consequently demands strict attention to the layout of any wind farm. Alternatively, the FloDesign wind turbine uses a shroud around the turbine blades to funnel wind into the turbine. See above video for best explanation and illustration.

Wind Cost Curve (cents/kWH) from NREL

The cost curve to the right shows why this technology is such a disruptive technology. Clearly advancements in wind energy are improving yet at a decreasing rate (a negative double derivative). Thus- the jump to jet engine design turbines could push wind costs in cents/kWH down much further than anticipated by most experts analyzing traditional wind. What this implies is wind energy that is competitive or cheaper than fossil fuels in many more locations than previously available.

On the business side, FloDesign recently secured $34.5MM of funding from investors led by Kleiner Perkins and joined by Technology Partners and VantagePoint Venture Partners. Additionally, Lars Andersen, former President of Vestas China, signed on as CEO. The funding is intended to begin commercial production of the turbines. IPO in 3-4 years?

Ok so what is the Achilles heel of the FloDesign? It’s ugly! (Zoning challenges) Personally I find traditional wind turbines to be beautiful- especially when you consider it is providing clean and renewable energy and replacing a fossil fuel generator. Fans of wind energy realize not every land owner shares these views and some find the light humming noise and gentle roll of the blades to be very unsightly. Well- if folks object to a beautiful, white, 3-bladed turbine- how would they ever accept essentially a jet engine hanging out by itself somewhere? Somehow I am skeptical the FloDesign turbine could dot the countryside and farming communities as well as a giant 1.5MW turbine. Perhaps the FloDesign turbine could find greater acceptance in industrial zones atop existing buildings or nearby towers. Or, maybe FloDesign will design a more aesthetically appealing cover that does not affect turbine performance.   Debates on appearance aside- the company truly has a remarkable, ground breaking technology which no doubt will help foster a giant leap forward for the wind sector.

Which way, Toyota?

If everything goes according to plan, Toyota will make hydrogen fuel cell vehicles available to private buyers within six years. The company that pioneered the hybrid, made it popular, economical and sexy- is now moving forward with fuel cell vehicles as well as a plug in version of the Prius. Is Toyota now advancing from their comfortable lead with hybrids to the next level? A closer look at comments by Toyota executives may show another story:

Koei Saga, managing officer of the Toyota Motor Corporation said in January, 2010: All-electric vehicles (EVs) are best as “very small commuter-type vehicles” and that long-range EVs are only possible “if we forget about battery life and if we forget about the cost incurred for replacement of those batteries. In my personal view, I think we will never abandon the internal-combustion engine.”

Ok, but Toyota is planning a plug in version of the popular Prius within the next few years. Plug-ins are of course a close family member of the EV.   The plug in Prius will be the first and ONLY of the Toyota family (including Lexus) to use lithium and not the less efficient, less powerful nickel metal hydride battery. While other companies in the market charge full speed ahead with lithium ion technology (Fisker, Tesla, Nissan, Volvo & more) Toyota has been very reluctant to embrace lithium ion technology expressing doubts about reliability.

But Toyota’s core competency in next generation automobiles is the traditional hybrid. And just this month Toyota announced it will increase production from 500,000 hybrids/year in 2009 to over 1,000,000 by 2011. “Toyota plans to add about 10 new hybrid models in the next few years to its existing lineup and to increase the number of sites where it can assemble hybrid models, the Nikkei said without citing sources. For the foreseeable future, the focus of Toyota’s (low-emission car) strategy will be on hybrids, not electric or fuel-cell cars, said Yoshihiko Tabei, chief analyst at Kazaka Securities, adding the production volume reported by the Nikkei was in line with his expectations.”

Now- seeing this hybrid strategy- take a look at these 2 quotes from Bill Reinert- the Toyota manager of advanced technology in the US:

1) “I think you’ll see that for the next 10 to 20 years that a hybrid … is probably about as green as you can get. I would say within 10 years, that hybrids might be at 10-per-cent market share. Plug-ins are a very small subset of that. Electric vehicles are a smaller subset of the subset.”

2) “One hundred miles covers most daily trips but not all,” he says. “How many people can afford a specialized car that can’t be used on vacation?”

Reinert is referring to the Nissan Leaf- which will be released as early as December 2010 in Japan and the US. Nissan’s director of product planning, Mark Perry, sees an ulterior motive in Reinert’s skepticism. “Our friends at Toyota have invested in hybrids,” he said “and they want to get a return on that hybrid investment.”

“Still- Reinert says EVs could experience a five-year bubble, like solar panels during President Carter’s term in the late 1970s. If budget cuts force governments to end subsidies, only a handful of EVs could be left standing in the market. Ghosn says competitors are trailing Nissan in EVs, so naturally they’re going to play down the technology’s prospects. They cannot say, ‘we’re forecasting a 10 percent market share for EVs and, by the way, we have nothing, he says.”

Is Toyota disparaging plug ins and full electric vehicles to further promote the brand that has helped the firm gain additional market share? Perhaps Toyota sees their rival Nissan attempting to leap frog the hybrid market and skip forward to full electrics. What about the Prius plug in program and the fuel cells? Are these real programs or merely demonstration projects?

The modern hybrid is a technological innovation that many consumers love. It however is not perfect and offers modest efficiency with room for improvement. The hybrid is also widely considered a “bridge” technology to the holy grail which is an efficient, economic full electric vehicle.

Driving 100 miles/charge, as the Leaf and Tesla Roadster offer, is not the best an EV will ever offer. The Tesla Model S will cost just under $50,000 and travel up to 300 miles on a charge but is also $50k and yet to be released. However while the battery issues are well known, and well discussed, most expect these to improve over time in large part to the economies of scale first created by hybrids. Perhaps Toyota is hoping this bridge technology lasts a little longer than do their competitors who are now about to pass them up in the fast lane. It’s unclear what their intentions are, but as the industry aggressively tackles EVs and Plug Ins, Toyota may want to take a clear stance beyond hybrids and show commitment.

Joule Biotechnologies

Joule Biotechnologies, based in Cambridge, Massachusetts, is a novel and more efficient technology to produce either ethanol or diesel, using the sun, recycled water and their patented photosynthetic organisms. These organisms, mixed with solar energy and CO₂, produce the desired biofuels in a game changing, highly productive manner. The firm refers to the end product as “SolarFuels”- not biofuels.

Product: Unlike existing approaches to producing renewable fuel, Joule’s process achieves a high net energy balance while avoiding the harmful depletion of arable land, fresh water or crops. This is made possible by the company’s technology which leverages solar energy and genome-engineered organisms to convert waste CO₂ directly into multiple solar fuels and chemicals. The continuous production process requires no biomass intermediates, removing resource limitations and costly processing from the equation. This process can use recycled wastewater.

Joule has successfully achieved the production of both ethanol and diesel at lab scale, with the former already reaching productivity rates exceeding 6,000 gallons/acre/year. At full-scale production, via future commercial sites, the company estimates the potential to deliver 25,000 gallons/acre/year of ethanol and 15,000 gallons/acre/year of diesel. Cellulosic ethanol typically produces 2,000 gallons/acre/year- therefore you can easily see the level of technological advancement possible!

This process avoids the depletion of precious natural resources, with no dependency on agricultural land, crops or fresh water. Joule expects to deliver ethanol and diesel at the energy equivalent of as little as $50 and $40 per barrel respectively.

Competition: Solazyme, Poet, Amyris, BP Biofuels, Coskata, Sapphire Energy, LS9 and many more.

Funding: Flagship Ventures founded and funded this company in 2007 which was under stealth mode until August 2009.

Management: William Sims, President & CEO: While his career is that of a proven leader of start up firms- much of this experience involved electronic technology plays such as Color Kinetics, Zenith, JVC and e-SIM. While at Color Kinetics he did help the firm grow 30% annually, IPO and sale to Phillips for $800MM in 2007. He does have an educational background however in Biological Sciences from Cal State Fullerton.

Recent News: Today announced the signing of a lease agreement to build its first pilot plant in Leander, Texas, where the company will further develop and test its transformative system for the production of renewable solar fuels. The plant will be operational within the first half of 2010.

Comment: As noted in the product section, Joule presents the possibility of a game changing biofuels technology that can use recycled water and improve productivity by a factor of about 10. (Much like EEStor teases people with for batteries!) We bring this firm to our readers’ attention as it is likely to garner much focus from investors and enthusiasts in the next few years while moving forward through both funding rounds and technology tests. Oh yes, and the technology needs to work economically for all of this to matter!

Energy Storage Notes

EEStor still not producing- EEStor CEO Dick Weir had mentioned that a prototype would be released in the Q4 of 2009 to their partner Zenn Motors. Because Q4 09’ has passed and no announcements have been made- well let’s assume for now another deadline was missed. EEStor fans around the world are yet again let down. The ultra capacitor from EEStor will either prove to be one of the greatest technological leaps in recent history ($250/kWh, 300 lbs. for 50 kWh), or one of the greatest corporate hoaxes. Also, check out this EEStor timeline:  EEStor Timeline

Panasonic scores the Tesla contract-Tesla which famously claims to be battery agnostic and eager to ride the technology curve forward just signed a deal with Panasonic to exclusively provide all batteries- for now. The change allows Tesla to source from just one supplier (less testing work to do) and to change chemistries to Lithium Nickel from Lithium Cobalt- a slightly superior chemistry for automotive applications. The Tesla Model S is also expected late 2011/early 2012.

Ford moving towards LGChem? LGChem may have scored a contract with the other big American manufacturer (in addition to the GM Volt contract) as a report out of Korea announced that Ford selected LG, and not its current supplier Johnson Controls Saft to supply their secondary cells (future plug in vehicles.)

Ener1 takes a small hit: Ener1 announced yesterday in an 8-k that talks with Fisker to supply the battery for the Karma are off for now, but “remain open to exploring possible future business relationships pertaining to other potential Fisker programs.”

This poses the question, despite having possibly superior battery technology, is there no room for the start ups (A123, Ener1, Valence) to become an established player in one of the largest, growing segments in CleanTech? We could speculate that one day these will become IP plays, but both A123 and Ener1 have established or are setting up manufacturing facilities. To be continued…

There's room for a baby seat in the back row!

CleanTech Investing in 2009 & 2010

356 investments in CleanTech occurred in 2009, a new high. However the dollar amount is down to $4.85B from $7.6B in 2008 over 350 deals comparatively, according to a new report from GreenTech Media. The downward trend over more deals may reflect the global capital markets as much as it does the CleanTech sector itself. Or, the optimist could point out that overall investment was nearly $5 billion in spite of the global economic crisis!

According to several VC firms spoken to on a recent trip to Silicon Valley by the staff of this blog, investors are seeking less capital intensive opportunities while seeing an influx of opportunities. Partnering with firms that have smaller capital needs, VCs may play a more significant role in their management and development, while lessening the potential for large, future capital re-investments. This trend may in part be a result of the challenge to raise capital most funds are facing as well as their preference to maintain control.

The solar sector is generally viewed as capital intensive, but despite this was the largest sector accounted for in 2009 investments with 84 deals over $1.4B. Biofuels was second, and energy storage, smart grid and automotive rounded up the top CleanTech sectors. Water now is on the radar with $130MM over 33 deals.

Things to look for in 2010:

1) Codexis IPO? Tesla Motors IPO? Solyndra IPO? (all 3 have reportedly filed)
2) Will oil price fluctuations help CleanTech?
3) Will a recovery of the capital markets occur to help encourage the flow of seed money?
4) Introduction of more electrified automobiles effect on energy storage and transportation (many new models expected this year)
5) And much more! (water, smart grid, government mandates, materials and infrastructure)

(CMEA Ventures invested in A123, and is also invested in Codexis and Solyndra- a nice, potential 3 firm IPO streak for 2009-2010!)