The costs of Lithium, the first workhorse of vitality storage options as we speak, 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 provide you a way of the impression of this glut, we now see that LFP (Lithium Iron Phosphate) batteries are already commercially out there at sub-$100 per kWh costs. This was forecast to occur solely past 2026. At these costs, it’s potential for EVs to have capital price parity with standard fossil gas based mostly automobiles which is meant to be a large 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 engaging substitutes with a considerably longer life and superior efficiency. Widespread sense dictates that that is concerning the worst time to spend money on a brand new chemistry and that we should always moderately take advantage of the continued provide glut to drive the agenda of accelerating decarbonization in India. We might nonetheless miss the forest for the bushes in doing solely that and nothing extra.
It’s a well-known truth that almost all of the world’s lively supplies, probably the most essential parts 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 internationally. So, financially talking, we’re merely changing our petro-dollars to lithium-dollars and directing them in direction of China as a substitute of the nations that provide oil and fuel. 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 following few years. Nevertheless, so long as the lively materials processing and the backward linkages relaxation with China or different nations the consequence shall be broadly related. This may occasionally additionally get rid of the potential for utilizing commerce limitations even when native cell manufacturing capability is absolutely established. India might want to do an analogous backward integration and arrange large capacities for lively supplies processing which can largely find yourself turning into a catch-up sport with low odds of success.
Secondly, Lithium, similar to some other steel is a commodity which can undergo its personal commodity cycles. It’s a dangerous gamble to depart a essential agenda like vitality transition to the vagaries of commodity costs. We have now had over 5 many years and persevering with authorities intervention to insulate the economic system from an analogous commodity cycle impression of oil and fuel and it has been something however a clean journey.
Lastly, the electrification of the economic system will solely be as inexperienced as the ability sector that generates the electrical energy. Whereas there’s loads of focus as we speak on EVs, the opposite, doubtlessly greater, drawback to unravel is the greening of the era by renewables which requires a considerable amount of vitality storage capability to mitigate the intermittency. As an example, NITI Aayog has estimated annual demand of round 300 GWh of storage capability by 2030 of which about 60% would come from grid stage storage alone. There is no such thing as 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 essential choice parameter as we consider the precise chemistries the place we select to speculate the nation’s restricted sources.
So, in abstract, we might do effectively to proactively spend money on a chemistry or set of chemistries which are moderately insulated from commodity cycles, may provide very engaging unit economics at scale, are effectively fitted to grid scale storage and don’t require aggressive essential 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 nonetheless come a great 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 loads of sense for India is that it meets lots of the standards we recognized earlier. For starters, Sodium is ample and cheaply out there in India which eliminates the necessity for backward integration. It additionally allows home provide chains and reduces the general price of cells. As an added benefit, Sodium cells use low price Aluminum collectors (as a substitute of the dearer Copper collectors required in Lithium) and the anode requires exhausting carbon (as a substitute of the dearer Graphite required in Lithium and likewise managed largely by China). A key downside of the Sodium-ion chemistry is that it has a decrease vitality density in comparison with Lithium. Nevertheless for a lot of functions like grid scale storage and 3W mobility, this isn’t a deterrent. Lastly, the method of Sodium-ion cell manufacturing is nearly equivalent to Lithium-ion making it potential to make use of commercially out there equipment and gear to scale up manufacturing.
The necessity for India to spend money on establishing native manufacturing capacities is inevitable. Nevertheless, leaving that call fully to the market forces by a chemistry-agnostic PLI scheme has the peril of driving an amazing quick time period optimization and lacking the chance to construct a very self-reliant and thriving vitality storage trade. The Chinese language authorities took the crucial of driving investments particularly in LFP ensuing within the dominance of that chemistry as we speak. India would do effectively to construct a standpoint on the precise chemistry it wish to wager on and take management of the narrative.
Writer: Venkat Rajaraman, Founder and CEO at Cygni Power
