How lithium-ion battery dominates the electrochemical ESS market?

As of the end of 2022, lithium-ion battery accounts for 90% of the Chinese electrochemical ESS market, light years ahead of other secondary batteries. The following paragraphs compare the performance and commercialization of three of the most popular ESS batteries: lithium-ion batteries, Pb-acid batteries, and flow batteries to explain the dominance of lithium-ion batteries. 


 

Battery performance

Table 1: Performance comparison of secondary batteries

As Table 1 shows, lithium-ion battery performs better than both Pb-acid and flow battery in terms of working voltage, energy density, and energy efficiency. They also have a longer lifespan and a more diverse energy storage application scenario. For example, the low energy density of Pb-acid battery is less suitable for power-type ESS, which deals with high voltage within a short period of time, and the large size of flow batteries takes up too much space when building ESS with a larger capacity. Therefore, lithium-ion battery is a better option for energy storage.

Furthermore, ESS are mostly integrated with renewable energy generation facilities. However, the lead in Pb-acid batteries is a heavy metal hazardous to the environment and the human body if not handled properly, contradicting the original intention of promoting renewables. Despite being cheaper, higher self-discharge rate, low charge/discharge efficiency, and a shorter lifespan limited the prevalence of Pb-acid battery. Flow battery, on the other hand, is not as widely used in ESS as LFP battery. The following paragraph will elaborate on this. 
 

Level of commercialization

As soon as the advent of lithium-ion batteries, manufacturers from China, the U.S., Japan, South Korea, and Europe spotted the business opportunity and scrambled to file patents. As a result, the number of patent applications started to surge in 2006. However, given the economic landscape in Japan and South Korea, as well as the limited demand and patent restrictions in Europe and the U.S., most manufacturers chose to invest in China. In 2011, China waived patents on lithium-ion batteries, forgoing royalties of LFP batteries made and sold locally, significantly boosting the growth of the LFP battery industry in China. In 2015, the country accounted for half of the global consumer lithium-ion battery market, with many manufacturers applying their products to electric vehicles. As of 2022, China's LFP batteries and cathode materials took up nearly 100% of the global market. Mass production and incessant technological advancements allow production costs to decrease every year, strengthening China's competitive edge in the industry.

Even with more charge/discharge cycles and longer lifespans, flow battery is still in the early stage of technological development and commercialization. Therefore, the initial investment cost of ESS based on flow battery is higher than the other two batteries. At present, the most commercialized flow battery is vanadium redox. However, its initial investment cost is 1.5 times as much as that of lithium-ion battery due to the high price of vanadium and the incompleteness of the industrial chain.  Given that, most companies opt for the less expensive lithium-ion battery. Currently, there are many overseas companies investing, developing, and expanding the flow battery industry chain to expand the application of flow batteries. However, the structure of the flow battery industry chain is more extensive and complex than that of lithium-ion battery. Transitioning from one to another could take years for all sectors, such as upstream raw materials, BOM, and electrolytes. Once manufacturers establish the industrial chain, flow battery will earn their place in energy storage businesses with their unique nature and battery performance.

The development of energy storage coincides with the maturity of the lithium-ion battery, making it the most widely used battery in ESS. The flow battery, in contrast, is commercialized at a later time and is still tackling the challenge of large installation space and high costs, resulting in less extensive applications in ESS.
 

Will lithium-ion batteries continue to be popular?

The lithium-ion battery will remain the mainstream product over the coming few years with a cost advantage due to mass production, its performance edge, and early commercialization. Yet, the surge of lithium salt prices in 2022 has brought the commercialization of other batteries with potential to the table. Presently, the average energy storage duration is two to four hours, and the market is striving for more. Harder measures mandating the installations of long-duration ESS will boost demand and accelerate the development of a more mature flow battery supply chain. Nonetheless, non-lithium-ion batteries are still at an early stage of development and commercialization. InfoLink believes that the lithium-ion battery will remain the mainstream technology in the ESS market in the near future, especially with the recent price decline of lithium salts.

As for LFP and NCA/NCM batteries, they each have their advantages and are not entirely in competition. The LFP battery is low-cost, safe, price competitive, and is mostly used in peak shaving. The NCA/NCM battery, in comparison, has higher energy density, and longer run time, and is, therefore, higher in cost, thus suitable for power type ESS that provides emergency response. InfoLink expects ESS based on NCA/NCM battery to achieve lower LCOS than that based on LFP battery, provided that NCA/NCM battery make technological breakthroughs in the future. However, due to their different characteristics, the application of the two will only be more diverged in the future.