The Cost of Everything and the Value of Nothing: How Lithium-Ion Batteries Reshaped the Automotive Industry

We call them batteries. They are both the bane and enabler of the electric vehicle. A strange paradox in personal mobility for over a century.

The term "battery" derives from Benjamin Franklin's experiments with capacitors actually - Leyden Jars - that he could use in series to achieve impressive voltages and shocking results. This series of jars reminded him of "batteries" of canon used in the military.

More properly, the voltaic cell chemically produces a difference in potential between the anode and cathode and when connected to a circuit, will induce a flow of current.

The electric motor dates back to 1837 and by the time of the development of automobiles in the 1880/1890's, was really fairly mature and much simpler to construct, operate, and maintain than any steam engine, diesel, or gasoline motor. The problem was of course the batteries.

A case can be made that Henry Ford actually preferred the electric car and history might have been very very different. In fact, he built several electric prototypes and was such an acolyte of Thomas Edison that he built an identical house next to Edison's in Fort Myers Florida.

They were close friends virtually their entire lives and Edison had rather promised Ford he would make a battery suitable for an electric vehicle. But this development process stretched to many years before the Edison Nickel Iron cell was perfected and Ford in the interim had introduced the MOdel T Ford at a price so low it launched what had been a diversion of the very wealthy into a national passion - the automobile.

All for want of a nail. Actually for want of a battery.

The market share for electric cars peeked in the early teens and electric vehicles retreated into the background, lingering for awhile as commercial delivery vehicles, a niche electric car proponents today still point to as a possible area of promise.

In 1906, an electric car used about 250 Wh per mile and a kWh of electricity was about 20 cents. A gasoline car got about 20 miles per gallon and cost 15-20 cents.

And so to travel 20 miles, a driver faced about 20 cents of expense via gasoline or about $1 in electricity. Basically gasoline was 1/5 the cost of electricity in personal transportation. And it was sold in most stores.

Electricity was almost entirely limited in availability to the downtown area of the larger urban cities.

In 2011 dollars, that 20 cents for a gallon of gasoline is equivalent of $4.97 and we actually pay LESS in real terms for gasoline today than we did 107 years ago. We still get slightly over 20 miles to the gallon.

Electric cars too still get about 4 miles to the killowatt hour. But electricity has dropped in price by several orders of magnitude, to 11.75 cents per kWh. That would be less than a half penny in 1906 dollars. Further, the U.S. electrical grid has grown to encompass every office, factory, home, garage, chicken coop, and out house in the land.

But the lead acid battery changed very little in that time. Lead acid batteries contain not only lead, but lead oxide as well. Lead oxide is one of the most thoroughly documented and thoroughly effective poisons known to man. It effects every organ in the body but none so much as the nervous system and brain. It mimics necessary minerals such as copper and zinc and so the human body readily absorbs it but to heartbreaking effect. Particularly in children. We think little of it because of familiarity but it is truly one of the most toxic substances in the universe.

It also made every attempt at electric transportation a bit of a nightmare. For two reasons. Pb cells are very very heavy. And Pb cells have a very limited cycle life. Typically 300-350 cycles in cells of the very best construction.

And so efforts at electric vehicle renaisance over the past century has been limited to prototypes and science projects. Yes, you could build a car that would move with an electric motor. But ranges beyond 40 or 50 miles were impractical and the range began decreasing with the first recharge, becoming ineffective in 2 or 3 years. And the vehicle was always ponderous from the weight.

Late in the century, there were some incremental advances with Nickel Cadmium cells and Nickle Metal Hydride cells. These batteries had marginally better energy to weight ratios but more importantly, longer cycle life expectations. And so interest in electric drive picked up.

To my way of thinking, it was the lithium ion battery that made electric vehicles viable for the first time. Lithium ion batteries rely on an entirely different chemistry to shuttle charges and store energy. They rely on the intercalation of positively charged lithium ions in a negative anode crystalline structure of carbon to store energy. These ions shuttle back and forth between the cathode (when discharging) and the anode (when charging) to effect the storage of electric energy in a chemical format. As such, they represent a bit of a miracle to me.

They have none of the stability problems and memory effects of the Nickel Metal Hydride or Nickel Cadmium cells and none of the toxicity or weight of lead based chemistries. Better, there is little to "wear out" or consume in this repetitive shuttling action and so cycle life is actually not really very well defined. Certainly 2000-3000 cycles before capacity diminishes to 80% of the original capacity is the norm in the case of Lithium Iron Phosphate cells.

The earliest lithium ionic cells used a Lithium Cobalt Oxide cathode and a carbon anode. These cells still offer the highest energy density but Cobalt is expensive, somewhat rare, a bit toxic, and cobalt oxide releases free oxygen at relatively low temperatures of around 130C. At that temperature it becomes exothermic and will burn to a very hot fire using its own oxygen. LiFePo4 cells, because the phosphorous more tightly binds the oxygen, reaches this point at a much higher temperature beginning around 250C.

But the lithium ionic battery, quite beyond enabling smaller cell phones, laptops with longer operating times, and other small appliances, takes the electric vehicle to a dimension it simply had not enjoyed before - viability..

It could be easily designed into vehicles with ranges of 80 to 100 miles in a world where the national average daily drive is 39.4 miles. The weight of the battery pack to do so - typically 400-600 lbs, was a load the vehicles could carry without particularly extreme alterations in suspension or geometry and still handled more or less like a car. Perhaps most importantly, the cells would last long enough to make it out of the category of consumable items and into the category of the capital cost of the car. The national average

lifespan from showroom floor to salvage yard of cars in the United States is 9.6 years and the lithium batteries promised an 8 to 10 year life to 80% of capacity.

Dawning awareness of these advantages has caused a near panic - a scramble to see who will profit from the coming age of lithium. This has pervaded not just individuals, or corporations, but indeed governments world wide, with both the Chinese and United States governments spewing money into supporting companies developing products for which there technically is no yet demonstrable market for their output. This has distorted everything about lithium ion cells to such a degree that NO one can tell what is going on or how it will develop.

In the U.S., both EnerDel and A123, whose bankrupt shell filed this week to have it's name changed to B456, received HUNDREDS of MILLIONS of dollars from the United States government to develop production lines and jobs for a product they could never demonstrate any economic need for. Indeed, A123 invested $30 million in Fisker Automotive in exchange for Fisker adopting the A123 cells, which had been snubbed by General Motors, so they could claim an OEM customer. In the end, this very act proved the undoing of both companies.

EnerDel performed the same act on THINK, investing over $90 million in THINK in order to be the battery for THINK. After both companies received support from the U.S. government, both were sold to a Russian neighbor of the Russian prime minister for less than 10 cents on the dollar.

General Motors of course selected LG Chem as supplier of LIthium Manganese Oxide cells for the Chevy Volt. LG Chem is most noted for building a plant and hiring workers in the U.S. that have never technically made a battery.

Nissan may have topped them all with over a billion in U.S. government support to build their own battery plant in Tennessee, again Lithium Manganese Oxide as the chemistry dujour. But sales of the leaf have dwindled to a few hundred vehicles per month. This month, they allude to the fact that lowering the price, increasing the range, and introducing their new 2013 model may get them a 1900 unit month.

And so chaos reigns supreme across the battery landscape.

In the Internet, we used to talk about the twelve blind men around the elephant. The analog imagery is of course of 12 blind men arrayed around an elephant. Each feels of the elephant parts nearest to them and then argues with the other 11 about the nature of elephants using what they feel from their perspective as the guide. How the elephant feels is rather subject to where you stand. And so with batteries circa 2013.

The Chinese government wants to play too. But their efforts to encourage electric car use in China have actually not even been as effective as in the U.S. Not to be disuaded, they have sunk billions into building factories to produce cells anyway. And they actively rebate funds to companies who sell them overseas. Curiously, here in the U.S., AFTER paying shipping from China, and customs duties, we can purchase Chinese made cells at less expense than they can in China.

I have examined a reasonably broad array of Lithium cells, and in fact spent quite a bit of time and effort on A123 cells from B456, after they became available from China. But these are again LiFePo4 based cells, as are virtually all of the Chinese prismatic cells. So my part of the elephant looks a lot like LiFePo4 cells, and tends to have instructions in CHinglish.

Among the electric vehicle enthusiasts, instead of "someday - Jerusalem" the cry has been "someday - less expensive cells." Broadly, I think that can happen. As more electric and hybrid cars are produced and sold, the proven market for batteries will slowly grow as well, perhaps attracting individuals and companies to actually risk in developing better chemistries and production processes.

But for the near term, the market is so distorted by false projections, wishful thinking, and government investment, that I fear all that will be delayed by a great wash out in batteryville.

I regularly hear from viewers just waiting for the price of cells to fall, and a constantly whine from the broader DIY crowd that somehow these cells SHOULD be less expensive, and someone, probably the Chinese is artificially holding the price in the air in some act of gravity defiance designed to deprive us of our cells.

It would not appear so. In fact, my main fear at the moment is that our current supply of ARTIFICIALLY CHEAP cells will dry up at a critical time in the development of the electric vehicle.

I've also come to the conclusion that our "cheap Chinese cells" that only DIY and homebrew car builders would settle for, may indeed be QUITE beyond the cells used by Boeing, General Motors, Tesla, et al. MUCH safer. MUCH longer lasting. MUCH more appropriate to vehicle use. And indeed my own bias and crusade against Battery Management Systems may be fueled by the fact that you can get away without it with LiFePo4 cells and perhaps you really DO need one with the more finicky and unstable LiCoO2 chemistry for example.

What if, in an ironic accident of history, WE the great unwashed have better cells at lower prices than anyone else on the planet?

I recently had a conversation with Sinopoly Battery Company Ltd. Our first cells, were purchased from a company in Arizona called Elite Power Systems and they sold a yellow battery they called Thundersky. The head of Thundersky called himself Winston Chung, kind of a westernized Chinese version of the name Chung Hin Kuah. We had good experiences with the Thundersky cells and others did as well and soon Thundersky was the cell for DIY electric vehicles. To expand, Mr. Chung entered into some agreements with some Chinese financiers and the company became publicly traded on the Hong Kong exchange. Within months the financial group and CHung fell out, Chung resigned, sold his stock in the company, and formed a new company Winston Battery Company. Thundersky almost immediately changed THEIR name to Sinopoly Battery Company Ltd and indeed changed the color of the case on their cells, which otherwise appear unchanged. A legal battle ensued that continues to this day. But as of last week I'm informed by Sinopoly and this appears to be confirmed by e-mail from one of the administrative assistants within Winston Battery, WInston CHung has been declared bankrupt in a CHinese court. And while various other aspects of the legal battle will undoubtedly go on for another year or even two, it would appear that Sinopoly has emerged still in the battery business.

Sinopoly is of course publicly traded in Hong Kong, and similarly to the U.S. Securities and Exchange Commission rules, they have to disclose certain information publicly as well.

A couple of things jump out right away. First the company is expanding production facilities at a bizarre rate. They have expanded their Jilin battery production base and built an entirely new one called the Tianjin battery production base with a by the end of this year goal of producing 250 MILLION ampere hours of battery cells per year.

This is very odd given that their entire sales of cells for the year ending September 30 2012 was some 27,657,000 RMB - about $4.5 million in U.S. dollars and certainly less than 4.5 million ampere hours. Where are these future sales coming from?

And worse, they netted about 2,577,000 RMB or $415,000 USD on the sales - a scant 9.45% profit margin on the sale of cells.

They appear to have 1154 employees or thereabouts and actually lost some $113 million RMB, 10.27 RMB per share. Their largest shareholder and CEO is Mr. Miao Zhenguo.

I would suggest we get the idled LG Chem workers in Michigan to invite the apparently also not very busy workers from Jilin and Tainjin to a series of international bridge and pinochle matches to determine just once and for all who the most capable battery workers in the world really are....

Meanwhile our OEMs are scouring the land actively LOOKING for any source of lithium battery at less than $600 per kWh while I'm sending out a couple of pallets a day at $450 per kWh. Of course they have to have BMS to handle their Lithium Manganese Spinel pouch cells and Panasonic camera batteries, and all we have is things that look like grey bricks and don't need all that. Our main concern is that the BOLTS not back out.

And os it is in batteryville. Twelve blind men. One elephant. And all the feeling and prodding is making the elephant uncomfortable. She's afraid the National Highway Transportation Administration will require her to make noises to avoid injuring the blind guys. Both governments spraying shredded currency in all directions. And all our viewers whining furiously that batteries should be cheaper and maybe next year they WILL be cheaper.

It's a madhouse around here.

For myself, I'm grateful for the peculiarly robust nature of the new CA series of cells we are working with. ANd I desperately hope that the pending changes in shipping regulations, the very meager margins and bottom line losses of teh players, do not threaten the continued supply of these very excellent and by all that I can make out VERY INEXPENSIVE batteries continues. If all this goes up in smoke, we really will be down to making extremely expensive electric cars from extremely expensive and short lived camera batteries bought on eBay.

Everything is relative. Yes, $10,000 is too much for batteries for electric cars. But wishing and whining won't drop the price at all. The underlying fundamentals would appear to imply that we are stealing battery cells for the moment and the only reason we get away with it is that none of us are doing it in very large amounts for the moment.

The cost of everything. The value of nothing...

Each day, I mount my little Cadillac Escalade and turn the key and drive away. No gasoline. No fumes. No noise. I never do get over it.

Jack Rickard