Vishal Sapru, Research Manager Power Supplies & Batteries, Frost & Sullivan
The US is a significant market for lithium-ion batteries for consumer, industrial and automotive applications in the North American region. The economic recession had a significant impact in the demand for lithium-ion batteries, particularly for consumer and industrial portable devices. This was witnessed by a decline in demand during the first two quarters of 2009, caused by decreasing demand for consumer electronic devices in the US.
However, signs of recovery began from the third quarter of 2009, with industrial application showing quick revival and consumer applications gaining strength. Impact of economic crisis was minimal in the demand for batteries used for military and medical application. For the automotive lithium-ion battery market in the US, the economic recession has had minimal impact on the industry advancement and growth.
The US lithium-ion battery market continues to evolve as high power and high capacity cells increase penetration into large-format applications. For large-format applications such as grid energy storage, aerospace/defense and others, competition among battery chemistries is intense. Many advanced battery and alternative energy storage solutions such as flywheel and fuel cells are vying for market adoption. However, key performance characteristics have enabled lithium-ion to make in-roads into the market, resulting in increased growth opportunities.
Growth Opportunities for Lithium-Ion Batteries
Grid/Utility Energy Storage: Although not in use today, high-power, energy-dense lithium-ion batteries are considered a viable option for future grid energy storage solutions. The US market for utility-scale lithium-ion batteries is lucrative and expected to generate significant market opportunities.
For utility applications, currently stationary lead acid batteries are the most commonly used energy storage technology in reserve power systems for switchgear and instrumentation control systems in electric utilities. These power systems offer emergency backup power to power generation plants, including fossil fuel, hydro, and nuclear power plants, as well as switching substations. Since a power outage in a utility system would result in serious complications along with heavy revenue loss both at the supplier end and the distributor end, high priority is given to maintaining continuous power supply through a backup system. This makes backup systems with efficient, reliable and maintenance-free batteries an integral part of utilities.
Grid energy storage serves as a controllable demand-side management option that can also provide premium services. These premium services include power quality for sags or surges lasting less than 5 seconds, uninterruptible power supply backup for outages lasting approximately 10 minutes, and peak demand reduction to reduce electricity bills.
Grid energy storage can optimize the electricity grid and enable wind and solar power plants to become more economical. Utilities would be able to store electricity made from renewable sources or produced during off-peak times. Then, when demand for electricity peaks, utilities draw from the reserved charge. Renewable energy sources such as wind and solar are intermittent power generators that require supplemental peaking power plants to ensure seamless operation.
Grid stabilization is a key focus area for energy storage solutions. Today‘s electric power utilities utilize conventional battery technologies for grid load leveling and spinning reserve backup applications. For larger-scale peak shaving applications, compressed air, pumped hydro and thermal energy systems are generally viewed as viable options. Current lithium-ion batteries do not offer the power output and cost levels of compressed air and pumped hydro. Additionally, lithium-ion is not proven in the field at this time in development. Therefore, a majority of lithium-ion battery manufacturers are focused on grid stabilization, backup, load leveling functions.
Energy providers require an efficient process to store and release electric power on demand. Although not in use today, high-power, energy-dense lithium-ion batteries are considered a viable option for future grid energy storage solutions. The US market for utility-scale lithium-ion batteries is lucrative and expected to generate significant market opportunities.
Telecom/ Data Comm Backup: Factors that are likely to influence the lithium-ion battery market toward increased penetration and adoption include price, increased production to cater to the growing demand in the market and technology breakthroughs to improve specific parameters that are requisites for the telecom and data com market. As an emerging niche area, lithium-ion battery usage with UPS and DC power systems is penetrating slowly.
Lithium-ion batteries for telecommunication and data communication backup applications are considered a niche market. More than 84 percent of backup systems (uninterruptible power supplies (UPS) and DC power systems) utilized stationary lead acid battery technologies. Market penetration for lithium-ion is expected to be slow until 2014 to 2015. Longer life cycle, lower maintenance and its role as a cleaner alternative serve as the main driving forces in the market for lithium-ion based telecom/data com backup systems.
Inherent characteristics such as high energy density, high rate of discharge capabilities and low self discharge make lithium-ion batteries ideal for this application segment.
Lead acid batteries have been used in telecom/data com backup for decades. Low cost, reliability, simple to operate, straightforward scalable features, easily accessible, established recycling infrastructure, battery manufacturers acts as user‘s partner (for sales, service, support, full network of solutions) are some of the key characteristics that have maintained lead acid battery usage for this application.
Factors that are likely to influence the lithium-ion battery market toward increased penetration and adoption include price, increased production to cater to the growing demand in the market and technology breakthroughs to improve specific parameters that are requisites for the telecom and data com market. As an emerging niche area, lithium-ion battery usage with UPS and DC power systems is penetrating slowly.
Several alternative technologies such as fuel cells, ultracapacitors, flywheels and other electrochemical batteries are in the process of testing and evaluation stage for utilization in telecom/data comm backup applications. Although these technologies are not fully commercialized, they offer more energy density than lithium-ion chemistry. Hence these technologies are likely to hinder growth of lithium-ion battery market when these are commercialized.
Military/ Aerospace: Strong potential for lithium-ion battery penetration as more complex, robust equipment requires energy and power-dense battery technology.
High-power, energy-dense lithium-ion batteries have started penetrating many aerospace and defense applications. This chemistry is attracting focus for several reasons including lightweight and high-energy characteristics, lower maintenance costs, and extended runtimes. Compared to other battery chemistries lithium-ion provides increased energy density, charge retention, and power without the need for scheduled cycling, prolonged priming or other costly maintenance practices. Lithium-ion offers a lower total cost of ownership for many aerospace and defense applications.
However, initial investment is still substantially high and customers in this application market remain sensitive to this additional cost. Currently a growing market area, lithium-ion battery usage with aerospace and defense applications is gaining momentum.
The chemistry is now reaching mass implementation stage and is not considered an unsafe system. For aerospace in particular, lithium-ion is reaching completion of a 15 year mission test evaluation that has enabled this user group to fully understand key safety, performance and capabilities of lithium-ion in extreme conditions.
However, Department of Defense (DoD) contracts have a feast or famine nature, and for companies receiving one-off contracts on an irregular basis, surviving in a time of tightened financial lending is difficult. The assumption that the military/aerospace market is a safe haven in terms of product sales opportunities is not incorrect for those companies that have become established battery providers to the DoD.
Off-Grid: Off-grid power system market for lithium-ion batteries is in nascent stage. Power sources currently used in these products include lead acid batteries and fuel cells.
Off-grid power products are suitable in consumer, recreational, automotive, maritime and industrial applications. In the automotive sector, off-grid power systems (termed as auxiliary power units (APU)) are used for transportation, construction, or maintaining vital infrastructure. APUs provides commercial vehicles with a rugged and dependable off-grid power source. Battery APUs generally consists of two or four battery packs for short-haul and eight battery banks for long-hauls. Battery APUs is an emerging market and provides growth potential for large-format lithium-ion batteries.
Other applications classified as off-grid power applications include maritime power, remote location power, traffic regulation, security surveillance and emergency power generators. Off-grid power system market for lithium-ion batteries is in nascent stage. Power sources currently used in these products include lead acid batteries and fuel cells. Currently a nascent market area, lithium-ion battery usage with off-grid power systems is penetrating slowly.
Remote off-grid power sources must provide the following attributes:
• Silent operation, environmentally friendly
• High power density, automatic operation
• Limited or zero initialization time, convenient remote
controlled ability, scalable for increased power requirements
Battery APUs is a lucrative market opportunity. This solution can be used for short and long-haul trucks, construction equipment, off-road transport (i.e. logging trucks) and buses. With increasing anti-idling legislation and increasing fuel costs, commercial trucks are increasingly dependent on batteries for overnight comfort (air conditioning/heat/accessory) loads. Impending environmental legislation will likely impact diesel/gas powered portable generators, providing market growth potential to replace units with battery-powered options. For several off-grid applications, reliability is a major concern as failure and/or downtime is exceedingly costly.
A lithium-ion battery is considered to be the power source for the future. These batteries offer efficient performance in consumer electronics and in industrial applications. The batteries gained strong potential for power tools market and is likely to be widely used in military, aerospace and defense applications as well. The inherent disadvantage of safety factor is the only major restraint that stops this chemistry to be used in all applications.
Within two decades of its existence, lithium-ion batteries have quickly replaced other rechargeable batteries that were well established in the market. This chemistry has huge growth potential in industrial and automotive applications. All major battery manufacturers and vehicle makers are involved in the research and development activity of making lithium-ion battery suitable to power alternative vehicles. This is likely to be achieved during the next few years, which would increase the market potential of lithium-ion batteries to remarkable extent. High price per cell and severe competition are the two challenges that needs to be resolved during the forecast period for proportional revenue and units shipment growth in this market
The US has been cultivating battery innovation and advancement for years; however Asia still remains the central of the energy storage manufacturing process. This trend could shift as advanced lithium-ion batteries are beginning to enter the market. These batteries are key to the next-generation hybrid electric, plug-in hybrid electric, and battery-electric powered vehicles as well as grid energy storage, telecom backup and aerospace/defense applications. With the much needed US Federal government support in the form of loans, grants, and tax incentives for advanced battery research and manufacturing, the US region could witness a renaissance in global battery manufacturing. One key issue regarding offshore manufacturing compared to US manufacturing revolves around the national security of supply. This issue affects the aerospace/defense and grid energy storage application markets profoundly and could create market penetration delays for lithium-ion.
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