Problem: I recently came across an article in The Economist titled, “Lithium battery costs have fallen by 98% in three decades.” It was accompanied by the graph below.
For obvious reasons, I found this fascinating: what are the tangential industries that will be affected by the falling price of lithium batteries? Of course electric cars, but what other large machinery that will eventually go green could benefit from an organization built to sell specialized lithium batteries?
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Solution: Before diving into the business proposition, let’s understand the market. As written by The Economist on March 31st, 2021,
BATTERIES HAVE come a long way in 30 years. In the early 1990s the storage capacity needed to power a house for a day would have cost about $75,000. The cells themselves would have weighed 113kg (250lbs) and taken up as much space as a beer keg. Today the same amount of power can be delivered at a cost of less than $2,000, from a 40kg package roughly the size of a small backpack.
Such technological progress is crucial for decarbonising the global economy. One of the shortcomings of renewable energy sources is their inconsistency: the sun does not always shine and the wind does not always blow. Batteries can help solve this problem by storing up surplus power when supply is high, for use when it is low. A steadier supply of electricity could eliminate the need for “peakers”—generation plants powered by fossil fuels that utilities bring online only when demand rises sharply, for example on hot days when air-conditioners are cranked up. Such carbon-belching facilities, which run only for a few hours each year, are expensive to build and run, raising costs for consumers.
As a result, the battery market is huge. Grand View Research estimates that “the global battery market size was valued at USD $108.4 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 14.1% from 2020 to 2027.” This would make the market roughly $800 billion in the next 6 years. They attribute market growth to 4 primary factors:
High demand from the automotive application: namely rechargeable batteries used in non-rechargeable batteries and electric vehicles.
Growth of consumer electronics: the lithium-ion battery as a product type over the forecast period is expected to see high demand for portable electronics, including LCD displays, smartphones, tablets, and wearable devices such as fitness bands
Highly projected technological advancement: specifically enhanced efficiency, cost-effectiveness, and product innovation.
Government regulation creating norms: Such as strict emission requirements by the government authorities of developed countries, such as the United States and the United Kingdom, coupled with growing attention towards fuel efficiency,
Looking at this, I see a clear business. It wouldn’t compete in the highly saturated automotive market or consumer market, but instead would hope to enable the “battery transformations” that are expected to occur in the next decade. It’s one thing to make a great battery, but ultimately sellers must find use cases and have trusted partnerships with corporations to position these technologies for adoption. This business would aim to be the leader in middle-man battery use-case discovery and application.
Of course, the biggest competitor in the battery market today (and tomorrow) is Tesla. As described by Scott Johnson of ArtsTechnica and from photos from Tesla’s September 22, 2020 battery day,
Tesla’s “battery day” Tuesday revealed a surprising amount of information about projects the company has kept under wraps. The presentation described changes and improvements to just about every aspect of its battery packs, with big-picture implications for the claim that a $25,000 Tesla vehicle would be possible in about three years.
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But Tesla has certainly set lofty goals for battery production—increasing by a factor of more than 100 to crank out terawatt-hours of battery storage each year by 2030. That will take more than just scaling up existing processes and rush-constructing many more “gigafactories.” The significant strides the company has outlined would make reaching its goal a lot easier—provided all the dominos show up and fall on schedule.
Without a doubt, the leader in the energy fields of the future will be the battery producers. Just as miners dominated the last century, batteries and power storage and transfer leaders will conquer this one.
Monetization: Sales of service provided to battery purchasers.
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)