In part 2 of our series on trends impacting the energy and utilities industry, Vito Labate welcomes Joe Fisher, CEO of Lithium Werks along with Perry Stoneman and Ellef Kure of Capgemini to discuss how battery technologies are changing and the short- and long-term implications for grid modernization and DERMS.
Vito Labate: (00:05)
Hello, and welcome to our podcast series on the transformation of energy and utilities companies to better serve their customers in the digital age. My name is Vito Labate. Today, we’re going to continue our series on trends that are transforming the energy and utilities industry.
Vito Labate: (00:21)
In the first trends episode, we looked at how utilities will move away from traditional procurement business models to create partner ecosystems, and we did touch on battery technologies too. Today, we’re going to continue on the topic of batteries, but specifically how they will become central to grid modernization and distributed energy resource management systems, or DERMS, as they’re known.
Vito Labate: (00:43)
To talk about this, I’m very pleased to welcome Joe Fisher, who’s the CEO of Lithium Werks; Ellef Kure, who is a principal here at Capgemini; and Perry Stoneman, who is the head of our global energy, utilities, and chemicals sector at Capgemini as well. Welcome to everyone.
Vito Labate: (00:59)
To start, Perry, let me ask you an obvious question. What role are batteries playing in grid modernization and distributed energy resource management systems?
Perry Stoneman: (01:09)
Thank you, Vito. Well, there’s a couple things that they’re going to be required to help with, but the number one is starting to balance the ever-increasing intermittent renewable energy. That energy is going to create havoc on the grids, as we did see over a year ago on South Australia Power Networks. Batteries will be able to balance that intermittent nature of renewables. In fact, the South Australia Power Network implementation was so effective the ROI is one and a half years, according to Chris Ford, the CIO down there. I had a chance to talk to him on a recent visit.
Perry Stoneman: (01:46)
But also, I think the other thing about batteries is their cost, and the gigafactories are bringing the cost down so much that it is becoming an affordable peaking plant. So with the cost coming down further, batteries will be relied on more and more not to just capture intermittent renewal energy but to help with peaking situations.
Vito Labate: (02:05)
Thanks, Perry. Ellef, I’d be curious to hear from you specifically now and your take on what, I guess, the impact this will have on utility design and engineering, if you could, please.
Ellef Kure: (02:15)
Yes, thanks, Vito. I think Perry already mentioned the peak design thing, which is very important if you introduce batteries, at least in Europe, where the grid is very costly to build out. It will be less CapEx, which is very important, but also, if you take it to the next level and introduce smart energy systems, introduce IoT and sensors and everything, and you can also take the next level of actually moving assets inside the grid, it will create a lot of opportunities for businesses.
Ellef Kure: (02:44)
I think also, from the Capgemini side, that the dataplay and tech stuff is very interesting. It is very interesting to see how Lithium Werks is positioning themselves in these areas. We’ve been working with them for a year now, and it’s a fun ride.
Vito Labate: (02:59)
Yeah, let’s talk about that a little bit more. There’s no doubt that there’s been a lot of advances in battery technology. With Lithium Werks being one of the leaders in this space, Joe, maybe I’ll turn to you to ask while it seems that the market-changing breakthroughs may still be several years off, what’s on the horizon in the near term, and more importantly, why now? It seems that we are witnessing a tipping point, but can you confirm?
Joe Fisher: (03:27)
Yes, definitely. Several developments are actually going on within the lithium battery space. While you mentioned batteries, I’m more specifically focused on lithium rechargeables. I’d just like to point out to the audience that not all lithium batteries are the same. Within a battery, there’s two electrodes. One is called an anode. The other is the cathode. Basically, a positive and negative. But the cathode material generally determines the type of technology and the different key characteristics and parameters of a lithium battery.
Joe Fisher: (04:03)
With that, there’s been quite a few different improvements and developments in the performance of the cathode materials, but it’s important to know that electrochemically, if you focus too much on one criteria, it affects the other one. Just the laws of electrochemistry.
Joe Fisher: (04:23)
Two of these key parameters are energy and power. Think of energy as being the run-time, and power is how fast you can charge it and discharge it. Another parameter that is a given is safety. Between energy, power, and safety, all these improvements within lithium batteries are really helping to force this tipping point. As Perry mentioned earlier, there’s also the rapid expansion of gigafactories. With these gigafactories, you get much more scale. You get better utilization, there’s new equipment for automation, all this, which reduces total product cost.
Joe Fisher: (05:05)
The other thing that’s impacting this tipping point is that there’s been quite a bit of advancement and growth, particularly in electric vehicles. There’s been a lot more capacity expansion of raw materials. Just like with the gigafactories where cell costs and module costs come down and you get more raw materials done in a better process, more efficient, less scrap, and more supply, the prices of raw material is coming down. So between the raw materials cost reduction as well as the gigafactories, this is really leading the lithium battery cost competitiveness to be able to create adoption.
Vito Labate: (05:49)
Enormously helpful, Joe. Very, very good description. Thank you for that.
Vito Labate: (05:53)
I guess one thing that you made me think of is there’s other terms that we’re hearing in the marketplace right now. For example, we’ve heard a lot of discussion around second life battery use. For the benefit, maybe, of our listeners, can you define what second life battery use is? How do you think it’s influencing the marketplace right now, and how will it in the future?
Joe Fisher: (06:13)
Sure. If you just think of recycling, there’s a basic premise of the recycling initiative globally, and it’s called the three Rs. The three Rs, there’s reduce, reuse, and recycle. We at Lithium Werks like to add another. The fourth one is repurpose.
Joe Fisher: (06:35)
If you think of second life batteries, the best way to describe it is the largest vertical within lithium batteries is electric cars and electric vehicles. Typically, these batteries in electric vehicles will last seven, eight, maybe 10 years if we’re fortunate. At the end of that time, then the range is not sufficient enough, so people will be requiring to go to another battery. But because there’s still 70% to 80% of active life left in those batteries, it’s creating the opportunity for what’s called in the industry second life batteries. This is where the repurposing comes in.
Joe Fisher: (07:14)
Just think of it. If you go back in time when laptop computers first came out, you used to be able to fly across country or internationally, and your laptop would work most of the way. But the more that your laptop was used and it got older, it didn’t last as long. That’s called capacity fade. Same way in the case of electric vehicle batteries. There is a fade of actual capacity within that battery.
Joe Fisher: (07:42)
So there’s the second life opportunity in market. We feel it’s a great opportunity for all lithium battery companies, and it really fits into the overall recycling plan because what you’re actually doing is reducing the amount of batteries required. You’re repurposing. It causes less recycling, but it still gives you the opportunity at the end to do the three Rs as well as that fourth R.
Joe Fisher: (08:09)
This market is just really starting to take off. I’ve read surveys. By 2025, it could be as much as 10% of the actual rechargeable battery market. That really means that there’s the opportunity for OEMs and for everybody to reduce the amount of waste, to also take advantage of the active power that’s left in these batteries. We at Lithium Werks actually are really starting initiatives on how to recollect and repurpose these. I think over the next year or two, just like the adoption of lithium batteries in DERMS, you’re going to see the same thing in second life batteries.
Vito Labate: (08:53)
That’s really helpful, Joe. Thank you. Before we leave the marketplace discussion for a second, Ellef, do you have any perspectives on how you see the marketplace being affected in the future in addition to what Joe has shared so far?
Ellef Kure: (09:05)
Yeah. If we build on Joe’s good description, if you think of the cost of an EV today, it’s probably approximately 50% is the battery. What happens in the marketplace if someone is willing to pay 40% to get the battery back after seven years? That will change a lot, and the second life battery market will more or less create itself because the batteries are reusable. It has approximately 80% of the capacity left. Then you have a solid opportunity, for instance, for the grid storage or utility owners to use those batteries since they have no restrictions in footprints for their acids or solutions.
Ellef Kure: (09:48)
So I think if you can get to the place where you know the quality of the battery, which has stopped being used and has some rules and regulations for quality measurements, then you have the second life. The second market for batteries will establish itself because it’s going to be quite big.
Vito Labate: (10:08)
We all encounter batteries in our daily life, but I guess where I’m curious now is, Joe, maybe a question for you. Lithium Werks, you’ve outlined some key areas where you see batteries being applied in the market. Maybe could you spend a moment identifying what those areas are and what you see happening in each area?
Joe Fisher: (10:27)
Okay. Sure. One area that we really see great opportunity and great for utility is in portable backup systems in areas where the grid is not always real stable or even available. That’s an area that you can take these electric vehicle batteries. There’s still 70% to 80% of the original capacity available. The key is also then to have the software and the battery management system to be able to help balance these.
Joe Fisher: (10:58)
Some people think, “Well, there’s a second battery. Is it really going to be that safe? Is it going to last long enough?” The short answer is with the proper battery management system, the answer is yes. There’s still a lot of energy left in that battery.
Joe Fisher: (11:14)
Other areas where we see the opportunity is emergency storm situations when there’s a power outage. Hurricane Sandy in the United States a couple years back was an example where hospitals and fire departments and police departments were shut down. They didn’t have power. We’re working with several groups to be able to take containers, to be able to move these containers into where there’s a potential hurricane or a storm outage. Also, even construction sites, and there’s no power to that area. You can take these containers with lots of energy and power left and with good battery management systems to really be able to help reduce the dependence on fossil fuels.
Vito Labate: (11:58)
Interesting insight there. But Perry, let me turn to you. There’s been a lot of talk and attention around sensors and artificial intelligence and the role that batteries are playing and interacting with those elements. It’s all a very hardware-based discussion, but where does software actually fit into the equation?
Perry Stoneman: (12:15)
Well, Vito, as Joe mentioned, there’s software involved in battery management, but there’s also going to be software involved in the complex grid management at the distributed energy resources. When you look at the existing grid today, there’s data systems that are software controlling the grid. In the future, you’re going to have distributed energy resource software. The data that’s coming to these centralized distributed energy resource software systems is going to come from IoT sensors and grid devices at the edge. So software will play a huge part in not just battery management but the whole complexity of renewable energy and batteries on the network.
Vito Labate: (12:53)
It’s interesting, Perry, you mention it because on our last podcast, we talked a little bit about partner ecosystems. I guess it follows, then, as traditional energy companies start partnering with storage companies, how is this going to affect the idea of supply and demand?
Perry Stoneman: (13:08)
Well, it’s going to create predictability for both the battery supplier and the utility. They’ll be able to sign up for long-term contracts [inaudible 00:13:20] predictability be a price, etc. There won’t be a scarcity of supply for that particular utility if they have a partnership with the battery manufacturer. Similarly, the battery manufacturer will be able to get funding and investments to build more gigafactories and further lower the price.
Perry Stoneman: (13:35)
So it’s going to be beneficial to both parties in many ways, but I do think it also opens the door for other parties to come in and partner with that ecosystem like financing companies because I think at some point, we’re going to see battery companies like Joe’s looking at lease options or having clients looking at lease options. It would create the conditions for a third party to feel that there’s a dependable relationship between the utility and the battery supplier to sign up contracts for financing.
Vito Labate: (14:04)
Joe, I’m interested in your perspective on this as well and how you see Lithium Werks dealing with this in the future.
Joe Fisher: (14:11)
Okay. We think of ourselves first as a cell lithium battery company. We also have moved up the food chain into battery modules, and then we’re actually doing a lot of work in the software, the battery management systems. We’re in discussions with a couple acquisition candidates. We think that it’s really key to have good, safe Lego blocks in the cells and the modules, but you also have to have the software and bring the hardware and the software altogether. So we’re totally looking at software and moving up that food chain.
Vito Labate: (14:48)
Thank you for the insights. Let’s move along as we often do to wrap up the podcast with maybe some recommendations. Perry, I’ll start with you. I guess the question is what steps should energy and utility providers take today to capitalize on those market-changing breakthroughs that we’ve been talking about and that are expected down the road?
Perry Stoneman: (15:09)
Well, Vito, I think the utility companies need to embrace the energy transition. Embrace renewable energy implementations. Increase your percentage of renewable energy, and that includes the introduction and implementation of storage systems to capture that energy and reuse it when the wind’s not blowing and the sun’s not shining. I think embracing the transformation is my number one recommendation, Vito.
Vito Labate: (15:32)
All right. Ellef, from your perspective, anything that companies should be acting on quickly here?
Ellef Kure: (15:36)
Yeah, I think we’re seeing … When talking to multiple clients in this area, I think we’re seeing that everyone is now paying more attention to what the end customer demands. You need to include this in a holistic, CSR approach. You need to think about, okay, where is the energy coming from? How do you use it? In this ‘how do you use it’ space, the batteries will be a significant player in how you’re recycling all your assets at the end.
Ellef Kure: (16:04)
Batteries will no longer be a commodity in this space. It will be a crucial part of all the business, and given all the market indications, I think all these players need to really ensure that they have enough batteries going forward because the demand is going to outrun the supply quite fast here. Long term contracts I think is the overall main advice from our side.
Vito Labate: (16:32)
Great. Joe, as our special guest on this podcast, what advice do you have for business leaders going forward?
Joe Fisher: (16:40)
Well, I would say two final comments there. One is safety. Safety is a given in this space. There’s lots of new technologies going on in lithium batteries as well as flow batteries, and I would advise the leaders of these organizations that adopt this always keep safety first on the list of requirements.
Joe Fisher: (17:03)
The second part is don’t just look at the initial cost of a solution. Sometimes, because of a better battery management system, which inherently improves the safety, a cost may be a little bit lower, but you can’t compromise on the safety. Look at the total cost.
Joe Fisher: (17:23)
With that, I would just say that the one thing with Lithium Werks technology, we currently are focused on lithium iron phosphate. That’s LFP, and if you notice that there’s no C in LFP. C is cobalt, and also a lot of other chemistries use nickel, which is a heavy metal. Sometimes, they may last a little bit longer initially, but you have to look at what the price of nickel and cobalt will be in the future. LFP, our actual trademark is power, safety, and life. If you think of power, that’s a given in this space, safety also, and life is the amount of cycles that’s available there. I would just advise people to look at the overall total cost of the solution, not just the initial.
Vito Labate: (18:17)
This has been really insightful, everyone. Thank you, Perry, Ellef, and Joe. I really appreciate your insights and recommendations on this topic.
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