Gates, Bezos bet on flow battery technology, a potential rival to big bets on lithium-ion

By Tom Connor for CNBC

  • The U.S. energy storage market is expected to grow by a factor of 12 in the next five years, from 430MW deployed in 2019 to more than 5GW and a value of more than $5 billion by 2024, says Wood Mackenzie Energy Storage Service.
  • Tesla and GM are making big bets on lithium-ion batteries for energy storage systems and electric vehicles, but billionaire investors and venture capital firms are investing in competing battery technology, such as flow batteries.
  • Breakthrough Energy Ventures, the group of private investors led by Bill Gates and fellow billionaires Jeff Bezos, Michael Bloomberg, Richard Branson and Jack Ma, invested in iron-flow battery maker ESS in November.

A UN report on climate change released Nov. 26 amounted to a dire warning for Earth: Unless greenhouse gas emissions are drastically reduced, and soon, the planet faces dangerously and irreversibly high temperatures in the near future. The report also criticized the 195 nations that signed the 2015 Paris Agreement for not doing nearly enough to reduce emissions. Two days earlier the World Meteorological Organization reported that greenhouse gases reached a record high in 2018, with no sign of peaking.

The warnings, albeit ominous, may prove timely for some investors.

In the wake of recent catastrophic storms in the Caribbean, along with devastating fires and mandatory power shutoffs in California, billionaire investors and venture capital firms are viewing renewable energy storage systems as a stable bet in an unstable future.

The U.S. energy storage market is expected to grow by a factor of 12 in the next five years — from 430 megawatts deployed in 2019 to more than 5 gigawatts — according to the Wood Mackenzie Energy Storage Service, a division of Wood Mackenzie Energy Research & Consultancy. The firm estimates that the total energy storage market value in the U.S. alone will be $5.3 billion by 2024.

Lithium-ion vs. iron-flow battery tech

Energy storage systems enable commercial enterprises and power-sensitive facilities, such as hospitals, to continue running when traditional power sources and generators fail or are unable to function. In addition, clean energy batteries have proved to be an environmentally safer, lower-cost alternative to carbon-based fuels. They also represent a sustainable way to deal with the intermittency of renewable energy from solar and wind.

In the early-1990s, lithium-ion energy storage systems replaced nickel-cadmium batteries to serve the burgeoning cellphone and consumer electronics markets. More recently, they are being used in medical equipment and electric vehicles.

Tesla is building massive “gigafactories” to produce lithium-ion batteries for electric vehicles and Tesla Energy’s storage solutions business, including its newest Gigafactory 3 in Shanghai, China. GM just announced a multibillion-dollar investment in a lithium-ion battery plant in Ohio.

But lithium-ion batteries have limitations. They lose capacity the more they’re charged and discharged, eventually needing replacement, and on occasion have exploded or caught fire. Iron low-energy storage systems, by contrast, last indefinitely, with no environmental risks. Both systems store energy from solar, wind and water on power grids, pulling it off as needed and re-injecting it when not.

Cost drives energy markets, and clean energy storage systems have gained momentum as technologies have advanced and manufacturing costs have dropped, particularly for lithium-ion batteries. From 2010 to 2018, lithium-ion battery costs declined by 85% and are forecast to decline by another 50% by 2030, according to Bloomberg New Energy Finance, with major implications for the utility and electric vehicle market.

Gates, Bezos, Bloomberg money

Unlike other grid-scale storage technologies, lithium-ion has benefited from the manufacturing scale of both consumer electronics and electric vehicle markets. Together the two industries have dominated the vast majority of lithium-ion markets, resulting in cost declines.

And with plunging system costs come the increasing value of clean energy storage, especially for new technologies that extend battery duration.

“Right now we’re only looking at energy storage that are around four hours,” says Daniel Finn-Foley, head of the energy storage team at Wood Mackenzie. “And lithium-ion can still compete at four hours. But as we move into the next phase of the energy transition, four hours isn’t going to cut it anymore. That’s why all these investors are asking if there’s a longer-duration technology that scales better than lithium-ion. This is where flow batteries come in.”

“You can follow the money,” Finn-Foley said. “All the investors are smelling it.”

In October of this year, ESS, a manufacturer of low-cost, long-duration, iron-flow batteries for the global renewable energy infrastructure, secured $30 million in a Series C investment round from Breakthrough Energy Ventures, the group of private investors led by Bill Gates and fellow billionaires Jeff Bezos, Michael Bloomberg, Richard Branson, and Jack Ma, among others.

While BEV has placed tight restrictions on ESS commenting on the investment, the group issued a statement that said, “There is a tremendous need for low-maintenance storage technology that can extend the availability of intermittent renewable energy sources like wind and solar.”

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