The Renewable Energy Market Investment Opportunities In Lithium Prepared by: MAC Energy Research 2016
Table of Contents: Introduction. Page 2 What is Lithium?... Page 2 Global Lithium Demand Page 3 Energy Storage Technology Page 3 Lithium Energy Storage for Residential Markets. Page 4 Lithium Energy Storage for the Grid. Page 4 Lithium Batteries for Electric Vehicles Page 4 Conclusion. Page 5 Links Page 6 1
Introduction: The growth of the renewable energy market over the past decade has been called an evolution. It has now become a revolution. Installed capacity and production across the world from all renewable technologies have increased substantially. Now, the majority of countries encourage the development of renewable energy through their policies and political support. There has also been a noticeable shift in the perception of renewable energy. A decade ago people could sense the possibilities, but there were still reservations about the practicality of deploying large scale programmes. Now, with the development of technology, particularly in the Lithium-Ion battery storage sector, the potential is becoming a reality. For most of this decade, manufacturing and distribution of renewable energy were concentrated in the United States, Europe and Japan. These regions paved the way for market expansion through their early investment in new technology. In more recent years, markets, manufacturing, and investment have expanded to other regions. China has become a key player in renewables manufacturing. Investments are now being made across third world countries due to the growing energy demands in those areas and the practicality of using renewables to meet that demand. Direct investment in renewable energy has played a significant part in contributing to its spread across both technologies and regions. The world s major banks were just starting to enter the renewable energy sector in 2005. At that time it was considered to be a High Risk sector with investment returns as yet unproven. In 2016, many financial institutions now invest in the renewable energy industry because they see its ability for strong long term returns. New sources of financing will come from areas like sovereign wealth funds and pension funds. In a few short years the annual global investment in renewables is forecast to be in the range of USD 400-500 billion. In the coming decade it is likely to exceed USD 1 trillion. As large as the renewable energy market is, this report will focus on one area where we believe the potential exists for very significant investment returns in the short to medium term. The world-wide market for Lithium is growing at a pace that is clearly beyond current production capacity; a situation that has created a variety of investment opportunities from mining through to technology applications. What is Lithium? Lithium (Li) is a soft, white / silver material which is the lightest of all metals and the least dense solid element. Traditionally, it has been used in a wide range of industrial applications including ceramics, lubricants and glass. There are two main mineral sources that produce Lithium. Brines - Lithium can be produced from brines in the form of Lithium Carbonate. This involves a process whereby the brine is pumped from the sediment basin, concentrated via evaporation and then purified through solvent extraction. Spodumene This is a hard rock mineral that mostly occurs in lithium-rich pegmatites (granite-like rock composed of quartz, feldspar and mica). Spodumene is usually recovered through conventional open pit mining methods. Most deposits are located in the south west of Western Australia. The accelerating growth in demand for Lithium is revealing the extent of the tight supply conditions around the world. Production capacity issues with existing producers along with new entrants still in ramp-up phase, point to the potential for significant lithium price increases in the near to medium term. 2
Global Lithium Demand Among the applications for Lithium, Lithium-ion batteries represent the fastest growing segment of the lithium market. They are the prime battery technology in high growth industries, such as portable electronic devices, electric vehicles, and commercial storage batteries. There appears to be very strong lithium demand growth in the coming years based on the positive outlook in these particular industries. Energy Storage Technology Energy storage technology includes batteries and other systems that store energy for later use. Lithium-ion batteries are already powering electric and hybrid vehicles, along with billions of portable electronics devices. Lithium-ion batteries in particular have seen consistent increases in performance and reductions in price, withcost per unit of storage capacity declining dramatically over the past decade. In the next couple of years, advances in energy storage technology will make electric vehicles cost competitive with current vehicles based on internal-combustion engines. Advanced battery storage systems on the power grid can assistby controlling frequency variations and help to handle peak loads. In developing economies, energy storage systems have the potential to bring reliable power to locations no matter how remote. Recently, companies such as Tesla, BYD and LG have all announced the development of large-scale Lithium battery manufacturing facilities to meet the forecasted rise in demand for Lithium-Ion batteries from the world market. This is very likely to support a significant increase in the demand for lithium in the coming years. 3
Lithium Energy Storage for Residential Markets Over the last decade solar energy production has soared globally. Solar is now one of the fastest growing sources of energy in residential and commercial markets. There has also been a significant improvement in the reliability of solar panels in recent years making adoption of renewable energy feasible on a much larger scale. The key factor for adoption now relies on the availability of this power during peak periods of use. The cost of production advantage of a centralized grid is often offset by the loss during transfer of power from the generating plant to point of use. By the same token, the advantage of generating power using renewable sources such as solar in the residential market may often be offset by the disadvantage of intermittent production due to prevailing weather conditions. The answer to the problem of having a consistent flow of power from renewable energies like solar is in incorporating the use of storage systems that can capture energy from renewable sources during peak production periods. There are a range of technologies from mechanical storage, hydro storage, and battery storage available in the marketplace to provide reliable solutions to efficiently store energy generated by renewable sources. Although each storage technology has its advantages based on size of storage and application needs, battery storage is the preferred solution for small renewable energy production in residential and small commercial buildings. Lithium Energy Storage for the Grid To maximize the benefits of renewable energy across the Grid, one solution may involve the implementation of large-scale lithium battery energy storage systems. In response to intermittent supply problem, electricity grid operators now have the option to deploy load-balancing technologies that increase grid flexibility. These technologies will include building excess generation capacity via battery energy storage. Lithium batteries due to their high transfer efficiency, cycle life and depth of discharge have the highest potential to efficiently store variable sources of energy during peak production. Lithium battery storage provides the ability to scale and deploy much smaller storage systems cost-effectively thereby allowing the deployment of decentralized grids at the source of energy consumption. While there are many reasons why battery storage would provide a useful tool for increasing grid flexibility, it is equally important to consider other benefits provided by battery storage, including improved power quality and access to electricity at times of generation shortages or grid failures. Lithium Batteries for Electric Vehicles In the coming decade, the greatest demand for Lithium-Ion battery technology will come from the motor vehicle industry. Manufacturers are now deploying investment capital in building up their capabilities in the Electric Vehicle market. For example, the Tesla Series 3 is due to be released in 2017. Its price is likely to be in the region US$36,000. This would put it squarely in the mid-price bracket where the greatest volume of new vehicle sales occur. There are also Chinese manufacturers who are proposing electric vehicles in the under US$20,000 range. BMW will also compete directly with the Tesla Series 3 from 2017. Audi and VW have also announced plans to enter the electric vehicle market in 2017-2018. 4
Conclusion There is enormous untapped potential in the electric vehicle market for lithium-ion batteries. Tesla, for example, is facing problems in meeting the demand for its electric cars due to shortage of battery packs, which is limiting its production capacity. This was one of the main reasons behind its decision to build a large-scale factory to produce lithium-ion batteries in collaboration with its partners. Overall, worldwide demand is being driven by the consumer goods and automobile sectors. Citigroup estimates that worldwide lithium demand will increase 64% in the next five years alone. What this means is that suppliers will have to quadruple their production capacity to meet demand. But that's unlikely to happen given the lengthy lead time required to bring new production online. The market s response to the shortage of any commodity in demand is to place a higher premium on it. That means higher prices. MAC Energy Corporation sees tremendous potential for investment in the Lithium market. Both in the source (mines) and in the technology. We believe that this market is at the cusp of change and will accelerate rapidly over the next few years. As such, the best returns will be made by investing in the early stage of this exciting market and Mac Energy is well positioned to achieve this for its investors. 5
Links Mac Energy Corporation: www.macenergy.com.au Chamber of Minerals and Energy of West Australia: www.cmewa.com 6