Electric-car race could strain lithium battery supply

The headlong rush to create electric cars for green-minded consumers may come with a significant economic and environmental cost.

Lithium ion batteries--the same used in electronic gadgets and laptops--have become the preferred battery type for plug-in hybrids and electric cars now starting to come to market.

That swelling demand has some industry observers concerned that there will be a shortage of the metal lithium, the material used to make the batteries.

"You can solve the transportation problem but end up creating an equally vexing commodity problem," said Matthew Nordan, president of emerging technology consulting firm Lux Research. "It's a big concern."

In the short term, auto companies will be able to bring plug-in hybrid cars to market as planned in the next few years. Production of lithium has increased since the 1990s to meet the demand for batteries in power tools and consumer electronics, said Brian Jaskula, the lithium mineral commodity specialist at the U.S. Geological Survey. Prices over the past few years have increased steadily as well, he said.

Longer term, though, the picture is less clear. Batteries for cars are expensive, which is the biggest reason that plug-in electric cars cost more.

"Prices in the last couple of years have slowly gone up," Jaskula said. "But if the Chevy Volt and other cars like that become a big raging success and the demand really increases but supply doesn't keep up, then the price will go up obviously."

Whether or not a global run on lithium pans out as projected by the worriers, the situation highlights an underappreciated risk when it comes to alternative energy, namely securing supplies of natural resources. In other words, if some green technologies are successful in displacing fossil fuels, there could be shortages of materials that most people never heard of before.

"In all these newfangled clean technology applications, quite often the ones that appear to have strong growth potential face a challenge in that they are reliant on some material that has been in short use to date," said clean-tech venture capitalist Rob Day, a partner at @Ventures. "Possibly, they don't have enough supply to fulfill (growth) requirements."

Other examples include indium, a material used in a new generation of low-cost CIGS solar cells, and coatings on solar panels, Day said. And for several years, researchers have sought to come up with an alternative material for expensive platinum, which is used as a catalyst in fuel cells, noted Barbara Heydorn, who is director at the center of excellence in energy at science research nonprofit SRI International.

Eye on South America
Today, Toyota's Prius hybrid electric cars have nickel-metal hydride batteries. Because of improvements in weight and storage in lithium ion batteries, though, a number of auto manufacturers will be using them in plug-in hybrids expected to come to market in the next two years.

General Motors, for example, plans to use lithium ion batteries for the Volt and the Saturn Vue plug-in hybrid, both of which are expected in late 2010. Toyota, too, is planning cars with lithium ion batteries, but it is said to be researching zinc air batteries for vehicles as well.

Today, lithium is extracted from dried salt ponds or "salt flats." A briny liquid underneath the surface is pumped out and dried in the sun. The dried material can be made into lithium carbonate, which is later processed to make lithium.

There are widely divergent views on whether the existing producers of lithium--most located in South America and China--can keep pace with an onrush of hundreds of thousands or millions of new plug-in hybrid cars in the next few years.

Energy and transportation consultant William Tahil of Meridian International Research last year rekindled the supply debate in a paper, which was followed by another paper (PDF) issued in May.

He concluded that lithium supply will be absorbed largely by the fast-growing consumer electronics industry and that increased demand for lithium production will worsen relations between the U.S. and Latin America.

With continued 25 percent yearly growth in portable electronics, there would only be enough lithium carbonate for 1.5 million Chevy Volt-type vehicles by 2015 with "optimum production increases," according to Tahil.

The results of Tahil's studies are disputed. Geologist R. Keith Evan, for one, calculated worldwide reserves and concluded there is an abundance of lithium to meet electric-car demand.

Tahil counters that the total inventory of lithium does not reflect the increased mining cost of getting lithium from sources other than lithium carbonate.

In addition, further exploitation of the world's largest salt flat, the Salar de Atacama in Chile, and the development of new sites, such the large reserves in Bolivia, would cause substantial damage to those ecosystems, Tahil and the USGS's Jaskula said.

"The point is that electric cars are supposed to be environmentally friendly cars and there are many other materials such as zinc and iron...which don't require any more environmental degradation than has already been done," Tahil said in an interview.

Financial analyst Craig Irwin, who is vice president of energy storage and energy efficiency at Merriman Curhan Ford, indicated that projected lithium supply has not dampened enthusiasm for the technology. He noted that lithium can also be extracted from different materials, including the mineral spodumene.

"There are two highly polarized camps," Irwin said. "The processing technology (for spodumene) is not entirely mature yet, but I don't think it's an insurmountable challenge."

Representatives from lithium ion battery maker EnerDel did not respond to a request for comment before publication. Another well-regarded lithium ion battery company, A123 Systems, declined to comment because it is in a quiet period before its planned public offering.

Commodity rules apply
For economic reasons alone, some businesses are taking a strategic approach to effectively sourcing materials, like lithium, for alternative energy technologies.

General Electric recently assigned a research scientist the full-time job of studying sources of materials that are critical to GE, which is investing heavily in battery technologies for transportation and grid storage.

GE was caught "behind the curve" when one material used in its aircraft engines shot up in price, so it's now looking for other "pinch points," said Mark Little, director of GE's research labs.

"The ability to supply batteries, including the raw materials, from a national security standpoint is a valid question which we should be posing. I don't know the answer," said Glen Merfeld, manager of the Chemical Energy Systems Laboratory at GE Research.

Because lithium is a commodity like oil, the same economics apply, said Ripu Malhotra, associate director at the chemical science and technology laboratory at SRI International.

Limits of mineral supplies lead to higher prices and an incentive to accumulate bigger reserves, he said. And the higher prices will spur investment in new extraction technologies from unconventional sources. For example, the price of corn shot up to meet a surge in ethanol demand. Now, producers are developing methods to use alternative feedstocks, like wood chips and grasses.

"These are brand new markets. If it truly becomes a limiting factor, prices go up and we find new sources of material or ways to recycle the material," SRI International's Heydorn said.

Better Place, for example, plans to install battery-charging stations in Israel, Denmark, and Australia to jump-start a rapid transition to electric cars. But a lithium shortage will mean its ambitious plans would need to be scaled back, according to Nordan.

Speaking at recent conference, Project Better Place co-founder and adviser Andrey Zarur acknowledged that the company is "betting big time" that recycling technologies and alternative to lithium ion batteries will emerge in the coming years.

Lithium ion car battery-pack suppliers themselves will have plenty of business in the years to come if sales come close to projections. But that growth will affect commodity prices, Nordan predicts. It's also leading to stepped-up research into alternative battery chemistries, such as nickel-metal hydride variants, zinc air, and magnesium.

"There's a flowering of interest in battery technologies with abundant materials," Nordan said. "Abundant materials are the words of the day."