By Christopher Gannatti, CFA
Global Head of Research
Many aspects of modern life that we have all become accustomed to depend on a steady supply of energy. Much like the concept of Moore’s Law led to the assumption that we can almost always expect more computing power, it’s possible that we will see that kind of expectation for the future of energy storage.
The critical focus in 2022 in this direction is: Where will we source all metals from?
Energy storage can proceed in several ways
Think of three different possible use cases:
1. A powerful electric vehicle. Here the focus would be on energy density and range, assuming it can be charged on a reasonably regularly scheduled cycle – ie while the owner sleeps at night. The battery can be large and a bit heavy, but these specs would largely depend on other details about the specific vehicle. Height and weight would certainly not be unlimited.
2. Stabilizing the supply of a power grid fed by intermittent sources. The world is seeing the benefits of zero-emission energy sources like wind and sun, but we know the wind isn’t always constant and the sun isn’t always shining. This is where extremely large batteries that can effectively store energy for days, if not weeks, could come in handy. Size and weight wouldn’t necessarily be an issue here as the battery itself is stationary.
3. A custom battery aimed at powering a small device. For example, efficiency and weight could be a priority for a wearable health monitor.
Because the range of use cases is so diverse, we would expect a similar push for a variety of energy storage solutions. Lithium-ion technology has been dominant for about three decades, but the future could support a collection of different technologies.
Do you think about the battery life? Focus on the cathode
When we change the batteries of a remote control or a smoke alarm, we see the + and the – signs – and if you’re like me you need to be careful to get the right sign right.
• The negative sign or terminal can be referred to as “anode”.
• The positive sign or terminal can be referred to as “cathode”.
Every battery must move electrons to deliver electricity. During operation, electrons move from the anode to the cathode, and during charging they reverse. However, it is well known that batteries cannot be charged and recharged indefinitely and the problems with this tend to come from the cathode.
Much of the research in battery development has focused on what elements and what types of structures work best in the cathode. For example, when we speak of an NMC 811 configuration, we are referring to nickel-manganese-cobalt with eight units of nickel, one unit of manganese, and one unit of cobalt. This covers certain economic and procurement concerns while balancing safety and power density requirements. As the atomic structure in the cathode is stressed through use and reuse, we find that battery life and charge performance may not match what we saw when it was brand new.1
Are metals independent of their source?
Well, the nickel, manganese, and cobalt used in a battery could come from a variety of sources. They could have come straight from mines and never been used in any other battery before. Likewise, they could come from a mix of recycled products, as it’s not always easy to mine more of these materials.
is there a difference That is, qualitatively, should they be expected to perform less if the source of the battery metals is recycled? Logically, the atoms of the different metals should be the same regardless of their source, but it certainly needs testing.2
Redwood Materials is a company dedicated to the sustainable production of battery metals, sourcing an ever-increasing amount of the required input from recycled material. The Materials Research Group at Argonne National Laboratories recently tested the performance of high-nickel cathodes, such as the NMC-811 discussed earlier, to see if they could detect a difference in performance between freshly sourced metals and recycled metals.3
The results of this test showed that the performance of redwood’s recycled materials when used in battery construction was indistinguishable from the performance of virgin metals.4 We can’t say this will immediately lead to an explosion in battery recycling from this point forward, but it’s an important step that adds credibility that if performance and safety are paramount, they can just as easily be achieved with recycled materials be able.
Conclusion: Recycling has interesting implications for the supply chain
Anyone following global battery production will at a certain point realize that China is the main player, currently responsible for producing about 78% of cathode materials.5 We have to remember that the metal ores don’t just come out of the ground and go into a battery – there’s a lot of processing to do. On the current path, that share could rise to 90% by 2030, even if the US makes efforts to invest and build its own internal capabilities. China has built an advantage – because the supply chain is native to its market, it has centralized expertise and can mine raw materials and scrap metals more quickly and cheaply, and bring them back into the required cathode structure time and time again. China is on track to get to where Taiwan is today with semiconductors with battery minerals and similar production.6
Redwood Materials is an example of a U.S. company that takes pretty interesting steps from simply selling raw materials to other suppliers to producing its own cathode materials. The company has even announced a $3.5 billion investment over 10 years in the Reno, Nevada region, where it plans to produce enough cathode material for 100 gigawatt hours of battery cells by 2025, which is roughly equivalent to CATL, China’s dominant producer, made last year.7
While demand for recycling is generally high as the market drives sustainable solutions across many industries in 2022, there are risks at this early stage of the industry’s development. One risk is whether a company like Redwood can increase production of very pure metals, since purity makes a difference in battery performance. The structure of the metals in the cathodes must be very precise. There is also the problem that many electric vehicles are relatively new and therefore there is not yet a large number of car batteries to be recycled. Battery recycling is currently at an interesting early point in its historical development and we believe it could be an important link in the broader energy storage value chain if the trend increases in the future.8th
We believe that WisdomTree Battery Value Chain and Innovation Fund (WBAT) is an interesting way to look at the many different corporate activities that contribute to a thriving energy storage ecosystem, including recycling.
Christopher Gannatti is an employee of WisdomTree UK Limited, a European subsidiary of WisdomTree Asset Management Inc.’s parent company, WisdomTree Investments, Inc.
As of November 1, 2022, WBAT owned 0% and 2.21%, respectively, of Redwood Materials and Contemporary Amperex Technology Co. Limited (CATL). Click here for a full list of fund holdings.
1 Source: Gregory Barber, “Recycled Battery Materials Can Work Just as Well as New,” WIRED 10/13/22.
2 Source: Barber, 10/13/22.
3 Press Release: “US Department of Energy’s Argonne National Laboratory Verifies Performance of Redwood Cathode Made from Recycled Content,” Redwood Materials, 10/13/22.
4 Press release: Redwood Materials, 10/13/22.
5 Source: Barber, 10/13/22.
6 Source: Barber, 10/13/22.
7 Source: Barber, 10/13/22.
8th Source: Barber, 10/13/22.
Originally published by WisdomTree on November 4, 2022.
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There are risks associated with investing, including the possible loss of capital. The fund invests in shares of publicly traded companies worldwide that are active in the investment themes of battery and energy storage solutions (“BESS”) and innovation. The value chain of the BESS companies is divided into four categories: raw materials, manufacturing, enablers and new technologies. Innovation companies are those that introduce a new, creative, or different technology-enabled product or service to potentially transform an industry landscape, and companies that serve those innovative technologies. The Fund invests in the securities included in or representative of its index, regardless of their investment value. The fund does not attempt to outperform its index or take defensive positions in falling markets, and the index may not perform as intended. Please refer to the fund’s prospectus for specific details on the fund’s risk profile.