The Skinny on Lithium
Source: Resource Investor, Mad Hedge Fund Trader (8/9/10)
"A truly economic, price-competitive lithium battery is some ways off."
Gasoline has 64x more energy per unit of weight than lithium batteries, but this advantage is partially offset by electric motors that are 4x more efficient than conventional piston engines. Lighter weight cars and other design improvements, like recapturing power when braking, shrink the lead further.
The DOE is pouring money into research on an amazingly wide front, and strides are being made with different electrodes (silver, sulfur, manganese), leading to rapid advances in inorganic chemistry. The challenges are formidable, with overcharged large lithium-ion batteries prone to explode or catch fire or internally/externally short circuit.
Toyota and Honda have stuck with proven nickel metal hydride batteries offering half the power per weight, and are understandably reluctant to make the needed multibillion-dollar investments until more is known about the long-term life of lithium batteries.
Another wrinkle is that Bolivia, the Saudi Arabia of lithium, has effectively nationalized the industry, limiting its development investment to $350M. As the production of EVs, HEVs and PHEVs is expected to ramp up to 5M vehicles a year by 2020, this could be a problem.
Many in the industry expect that lithium prices won't be driven by automaker demand, but by the price of oil. Take crude up to $150 again, and all of a sudden, everything works.
The intelligent way to approach the industry now is to invest in low-cost producers of proven battery technology. Unlike past battery car movements, this one is not going to end up crushed in a junkyard.