I had an old Milwaukee portable drill. It was one of those early versions with a big, clunky battery pack.
This drill lasted forever. I used it to build a deck. I used it to build my kids’ swing set. I used it all the time. The problem was, it was heavy. You’d suffer arm fatigue after an hour. And if you dropped it on your foot … well, your weekend was ruined.
When that finally died, I moved up to a new Makita. I loved how light it was, thanks to its fancy new lithium batteries.
I used it to build my deck … or started to. The thing would run out of juice after half an hour. Finally, I just bought a drill with a cord to finish. And that’s the huge problem with batteries today — the weight vs. energy storage issue.
And batteries are everywhere these days. Everything is wireless, needs charging and seems to lose its charge faster and faster…
That’s one reason for my skepticism on battery-powered vehicles.
From my point of view, energy storage is the single biggest hurdle we face in the transition from fossil fuels to renewables. That’s why Bill Gates, in his Gates Notes blog, called for more investment in innovation in this field. As he said:
“Storing energy turns out to be surprisingly hard and expensive.”
That’s a huge hurdle, especially for vehicles. In a society used to going wherever it wants in cars, battery-powered engines are a huge problem. They limit the car’s utility, range and travel time.
For example, the top-end Tesla Model S (Long Range) can go roughly 370 miles between charges. But it takes 11 to 12 hours to recharge the battery.
If you can find a supercharger, it will still take over 70 minutes to recharge that battery.
That severely limits the utility of electric vehicles (EVs). For example, a long road trip, from Miami to New York City would normally take 19 hours (if we got lucky in Washington, D.C., traffic). But in the Model S, it would take at least an extra four hours of charging along the way.
It would be so difficult with most EVs that it wouldn’t be worth it.
And today, there aren’t chargers everywhere you want to go. You’re going to have a hard time finding a charger if you’re going even slightly off the beaten path. You won’t find many campgrounds with a Tesla Supercharger or station. That puts limits on what you can do with these vehicles.
The problem is in the battery chemistry. In vehicles, there’s a trade-off between energy storage and weight. We call that energy density. Today, there’s a cap of about 700 watts per liter in typical lithium-ion batteries.
Like my drill example, a heavier battery has limitations. It’s more pronounced in vehicles. More weight requires more power to move it … requiring a larger battery in a vicious circle. Lithium, which can pack a lot of energy into a lightweight battery, is almost ideal.
Almost. The problem is that conventional lithium batteries have a hard cap on how much energy they can store. It’s a locked door that must be opened for the world to move forward to an all-electric future.
However, a Chinese manufacturer may have broken the lock on energy storage.
The Next Leap Forward
Contemporary Amperex Technology Co., which makes batteries for Tesla and Volkswagen, claims it can produce a battery pack that will last 16 years and 1.24 million miles. That’s about twice the lifespan and almost 10 times the distance in current battery warranties.
If true, this could be the event that breaks through the bottleneck on EV adoption in the U.S. and around the world.
Today, sales of EV’s are just 8 out of every 100 vehicles sold in China. That falls to 5 out of every 100 in Europe. Obviously any new technology faces adoption hurdles. But battery limitations are a big part of that.
It’s also important to note that the cost of these batteries is on the decline. In general, the price of batteries fell 85% in the last decade. And car batteries’ prices fell substantially. In 2015, the battery cost made up half the cost of the car’s construction. Today, it’s about 25% of the cost of the car.
And as batteries get cheaper, EV’s will get cheaper and more widely available. Audi, Chevrolet, Kia, Honda, BMW, etc., all offer EVs today. And several offer multiple models to choose from.
Analysts with UBS estimate that the battery market could grow by $426 billion over the next decade. This is the new frontier in energy. And it’s something you need to add to your portfolio today.
A simple way to play the whole space is through the Global X Lithium & Battery Tech ETF (NYSE: LIT).
It will benefit as the race to crack the battery problem ramps up. And if the Chinese company touting its breakthrough is telling the truth … we could see a massive new investment in this space coming up soon. Stay tuned.
Good investing,
Editor, Real Wealth Strategist
