DOE Challenges Battery Industry To Leap 10 Years Forward
The battery startup landscape isn’t just populated by battery cell producers, it’s fueled by the success of a series of businesses that contribute to a thriving supply chain. From raw materials extraction to material processing to manufacturing cells, the lithium-ion battery industry relies on substantial financing to support innovation.
The great news is that the U.S. Department of Energy recently issued a grand challenge to push the development of battery technology forward in the next 10 years, and the government has pledged millions of dollars in grant funding to support the necessary research.
Before we begin to speculate about what the next decade in lithium-ion battery evolution will look like, let’s talk about the current state of battery and materials start-ups and the driving forces behind improvement in lithium-ion technology.
A Short History: Lithium-Ion Battery Innovation
Since they were invented in 1985, scientists and corporations have been working to improve lithium-ion batteries. From the beginning, these batteries represented an incredible energy storage tool that had the potential to change how we use sustainable energy sources.
Although these batteries have been around for 35 years, their primary application only recently hit the mainstream. About 10 years ago, battery manufacturers made major gains in energy density that helped push fully electric vehicles (EVs) and hybrid vehicles into a mid-market price point that made them accessible to more middle class consumers.
The story of startups within this industry is even shorter, in part because the traditional model for these famously scrappy companies doesn’t apply to battery development and production.
Today, there are a few dozen startups working on producing innovative battery materials and manufacturing better lithium-ion cells. But the startups tackling the question of how to improve power for electric vehicles are not operating solely on the traditional venture capital funding model. Instead, many rely on grants in equal part.
Battery development takes time, and the startup model that relies on satisfying a board of investors with expectations of fast market traction and significant revenue simply does not fit with the pace of product development for battery materials and cells. Instead, innovators in this field have found that major grants are required to balance their books, alongside the rare investor who understands that returns may take up to a decade to achieve.
EVs and OEMs Continue To Drive Evolution and Pricing
Once today’s battery startups mature, many will be acquired by the companies that are driving the evolution and price point of lithium-ion batteries today: OEMs. This relationship between suppliers and demand-generators isn’t new. It also isn’t likely to undergo radical change, but we will see the necessary materials and technology that goes into batteries continue to improve.
As American car manufacturers design better luxury hybrid and electric vehicles, demand will continue to grow. Consumers are asking for better range for their EVs, and the folks all along the battery supply chain are listening. In this interconnected ecosystem, the OEMs’ needs will set the tone and define the market for lithium-ion batteries in this decade and perhaps decades to come.
The good news is that OEMs are more open to making the switch to renewable energy sources than ever before. As hybrid vehicles sales and battery technology improves, there will continue to be room for entrepreneurs to try their hand at battery development.
What’s Next Will Look a Lot Like What’s Happening Today
Battery materials technology will continue to take a huge amount of capital to evolve and a long time to get to market for the foreseeable future.
The reasons for this are systemic: the raw material supply chain is not yet mature, manufacturing processes for new materials may need to be invented, and some of the machines required for new manufacturing processes may not yet exist. Given this list of uncertainties, it should come as little surprise that the evolution and pricing of electric batteries are still being set by the top of the supply chain.
The biggest change we can expect to see is one that consumers are most excited about: EV adoption will continue to increase. It’s easy to imagine that in 2030, American families with two cars in the driveway will own one EV and a hybrid in lieu of two gas-only vehicles.
Meanwhile, companies that produce component materials for battery production and cell manufacturers will see the same types of exits on the horizon; acquisitions and licensing opportunities will define growth for many of these innovators, moving them forward into a new, more stable phase of funding and development.
The next decade will bring battery startups into another stage of growth that’s as promising as the one we’ve just passed through. If all goes well, the world will be greener on the other side.
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