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©2014 Navigant Consulting, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system,

or transmitted by any means, in whole or in part, without the express written permission of Navigant Consulting, Inc.

ENERGY STORAGE SUPPLY CHAIN OPPORTUNITIES

SEPTEMBER 10, 2014

SAM JAFFE PRINCIPAL RESEARCH ANALYST

2 ©2014 Navigant Consulting, Inc. All rights reserved.

Introduction

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OF GLOBAL CLEAN TECHNOLOGY MARKETS.

The team’s research methodology combines supply-side industry

analysis, end-user primary research and demand assessment, and

deep examination of technology trends to provide a comprehensive

view of the Smart Energy ecosystem.


Table of Contents

Section 1 » Battery History and Background

Section 2 » Battery Forecasts

Section 3 » Battery Supply Chain and Materials

Section 4 » Thoughts on Tesla’s Gigafactory

SECTION 1

BATTERY HISTORY AND

BACKGROUND


Commercial Battery History

» Daniell battery, developed in 1836, becomes the first commercial battery

» First lead-acid battery developed by Gaston Plante in 1859 for rail applications

in France

» Rechargeable Li-ion battery developed by Dr. Stan Whittingham at Exxon in

early 1980s

» Dr. John Goodenough of Texas developed the lithium cobalt chemistry and later the lithium

iron phosphate chemistry

» Sony launched the first commercial Li-ion battery for consumer electronics in 1991

» Today, Li-ion powers most portable tools and devices, as well as most EVs and stationary

storage systems

Plante Battery Stanley Whittingham John Goodenough

(Source: Wikimedia Commons) (Source: SUNY Binghamton) (Source: University of Texas)


Li-ion Market Share by Segment, World Markets: First 5 Years

Li-ion Inflection Point

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Year 1 Year 2 Year 3 Year 4 Year 5

Power Tools

Laptops

Video Cameras

Feature Phones

Hybrid EV's

Telecom Backup Power

(Source: Navigant Research)


Lithium Ion Pricing Forecasts

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$/k

Wh

Large Format

Small Format

Tesla Small Format

Historical and Forecast Lowest-Point Pricing for Li-ion Batteries by Form Factor, 2009-2023

Source: Navigant Research

SECTION 2

BATTERY FORECASTS


Advanced Battery Consumer Electronics Forecast

Advanced Batteries for Consumer Electronics Revenue by Region, World Markets: 2014-2023


Advanced Battery Consumer Electronics Forecast

Advanced Batteries for Consumer Electronics Revenue by Region, World Markets: 2014-2023


-

10

20

30

40

50

60

$0

$2

$4

$6

$8

$10

$12

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(GW

h)

($ B

illi

on

s)

North America

Europe

Asia Pacific

Latin America

Middle East & Africa

Total GWH


Advanced Battery Power Tool Battery Forecast

Advanced Batteries for Power Tools Revenue by Region, World Markets: 2014-2023


-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

$-

$100

$200

$300

$400

$500

$600

$700

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(GW

h)

($ M

illio

ns

)

North AmericaEuropeAsia PacificLatin AmericaMiddle East & AfricaTotal GWH


Advanced Battery EV Forecast

Advanced Batteries for XEV Revenue by Region, World Markets: 2014-2023


-

10

20

30

40

50

60

70

80

$-

$5

$10

$15

$20

$25

$30

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(GW

h)

($ B

illi

on

s)

Middle East & AfricaLatin AmericaAsia PacificEuropeNorth AmericaTotal GWh


Advanced Battery Stationary Storage Forecast

Advanced Batteries Stationary Storage Revenue by Region,

World Markets: 2014-2023


-

10

20

30

40

50

60

$-

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(GW

H)

($ B

illio

ns)

North America

Europe

Asia Pacific

Latin America

Middle East & Africa

Total GWh


Global Revenue Forecast for All Advanced Batteries

Advanced Batteries Revenue by Application, World Markets: 2014-2023


-

20

40

60

80

100

120

140

160

180

200

$-

$10

$20

$30

$40

$50

$60

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(GW

h)

($ B

illi

on

s)

xEV

Stationary

Consumer Electronics

Power Tools

Other Applications

Total GWh


Beyond Li-ion Chemistries: 2015-2018

Lithium NMC with Silicon Anodes

Energy Density: 308 Wh/kg to 440 Wh/kg

Cost Estimate: $300/kWh to $900/kWh

Manufacturers: Envia, Johnson Controls, Bosch

Lithium Sulfur


Cost Range: $100/kWh to $1,200/kWh

Manufacturers: Sion Power, PolyPlus, Ohms

Solid Electrolyte



Manufacturers: Seeo, Sakti3, Solid Power


Beyond Li-ion Chemistries: 2018 and Beyond

Magnesium Ion


Cost Range: $100/kWh to $900/kWh

Manufacturers: Toyota, Apple, Pellion

Metal Air

Energy Density: 400 Wh/kg to 3,500 Wh/kg


Manufacturers: IBM, Samsung, Toyota


Beyond Li-ion: Ultracapacitor Technologies

Electric Double Layer Capacitors (EDLC)


Cost Range: $4,000/kWh to $12,000/kWh

Manufacturers: Maxwell, Nippon Chemi-Con, Ioxus

Lithium Capacitors (LiC)


Cost Range: $1,200/kWh to $8,500/kWh

Manufacturers: JSR, Hitachi Chemical


» Asia Pacific and Europe will be the leaders in the early years, especially due to enthusiasm

around ultracapacitors

» The North American market will become the largest market by 2023 thanks to the startup

culture leading to significant breakthroughs with metal air and magnesium ion

Next-Generation Advanced Batteries by Region


Next-Generation Advanced Batteries Energy Capacity and Revenue,

All Applications, World Markets: 2014-2023

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

($ B

illio

ns)

(MW

h)

North America

Europe

Asia Pacific

Latin America

Middle East Africa

Revenue


» By end of 10-year period, even distribution between transportation and stationary, with portable

power applications making an appearance at the end

» Initial automotive applications, especially ultracapacitors for stop-start vehicles, will sustain the

market in first 5 years

Next-Generation Advanced Batteries

by Application

Next-Generation Advanced Batteries Energy Capacity by Application,



-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

(MW

h)

Transportation

Stationary

Portable Power

Other Applications

SECTION 3

BATTERY SUPPLY CHAIN

AND MATERIALS


Lithium Ion Materials Costs

$14.49$19.08

$32.48$0.02

$2.87

$6.74

$3.48

$4.36

$24.16

$5.06

$7.27

$8.36

$3.26

$4.05

$5.51

$2.46

$5.36

$9.20

$2.38

$6.44

$7.36

$3.95

$9.75

$1.84

$0.01

$0.08

$2.25

$8.91

$9.90

$6.01

$0

$20

$40

$60

$80

$100

$120

Raw Material Price Refined Material Price Fully ProcessedMaterial Price

Other InactiveMaterial

Aluminum Container

Other ChemicalAdditives

Electrolyte Solventsand Additives

Electrolyte ActiveMaterial

Separator

Anode Copper FoilBacking

Anode ActiveMaterial

Cathode AluminumFoil Backing

Cathode ActiveMaterial

Raw Material, Refined Material, and Fully Processed Material Costs for Li-Ion Batteries, 2014

$44

$69

$104

©2014 Navigant Consulting, Inc. All rights reserved. 21

Battery Transportation Logistics

» The Journey of a Molecule

› A single Lithium molecule has 7 distinct trips

before it is used by a consumer. All told, the

molecule has travelled 29,875 miles to get to

the user.

› Those trips are: 1: Molecule is mined in Chile and shipped to U.S. refinery

to be turned into lithium carbonate (3,600 miles)

2: Lithium carbonate is shipped from U.S. refinery to

processing facility in Japan to be packaged and

measured (17,360 miles)

3: Lithium Carbonate is shipped to cathode powder

facility in South Korea (715 miles)

4: Cathode powder is shipped to China

5,6,7: Powder is moved within China three more times to

various distribution centers before finally getting to battery

factory to be placed inside battery (1,300 miles)

7: Finished battery is shipped from China back to U.S. to

be placed in automobile (7,800 miles)

1

2

3

5,6,7 8 4

Source: Navigant Research


Battery Materials: LiPF6 Electrolyte

» Dramatic drop in LiPF6 pricing between 2010 and 2014 from as much as

$120/kg to $25/kg—due to emerging manufacturers in China

» No LiPF6 manufacturer in the U.S. today

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

-

20,000

40,000

60,000

80,000

100,000

120,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mil

lio

ns

US

D

Me

tric

To

ns

LiPF6

LiPF6 Revenue

Forecast of LiPF6 in Metric Tons and Revenue,



Battery Materials: Lithium

» Relatively small volume of Lithium ore goes into Lithium Carbonate

» Most new battery chemistries are still lithium based, so lithium

batteries will be with us for at least the next two decades

» Navigant Research sees no significant threat of lithium shortages in

the next ten years

Forecast of Lithium Ore in Metric Tons and Lithium Carbonate in Metric Tons and Revenue,


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Millio

ns U

SD

Metr

ic T

on

sLithium Ore

Lithium Carbonate

Lithium CarbonateRevenue


Battery Materials: Graphite

» Graphite can be made synthetically, but most graphite used in batteries is

mined

» More than two dozen active graphite mine starts are in process today, including

up to eight in North America

Forecast of Raw Graphite and Milled Graphite and in Metric Tons and Revenue,


$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Millio

ns U

SD

Metr

ic T

on

sGraphite Ore

Processed Graphite

Processed GraphiteRevenue


Battery Materials: Separators

» Separator film shipments will grow in direct relationship to growth of battery

market

» Most separators are relatively simple and cheap polyolefin blends

Forecast of Separators in Metric Tons and Revenue,


$0

$100

$200

$300

$400

$500

$600

$700

$800

-

5,000

10,000

15,000

20,000

25,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mil

lio

ns

US

D

Me

tric

To

ns

Separator

Separator Revenue


Battery Materials: Vanadium Oxide Electrolyte

» Not all batteries will be Li-ion: Navigant Research expects significant

growth in the Vanadium Oxide Battery space also

» If growth gets too rapid in VO2 battery market, then it will impact the price

of Vanadium, quickly making these batteries less competitive

Forecast of Vanadium Oxide Electrolyte in Metric Tons and Revenue,


$0

$50

$100

$150

$200

$250

$300

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mil

lio

ns

US

D

Me

tric

To

ns

Vanadium OxideElectrolyte

VO ElectrolyteRevenue

SECTION 4

TESLA GIGAFACTORY


» Chemistry › Optimized for high power and long cycle life

› LiNi0.76Co0.14Al0.10O2 Cathode (NCA)

› Graphite Anode

› Voltage range of 3.6 to 4.05 V

› 90% capacity after 3,000 cycles

› Tesla NCA batteries use 25% of the cobalt that

traditional LCO batteries use

» Cell design › Central rod inside the jelly roll deforms at higher

temperature, causing battery cell to collapse

downwards in case of thermal runaway

› 18650 size

› More than 7,000 cells in a Model S pack

Tesla Motors:

Pack Design-The Cell

Deformable center bar configuration Source: Tesla Patent 20110117403


» Each 18650 cell is connected to a

busbar with 1 mm wide connector

which serves as current collector and

physical fuse

» Each cell is held in metal pocket that

isolates any thermal transient issues

and is surrounded by liquid heat

transfer system

» Pack is structurally integrated into

vehicle chassis, providing crash

protection and handling

improvements

Tesla Motors:

Pack Design-The Pack

Model S Pack Internals Source: EV Upgrade


» Tesla has publicly stated that it pays

somewhere between $200 and $300 per

kWh for the entire battery pack Navigant

Research estimates that it is spending

~$180 per kWh for its Panasonic cells

» Costs for cells and packs will continue to

decline in 2014 and 2015 (maybe 10-15%)

» With establishment of GigaFactory, Tesla

will be producing cells at $110-150per

kWh

Tesla Motors:

Pack Design-Costs

Model S Chassis Source: Greentech Media


» 35 GWh cell capacity; 50 GWh pack capacity

» Integrated on-site renewables for “majority” of power needs

» “Soup-to-nuts” facility: raw materials go in one end, finished battery

packs go out the other

» 6,500 employees

» Transportation of packs to NUMMI will be a minor cost, however rail is a

requirement—if shipping is by truck, then shipping costs increase by 4x

Tesla Motors:

GigaFactory-The Plan

GigaFactory rendering Source: Tesla


» Differential between pack capacity (50 GWh’s) and cell capacity (35

GWh’s) is the carrot to lure Panasonic as a battery manufacturing

partner; those extra 15 GWh’s of cells will have to be sourced

elsewhere at higher cost

Tesla Motors:

GigaFactory-The Carrot

GigaFactory Timeline Source: Tesla


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