Solar power is now the world's fastest-growing source of electricity. The International Energy Agency (IEA) forecasts that solar photovoltaic alone will account for 60% of the world's total renewable capacity additions through 2025. By 2050, it is forecast to become the world's largest source of electricity.
Not surprisingly, 2019 was the peak year for solar energy usage growth. In 2020, the industry, like the world economy, dragged the anchor of the COVID-19 pandemic. Solar power for generating electricity grew, but more slowly.
Now, 2021 is predicted to be a take-off year.
For example, 2020 residential installations in the US dropped by a quarter from Q1 to 617 megawatts (MW) in Q2, the lowest in a year. At utilities, 2.5GW were installed in Q2; this was almost three-fourths of all solar capacity brought online during that quarter.
Part of the reason was that the sector experienced minimal COVID-19 drag. And 8.7KW of new utility power-purchase agreements were announced in Q2 for a record contracted pipeline of 62 GW.
Despite some decline in all market segments, solar photovoltaic power (PV) accounted for 37% of all new U.S. electricity-generating growth in the first half of 2020.
Why the Solar Industry Needs Batteries
The marriage of the rapidly advancing installation of solar electricity generation with the burgeoning use of batteries is perhaps the single most significant development now in the field of solar energy.
One of the 2 dominant applications of solar power, rooftop installations linked arms with battery technology when Tesla announced it would include a battery with every solar installation.
Solar power does not require a battery. Of the two chief ways to use solar power, direct sunlight and solar thermal, which heat fluid as a middle step in generating electricity, solar direct is almost universal in rooftop installations.
The secret to the entire solar energy process (and to photovoltaic cells) is this simple: a photon, the basic unit of light, strikes a surface and releases an electron. The photoelectric effect.
The solar panel achieves this using the right surface material and semiconductors. No battery is required, but the electricity must be used immediately in the home or in the electric grid to which the home may be connected. This direct photoelectric effect is why solar produces no power at night.
The battery solves this problem by storing solar energy and releasing it as needed.
The Limits of Solar Power: Efficiency and Space
Solar energy is not growing due to competition with other energy sources in the marketplace. Growth is driven by countries worldwide committed to renewable energy and reduction (and eventual elimination) of CO2-emitting fossil fuels.
This engine of solar power growth is viewed as taking a huge leap forward in 2020 with the election of Democrat Joseph Biden as President of the United States.
President Donald Trump explicitly approached competing energy sources with an "all of the above" perspective, letting all energy sources compete for acceptance. Mr Biden is explicitly committed to throwing the whole weight of government behind renewable energy sources with a proposed commitment of $2 trillion during his first term. Many major states already are favoring renewable energy policies.
Stimulated by policy commitment in Europe, the United States, and Japan, distributed solar PV systems in homes, commercial buildings, and industries have been increasing exponentially over the last decade. The first push came from the United States, moved to Germany, then Japan, and now China dominates the market, with policies that can skew international statistics on growth (as they did in 2019 and 2020).
However, there remain limitations on solar power.
Firstly the efficiency of PV cells, in essence the percentage of solar energy captured by each cell.
Although the efficiency of PV cells since they were invented has kept multiplying, by 2019 the most active solar panels only averaged 18% efficiency. Now, headlong advances change that at least once a year. A solar PV array comprises hundreds or even thousands of solar cells, which individually convert the photons to electrons, countering inefficiency with scale.
However, the average solar cell (not the most active) is just 15% efficient, with 85% of sunlight left unconverted.
There is a continual search for new technologies for light capture and conversion.
The Solutions?
Light-Sensitive Nanoparticles
University of Toronto researchers have employed a new type of light-sensitive nanoparticle, "colloidal quantum dots," by using semiconductors that function outdoors. Earlier designs did not and so were impractical for the solar market.
Increasing radiant light absorption, panels using the new technology proved to be 8% more efficient.
Gallium Arsenide
At the University of London's Imperial College, researchers discovered another new material, gallium arsenide, that promises to make solar PV systems 3 times more efficient than those on the market.
These "triple junction cells" can also be chemically altered to capture more sunlight and combine with a system that can track sunlight and guide it into the PV cells.
This year, the US Department of Energy announced a $125.5M program to advance solar technology by reducing its costs and improving its reliability. US Secretary of Energy Dan Brouillette stated that "solar energy has grown tremendously in the last decade…" and that government grants "directly support the Trump Administration's all-of-the-above energy strategy."
The program emphasises the goals of cybersecurity, grid integration, artificial intelligence, machine learning, storage, solar-powered microgrids, and siting solar arrays on unused agricultural land.
Alongside an announcement for 8 to 12 projects for PV hardware research to extend PV system lifetimes, reduce the costs of silicon solar cells, and new technology such as thin-film, tandem, and perovskite (an oxide mineral) solar cells (all to improve the sunlight-capturing face of the solar array).
Secondly, the other chief limitation on solar power is the space that solar arrays require, however, new technologies are currently in development to solve this:
Solar Roadways
Could highways be lined with solar panels, exploiting now unused land? This idea already is being put into practice in the Netherlands.
Floating Solar
If windmills can be stationed on floating platforms out to sea, why not solar arrays? Projects are being set up in France, Japan, UK, India, and California.
Space-Based Solar. Another area of particular interest is the resurgence of satellite based PV cells which captured sunlight and converted it to microwave energy. Scientists are resurrecting the technology, which should capture far more sunlight (up to 90%) as satellites can continuously reposition themselves for the greatest efficiency. China and Japan, always leaders in solar energy, are investing heavily in this approach right now.
Batteries and The Future of Solar Storage
There is no solar power independence without storage, and storage means batteries.
Without storage, the increasingly widely distributed rooftop installations require a connection to the power grid during the night and on cloudy days. Even big free-standing solar arrays must either feed directly into the grid for current use or store their energy.
Even the high-tech batteries now available are inefficient, expensive, and short-lived, and therefore less than attractive for homeowners and utilities. If this problem can be solved, then solar energy can become an on-demand energy source.
The U.S Department of Energy is funding a project at Ohio State University that has reported a battery 20% more efficient and 25% cheaper than anything on the market. The rechargeable battery is built into the solar panel, rather than constituting a stand-alone system.
At present, there are three basic types of battery for home use:
Lead-acid batteries
Long-established, with a relatively short life and lower depth of discharge (DoD), which is the amount of energy that can be discharged before the battery must be recharged. But lead-acid is also one of the least expensive options, especially for homeowners who want to be entirely off the grid and require a lot of storage.
Lithium-ion batteries
These make up the majority of new home energy storage, which use various lithium-ion chemical compositions. They have a longer lifespan and better DoD than lead-acid, however, they also are considerably more expensive.
Saltwater batteries
A newer technology which doesn’t utilise heavy metals but water electrolytes. However, they are still in development but early indications suggest each recyclability, a significant advantage over lead-acid and lithium-ion batteries.
Solar Batteries: The First Wave
Companies manufacturing electric vehicles have made big investments in battery research and now are applying it to general energy storage.
Tesla is the first mainstream company to do so with its Powerwall battery, which immediately sold out in 2015 and went into back-order. Demand, Tesla recently reported, is still through the roof for home energy use and this year Tesla jacked up the price to $11,000. Variations on the Tesla product are also being used in power plants.
In February 2020, Monterey County in California approved a 182.5 MW Tesla Moss Landing Battery Energy Storage facility for the Pacific Gas and Electric Company. It will constitute one of the world's most powerful battery systems, almost five times larger than the largest existing U.S. battery array, in San Diego.
Overall, a recent S&P Global Market Intelligence analysis estimated an increase of 1,500 MW for large-scale energy storage in 2020, and more than 3,000 MW planned in 2021. Lithium-ion batteries at gas plants on solar farms will account for most of the growth, particularly, large-scale projects in Florida, Hawaii, New York, and Oregon.
These projects are being called "the first wave of storage facilities" at this scale, but only for forerunners of bigger things to come.
The storage is all about batteries and, for now, these batteries are chiefly about metals
The dominant battery types:
- Lithium-ion batteries: cobalt, lithium, nickel, manganese
- Electric vehicles: rare earths (neodymium and dysprosium)
- Solar PV: cadmium, indium, gallium, selenium, silver, tellurium
With all of these technologies requiring copper.
Battery Metals: Supply and Substitutes
A 2019 report by the Institute for Sustainable Futures found several future shortfalls in the supply for battery materials, emphasising that:
- Copper is used in all technologies and difficult to replace because of its high electrical conductivity.
- Lithium also is difficult to replace with a substitute because it is used in all dominant battery technologies and has only limited potential, at present, to be recycled from batteries.
- Silver is used in 95% of PV panels and, though continuously made more efficient, is not now recycled and technically difficult to recycle.
- The rare earths neodymium and dysprosium are not recycled and almost all EVs use them in their technology.
- Cobalt, nickel, and aluminum already have high recycling rates and are easier to substitute with other metals or technology.
- Cadmium, tellurium, gallium, indium, and selenium are used only in "niche" PV technologies.
- The metals for which renewable energy is significant overall end-use are cobalt, lithium, rare earths, and tellurium. Batteries for EVs and storage demand lithium and cobalt, but this year could become as much as 40% of the demand for cobalt and 50 % of the demand for lithium. Solar PV already represents a large percent of the end market for tellurium (40 %), gallium (17%), indium (8 %), and silver (9%). For the most part, the percentages are expected to increase rapidly.
The Struggle to Find Substitutes
In considering the future market for any battery metal, it is crucial to consider research that is seeking substitutes. The best example, today, is cobalt, widely used in the most popular lithium-ion battery types, but is also considered one the most expensive materials and is primarily found in the politically unstable Democratic Republic of the Congo.
Given these problems with the dominant commercial lithium-ion batteries, which always have relied on cathodes that contain cobalt, the search is on for a new cobalt-free cathode.
The battery cathode they are trying to replace is usually a mix of nickel, cobalt, aluminum, and manganese.
Nickel alone would give the most energy-dense batteries, but it is unstable and reactive. Cobalt is the key to boosting energy density and battery life as it keeps the whole structure stable.
Most of today's electric vehicle batteries use nickel-manganese-cobalt cathodes, with two-third nickel and one-fifth each of cobalt and manganese.
A new cathode is currently being tested with preliminary reports indicating that its use in lithium-ion battery cells could hold more energy over hundreds of charge cycles than present commercial batteries.
Another alternative in the works is to push the use of nickel up four-fifths and reduce the other metals each to one-tenth.
The success of this research would lower the price of batteries and avoid the pending shortage of cobalt, but it would also threaten the price of cobalt. This is the kind of rapid research going on in solar and batteries technology that investors in battery metals must monitor in making investments.
What Investors Need to Know
The fundamental underlying demand for the battery metals, as a group, seems irresistible.
As nation after nation commits to a future of renewable energy, and solar energy leads the way in new energy generation, and battery storage rises in prominence, the future for battery metals looks bright.
As the storage of solar-generated power becomes ground zero of the solar industry, huge investments are being made in new battery technology manufacturing. Both China and the United States are currently leaders in these areas, yet the US is set to take even greater prominence as President Biden will exponentially increase its investments in renewables.
Investors have many established options for profiting from the super-charged fundamentals for battery metals. Many, of course, are available on the futures markets, where investments come with the potential for large risks and rewards.
Increasingly, investment in metals is possible through exchange-traded-funds, such as the ETFs which own silver bullion to back the value of their shares. A lithium ETF (LIT) is now available.
All metals, including rare earths, are mined by private or publicly owned companies including some of the largest firms in the world with investment worldwide in metals mining.
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Junior Miners in the Battery Metals Space
Recent articles published by Opens focus on another option, junior mining companies, and discuss how to assess them as investments, managing the considerable risks of early-stage companies and selecting those that balance risk with potential profit for an attractive "value proposition."
Like all junior mining companies, those in the battery metals sector leverage the price swings of the metals themselves 2x or 3x because the costs of mining the metals are relatively fixed but metals prices can see huge gains (or losses) that exert an outsized impact on the company profits.
- An example of an aggressive strategy to reduce risk while seeking leveraged profits is Neometals (ASX:NMT), a "projects generator" Australian mining company that has advanced multiple EV thematic projects with multiple multi-billion Euro partners. Creating a portfolio that diversifies risk by type of commodity and political jurisdiction (always a big concern in mining investment). While some Neometals partners are established industrial companies with large balance sheets and extensive influence in Europe to tap in to the OEM Car Manufacturers and metals traders.
- Likewise, we are impressed by companies timing the renewables momentum, like Canada Nickel Corp. (CSE: CNC) They have in just 12 months built a $200M nickel developer, with an asset that sits in the top 10 Nickel deposits in the world. The share price is up 8x. In a sector which counts multi-billion dollar acquisitions as normal, Canada Nickel still has some growing room. A PEA due by end if Q1/21 and Feasibility Study to be delivered by year end signals a company in a hurry to be in production in 2025. The supply & demand stcry for nickel suggests we will need many more companies like this to meet the growing demand to nickel.
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