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2020 Vision: Global Lithium-ion Battery Market Changing Utility Regulation is Helping to Pave the Way For
Grid Storage
Vishal Sapru
Research Manager
Energy and Power Systems
Frost & Sullivan
3
Executive Summary
Source: Frost & Sullivan
• Demand for lithium-ion batteries is expected to continue to grow from 2013 to 2020.
• Key end-users driving growth in demand for lithium-ion batteries include consumer
device vendors, industrial goods manufacturers, the grid and renewable energy storage
segment, and automobile manufacturers.
• The automotive segment is slated to exhibit higher growth beyond 2015, largely because
of the increase in electric vehicle (EV) production and the continuing demand for hybrid
electric vehicles (HEVs) and plug-in hybrid vehicles (PHEVs).
• The grid and renewable energy storage energy segment will likely provide lithium-ion
battery manufacturers with solid revenue growth opportunities over the next 5 to 7 years.
• Within the industrial segment, healthcare, power tools and equipment, and military
applications constitute the leading user-base for lithium-ion batteries.
• Regulatory factors such as a push toward alternative and green energy sources,
increasing emphasis on boosting fuel efficiency, and emissions standards will likely
stimulate market demand.
4
Executive Summary (continued)
• Continuing investments in research and development (R&D) will likely improve
lithium-ion battery capabilities and pricing.
• The competitive structure within the lithium-ion battery market remains fragmented,
including providers such as cell manufacturers and battery-pack integrators.
• Market consolidation is expected as fewer smaller participants will likely sustain rising
R&D costs, combined with a push toward declining prices.
• North America and Asia-Pacific (APAC) are expected to lead in market demand;
however, many European countries also continue to seek alternative energy sources for
the automotive and the grid and renewable energy storage segments.
Source: Frost & Sullivan
6
Market Segmentation by Application
Automotive 18.3%
Grid and Renewable
Energy Storage
6.9%
Consumer 60.3%
Industrial 14.5%
Key Takeaway: The consumer segment
dominates the global lithium-ion battery
market with increased use in laptops, smart
phones, power tools, and other applications.
Total Lithium-ion Battery Market: Percent
Revenue Breakdown by Application, Global,
2013
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
Key Takeaway: The utility segment dominates the
market as utilities are seeking smart grid solutions
that utilize lithium-ion batteries to improve
operational efficiency and effectiveness.
Total Lithium-ion Battery Market: Percent
Revenue Breakdown by Application, Global,
2020
Automotive 30.0%
Grid and Renewable
Energy Storage 37.6%
Consumer 23.9%
Industrial 8.5%
7
Market Segmentation by Application (Continued)
• While still showing revenue growth, the consumer segment is expected to see its share of the overall
industry revenues decline throughout the forecast period. The consumer segment, which accounted
for 60.3% of total lithium-ion battery revenues in 2013, is expected to see its market share reduced to
23.9% in 2020.
• This reduction in total market share will likely be from declining prices, significant growth in lithium-ion
battery demand in other segments such as grid and renewable energy storage, and lower demand
expectations for certain consumer products such as laptops, and standalone audio and video devices
such as MP3 players.
• In addition, continuing device convergence will likely further limit the ability of the consumer market to
garner stronger revenue growth throughout the forecast period. For instance, smartphones and
tablets are increasingly taking on MP3 player functionality, thereby reducing the need for consumers
to buy devices such as Apple’s iPods. A decline is also expected in demand for hand-held video
gaming consoles.
• Despite revenue growth, market share in the industrial segment is expected to decline because of the
explosive growth in the grid and renewable energy storage segment and the automotive segment.
• Furthermore, longer replacement cycles for certain industrial products such as power tools will also
likely be a factor responsible for the reduction in revenues contributed by the industrial segment.
Source: Frost & Sullivan
9
Drivers 1–2 Years 3–4 Years 5–7 Years
Growth in mobile communications and
computing devices drives demand for lithium-ion
batteries
H H M
The industrial segment continues to grow because
of greater utilization of lithium-ion batteries in power
tools and other sectors such as telecommunications
H H M
Developing applications within the energy sector
help fuel interest in lithium-ion batteries L M H
The automotive segment continues to present
growth opportunities for lithium-ion batteries L M M
Impact Ratings: H = High, M = Medium, L = Low
Total Lithium-ion Battery Market: Key Market Drivers, Global, 2014–2020
Market Drivers
Source: Frost & Sullivan
10
Restraints 1–2 Years 3–4 Years 5–7 Years
Product safety concerns continue to affect lithium-
ion battery utilization across certain industrial
applications
H M L
The lack of a recharging infrastructure for EVs
further impedes demand within the automotive
segment
H H M
Higher prices continue to stifle production and
sales of pure EVs H H M
Total Lithium-ion Battery Market: Key Market Restraints, Global, 2014–2020
Market Restraints
Impact Ratings: H = High, M = Medium, L = Low
Source: Frost & Sullivan
12
0.0
5.0
10.0
15.0
20.0
25.0
30.0
0.0
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
70,000.0
80,000.0
90,000.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Gro
wth
Ra
te (
%)
Re
ve
nu
e (
$ M
illi
on
)
Year
Total Lithium-ion Battery Market - Revenue Forecast
Key Takeaway: Innovation in lithium-ion batteries to fuel market growth
Total Lithium-ion Battery Market: Revenue Forecast, Global, 2012–2020
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
13
Revenue Forecast Discussion
• Overall demand for lithium-ion batteries will continue to increase throughout the forecast period
because of anticipated high growth within the automotive and grid and renewable energy storage
segments.
• Within the automotive segment, the pure EV market is expected to face a longer mass adoption cycle;
therefore, the continuing push toward marketing hybrid vehicles is expected to provide lithium-ion
battery vendors with growth opportunities.
• In addition, the trend toward incorporating lithium-ion batteries for start-stop applications within the
automotive segment is also expected to drive demand.
• Several manufacturers are planning to launch additional hybrid models and pure EVs in the 2014 to
2015 time period, including BMW (i3), Tesla (Model X), and Volkswagen (e-Golf). Within emerging
markets such as India, Mahindra launched the e2o lithium-ion vehicle.
• Price reductions for existing EVs (Nissan Leaf) and PHEVs (Chevy Volt) within the North American
market are further expected to have some positive impact on demand.
• Within the industrial segment, increasing utilization of battery back up for healthcare, military,
telecommunications, and other applications will likely drive demand.
• The grid and renewable energy storage segment is expected to show strong growth throughout the
forecast period. Source: Frost & Sullivan
14
Total Lithium-ion Battery Market - Percent Revenue
Forecast by Region
Key Takeaway: North America and APAC will remain at the forefront of growth.
0.0
20.0
40.0
60.0
80.0
100.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Reve
nu
e (
%)
Year
Total Lithium-ion Battery Market: Percent Revenue Forecast by Region, Global, 2012–2020
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
NA
EU
APAC
LATAM ROW
15
Revenue Forecast Discussion by Region
• The APAC market accounted for the largest share of revenue at 43.6% in 2013 because of its large
demand base for lithium-ion batteries used in manufacturing a range of consumer devices such as
smartphones, laptops, and tablets.
• The North American market, which accounted for 34.7% of the total revenue generated by lithium-ion
battery manufacturers in 2013, is expected to become the leading revenue generating source in 2020
because of the rising interest in alternative energy sources within the region.
• In addition, increasing demand for lithium-ion batteries within the automotive and industrial segments
is further expected to drive revenue growth in North America. The US market remains a prime target
for EVs, HEVs, and PHEVs among domestic and global auto manufacturers.
• The European market, which accounted for nearly 16% of the revenue in 2013, is expected to show
stable revenue growth because of continuing increased investments in renewable energy storage
across countries such as Germany.
• The European market is also showing some signs of growth within the EV market as companies such
as Tesla are gaining greater traction across certain countries such as Norway.
Source: Frost & Sullivan
17
Technology Trends - Battery Chemistries, Costs, and
Safety
• Given the temperature constraints faced by traditional lithium-ion batteries, manufacturers are
increasingly seeking materials that enable lithium-ion batteries to operate effectively and safely in
extreme temperatures.
• For instance, Leyden Energy has developed lithium imide-based electrolytes that minimize the
incidence of thermal expansion when operated in extremely hot temperatures. Leyden is also at the
forefront of developing silicon-based anodes that enable higher energy density compared to
carbon-based anodes.
• Similarly, Electrovaya Inc. has launched SuperPolymer 2.0 lithium-ion batteries that improve battery
efficiency and effectiveness across a range of applications and also exclude non-toxic material
N-Methyl Pyrrolidone (NMP), which is known to be hazardous to human health.
• SuperPolymer 2.0 is expected to have greater fire resistance and wider operating temperature
ranges, both hot and cold.
• While greater power and energy density remain the focus in new product development initiatives,
stronger emphasis is also being placed on reducing overall costs, including cells, battery-pack
materials, and battery management systems.
Source: Frost & Sullivan
18
Technology Trends - Role of Support Infrastructure
• While the availability of an effective and cost-efficient support infrastructure such as charging stations
and solar panels is on the rise, the overall number of deployments remains low.
• Despite the increase in charging stations within the automotive segment, their geographic
concentration is limited to major cities, hence failing to address range anxiety concerns of potential EV
buyers. The overall figure remains limited to a few thousand worldwide compared to the presence of
traditional fueling stations.
• For instance, Tesla, a leading marketer of EVs, reported 94 charging stations in the United States, 17
across Europe, and 3 in APAC. While there are other charging mechanisms besides Tesla’s
Supercharger stations, their number remains rather low compared to the over 130,000 gas stations
that exist in the United States alone.
• While most of the existing automotive charging facilities were built using government subsidies,
private sector investment in infrastructure is essential in fostering EV demand.
• Lacking short-term battery technology improvements that address driver range anxiety concerns, the
limited availability of effective (low charging time) and cost-efficient (installation and maintenance
costs) charging stations will continue to influence demand for EVs.
Source: Tesla Motors, Inc., ”Road Trips Made Easy: Charge in minutes, for free.” (May 2014); Frost & Sullivan
20
Automotive Segment - Outstanding Question
In the absence of significant charging infrastructure and the rather lengthier charging times, what
improvements need to be made to EVs to address range anxiety issues?
• A short-term answer to the above question may reside in convincing automotive OEMs to utilize larger
battery packs. For instance, unlike Nissan’s 24 kWh battery pack for Leaf, Tesla offers 2 battery size
options of 60 kWh and 85 kWh for its Model S EV. While a larger battery size increases production
costs and retail prices, Tesla’s recent success alludes to the fact that larger battery packs may be the
answer to range anxiety concerns in the short term. Tesla touts a driving range of 244 to 300 miles, at
55 miles per hour (mph) average speed, for its Model S, compared to the 75 to 125 miles for other
EVs.
• While using smaller battery packs leads to lower EV prices, an argument can be made that a car that
is not deemed functional because of a limited driving range may be unappealing to consumers at any
price. This scenario is essentially akin to what is taking place in the smartphone industry. For
example, while most carriers offer non-smartphones for free, consumer migration to smartphones
continues to grow despite higher prices as these phones deliver greater functionality.
• Lithium-ion battery vendors must work to reduce overall prices, hence allowing auto manufacturers to
consider using larger battery packs.
• The idea of battery-pack swapping, while helpful, will likely remain in an evolutionary stage, at least
during the first half of the forecast period. Source: Frost & Sullivan
21
Automotive Segment - Outstanding Question (continued)
• While expansion of charging stations is expected to occur over the forecast period, the mere presence
of such stations is less likely to convince consumers to purchase costlier EVs that offer a lower driving
range.
• Moreover, the reduction in charging time is also expected to have a limited impact on influencing
demand for EVs unless accompanied by improvements in the driving range for such vehicles.
• For instance, within the traditional (gasoline powered) vehicle market, the mere presence of
thousands of fueling stations does not translate into greater consumer interest in purchasing vehicles
with a lower driving range, regardless of the attractiveness of the sticker price of such vehicles. This
specifically holds true for markets such as the United States, where driving habits vary significantly
compared to other regions worldwide and where the need for instant gratification often affects
consumer behavior, which translates to shorter charging times, increased access to charging
infrastructure, and a higher driving range.
• In the near term, extending the driving range of EVs will likely remain a function of improvements in
battery technology or utilization of a larger battery pack, which is akin to Tesla’s approach for its
Model S vehicle that comes with much larger battery pack options compared to other EVs currently on
the market.
Source: Frost & Sullivan
22
Grid and Renewable Energy Storage Segment - Global
Projects
• The DOE’s global energy storage database shows a range of projects that are employing various
lithium-ion chemistries for grid storage applications.
• From a global perspective, the United States leads in the overall number of lithium-ion-based grid
storage projects. Most of these 41 projects, however, are concentrated in the East and West coast
states because of the greater regulatory push for grid and renewable energy storage in these
markets.
• As of December 2013, 16 projects across Europe were reported as active by the DOE. These projects
are scattered across Germany, Italy, the United Kingdom, and Spain.
• Within the APAC market, the DOE identified China, South Korea, and Japan as active participants in
the grid and renewable energy storage segment.
• From a capacity perspective, the sizes of these projects vary widely as some are currently in an
exploratory or trial stage, whereas others are actual commercial deployments.
Source: Frost & Sullivan
23
Grid and Renewable Energy Storage Segment - Trends
Within the grid and renewable energy storage segment, the following key trends are driving demand for
lithium-ion batteries:
• A changing regulatory environment requires utility companies to improve operational efficiency and
effectiveness through energy storage. Within the US market alone, utility regulators such as CPUC
are setting guidelines for utilities and other load-serving entities (LSEs) for energy storage
procurement mechanisms and goals. For instance, in October 2013, CPUC established an energy
storage target of 1,325 megawatts by 2020 for Pacific Gas & Electric Company, Southern California
Edison, and San Diego Gas & Electric. CPUC’s decision was guided by the need to optimize the grid
performance, including peak reduction, and to improve power distribution reliability.
• Alternative energy generation sources reduce greenhouse emissions. In this regard, greater
investments in renewable energy resources are being considered to help both the consumer and
commercial markets, including the grid and renewable energy storage segment, while also achieving
environmental sustainability goals.
Outside North America, organizations such as the European Association for Storage of Energy (EASE)
are making efforts to increase energy storage deployments that are designed to boost energy distribution
efficiency while also supporting climate goals.
Source: Frost & Sullivan
24
Consumer Segment - Trends
• The consumer segment continues to provide lithium-ion battery vendors with a stable source of
revenue growth.
• The continuing increase in the adoption of mobile computing and communications devices such as
smartphones and tablets is a major driver behind growth in the consumer segment. Expanding
product lines for these devices, such as various screen sizes and functionality, will likely keep the
consumer segment as a large source of revenue for lithium-ion battery vendors.
• Greater use of battery-draining and battery-hungry applications such as mobile video will likely force
OEMs to continue to incorporate higher-end and higher-priced batteries in smartphones and tablets.
• In addition, the development of wearable technology such as smart watches will likely continue to
provide a new avenue of growth for lithium-ion battery vendors.
Source: Frost & Sullivan
25
Industrial Segment - Market Trends
• Within the telecommunications and IT sectors, lithium-ion battery use for cell towers and datacenter
back-up powering is on the rise.
• In addition, lithium-ion batteries are increasingly being used in a variety of healthcare-related
applications such as back-up powering and implantable devices.
• Growth in demand across various industrial sectors and growth in other consumer, automotive, and
grid and renewable energy storage applications will likely result in demand outstripping supply,
thereby leading to a slightly higher average price per unit toward the end of the forecast.
Source: Frost & Sullivan
26
Contact Us To Find Out More
Source: Frost & Sullivan
Vishal Sapru Research Manager & Growth Consultant
Energy and Power Systems
210-348-1016 (O), 732-429-2252 (C)