Alternatives to Lithium in the Industrial Battery Race

23.02.2017 • Gold and Natural Resources

Nick O’Connor – Capital and Conflict (Great Britain) –

Let’s start our letter 39 light years away from Earth, at the TRAPPIST-1 solar system, in which Nasa has discovered seven potential “Earth-sized” worlds.

‪Three of them are capable of having oceans, which increases the chances of life being present (or having been present) there. What does that have to do with becoming a better, wealthier investor?

‪Nothing! Except, perhaps, to remind us of just what science and technology can achieve. And hey, sometimes a little perspective on our own problems is useful.

‪Closer to home, but in a somewhat related field… battery tech. Wait! There is a connection between those two ideas. Did you know that the technology behind lithium-ion batteries actually came out of the Space Race? It was one of the many “spin-off” technologies that came from the US racing Russia to the Moon. Competition breeds innovation in a way nothing else does.

‪The field of battery tech has come a long way since then. And it has a long way still to go to fulfil its potential.

Which brings us back to earth, and back to the markets. It may not always feel like it, but we’re in the middle of a huge shift in the way we generate and store power.

Change on this scale doesn’t happen overnight. At least it doesn’t feel like that. But look away for a while and suddenly the whole industry takes another giant leap forward. History books in 50 years will likely describe the change as inevitable and sudden.

Take battery technology. It’s the key to so many shifts in the way we generate energy. Renewables like solar, wind and tidal power can scale up as quickly as you like, but if battery tech doesn’t scale with them, there’s nowhere for us to store all that power.

The National Grid helps distribute traditional sources of energy; tankers and pipelines help move fossil fuels around; and reservoirs store water for us. Battery tech performs the same role for renewables.

And traditionally it’s been much slower to improve than, say, solar power. One reason for that I’ve often heard repeated is improving battery efficiency is a chemical process which isn’t an “exponential” industry and slows things down.

But still, battery tech is coming along. Earlier in the week Bloomberg reported that industrial battery costs have fallen 40% since 2014. That’s highly significant. If it continues – and efficiency continues to improve – it will change the industry in a big way. The National Grid here in the UK has already begun signing storage contracts. Investment is flowing in across the world.

Note that we’re talking about industrial batteries here, by the way. We’re not talking about power for your phone, laptop or even an electric car. We’re talking about storage on the power station level.

Lithium-ion doesn’t necessarily reign supreme here as it does in other places. There are other options, like aluminium-based batteries for instance. These are far too heavy to go in a car… but in an immoveable power station scenario, they could be competitive.

If you want to learn more about the competition among different battery tech, Exponential Investor editor Andrew Lockley put together a series of reports on it last year. They’re free. The industry has moved on since he put it together, but it’s still a useful resource if you want more information.


Life expectancy: another threshold crossed

A world first! Life expectancy just smashed through another barrier – albeit a symbolic one.

According to an Imperial College London and World Health Organisation report, which analysed life expectancy across 35 different countries, South Korean women now have a life expectancy of over 90 years.

It’s all a part of a bigger, worldwide trend. Life expectancy worldwide is increasing. That’s thanks to improvements in medicine and technology, though increasingly poor nutrition provides a counterweight. Who knows how high life expectancy would be without fags, booze and burgers? Life might be longer but less interesting without the odd drink.

I’m only half joking there. Perhaps life expectancy is another example of a trend we talked about earlier in the week – it’s quantitative, but takes no account of quality of life. Surely that’s important too?

Which ties us back to the idea I’ve been talking about all week: planning for retirement and generating a decent income. Increasing life expectancy affects both of those things. We should celebrate the fact that people today can expect to live longer than any other generation in history – but understand the consequences of that.

On the personal level, it means you need a plan to fund a “third age” that, statistically speaking, will be longer than it was for previous generations. That’s not just about money (quality of life isn’t just a £number), but it’s a big component. You don’t want to run out of money before you run out of life, as the saying goes.

That means doing what you can to avoid eating into your capital and generating a decent income. How do you do that? Well, if you’re looking for ideas you could do worse than following this link and taking a look at our “30-Day Income Challenge”.

That’s the micro, personal finance level. The challenges posed on the macro, big picture level are different. How do you fund a welfare system as the balance of older people to younger moves in an unhealthy (financially speaking) direction?

I got an interesting note from a reader about this earlier in the week.


You all seem to be implicitly saying that ALL State retirement schemes have ALWAYS been Ponzi Schemes and were NEVER construed as self-funding by those making contributions. This is a fascinating statement and I’d really like to know if you ALL actually believe it.

Do you really believe that no State-funded retirement scheme was ever designed to use the actual contributions of members to generate sufficient reserves for those same members to be able to draw an adequate pension in retirement?

Because if you truly believe all pension schemes are Ponzi Schemes then we should shut them all down; return all funds to the individuals and say you’re on your own – good luck.

And therein lies the problem. What “funds” would we return? The UK welfare system doesn’t set your contributions aside in a fund. It uses them to pay current liabilities.

(This is true of most other Western nations with the exception of countries with a sovereign wealth fund, which are usually resource-rich nations like Norway.)

You might have “paid in” your whole life. But those contributions paid other people’s benefits. Given that, the key question is: what is the ratio between contributors and claimants? That is entirely a question of demographics.

It’s ultimately mathematical, not moral. If the number of claimants overwhelms the number of contributors… the system breaks down. Then you have to either renege on your promise or borrow money.

You might describe that as a Ponzi scheme. I wouldn’t. I’d say it’s a system that works when you have a large number of workers to retirees. In that scenario, which of course was the situation when these systems were set up, then rewarding people who’ve worked their whole life with a pension in retirement works.

If the situation changes… and it is changing… then it doesn’t work. Then the only moral thing to do is inform people as to what’s happening and find a way to solve it. Not to keep blindly promising people things until the entire system collapses.

Perhaps you disagree. Or perhaps you take every promise the state makes to you with a large pinch of salt (another drag on life expectancy, apparently). Maybe being in control of your own financial situation is paramount and any state benefits on top of that are a bonus. If that’s the case, have a look at this – it’ll be perfect for you.

Tax the robots!

Maybe there’s another way out. At least, according to Bill Gates.

In a recent interview he suggested that we start “taxing the robots”. If a robot takes someone’s job, it is “taxed” so that the state doesn’t lose out on revenue. Maybe we should tax the robots to pay for our retirements?

Here’s an excerpt of what Gates had to say:

Certainly there will be taxes that relate to automation. Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.

Hmmm. I’m not sure about that one.

What about the people that designed, built and sold the robot? Aren’t they paying taxes? Taxing the creators of a machine then taxing the machine itself sounds like a double tax to me. Why not add a third layer in? Slap an extra tax on purchases of goods or services produced by robot labour?

That wouldn’t work, would it? We’d all be paying through our noses. “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing,” as Jean-Baptiste Colbert once famously declared. And robots don’t have feathers!

Until tomorrow,

Nick O’Connor
Associate Publisher, Capital & Conflict

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