John Petersen

My last article, "The Obama Fast Track for HEVs" graphically highlighted some critical cost issues that I've been writing about for several months and was surprisingly popular with readers. After responding to numerous comments and considering the gaps in that article, I believe a follow-on article is appropriate to provide additional color, put a finer point on the differences between advanced lead-acid and lithium-ion batteries and try to relate those differences to the rapidly evolving HEV markets.

As I explained last week and in a November 2008 article titled "Alternative Energy Storage; Lithium, Lead or Both?" micro hybrid, mild hybrid and full hybrid vehicles [HEVs] are classified as "power applications." They use relatively small battery packs to:

• Stop and start the internal combustion engine [ICE] when the vehicle stops and starts;
• Provide moderate amounts of power to launch the vehicle from a stop and improve acceleration;
• Recover all or part of the energy that is normally lost in braking to recharge the batteries; and
• Power accessories like heat and air conditioning while the ICE is off.

Micro, mild and full hybrids need a battery pack that can accept a fast charge over a brief braking interval, deliver that stored electricity over a brief acceleration interval and repeat the process hundreds of thousands of times over the life of the vehicle.

In comparison, plug-in hybrids [PHEVs] are classified as "energy applications." They use much larger battery packs to:

• Power the vehicle in electric-only mode for a distance of 10 to 40 miles before starting the ICE;
• Recover all or part of the energy that is normally lost in braking to recharge the batteries;
• Stop and start the ICE when the vehicle stops and starts; and
• Power accessories like heat and air conditioning while the ICE is off.

Since power is rarely an issue in larger battery packs, the critical requirement for PHEVs is a battery pack that can deliver substantially all of its stored energy over the time required to drive 10 to 40 miles and repeat that process once or twice a day for the life of the vehicle.

Weight and Volume

Most people find that battery comparisons based on energy densities are confusing because they use metric measurement terms and do not provide a meaningful context for the raw numbers. The following table is my effort to re-state the most common energy density values in familiar weight and volume terms. My goal is to show what energy density actually means to the owner of an HEV. For purposes of the table, I used energy densities of 30 Wh/kg and 50 Wh/l for advanced lead-acid batteries and 100 Wh/kg and 150 Wh/l for lithium-ion batteries as my starting point. I then did the necessary conversions and calculated the weight and volume advantage of lithium-ion batteries for each of the principal HEV configurations.

For reference, a subcompact will typically weigh 3,000 pounds and have 10 to 12 cubic feet of trunk space.

Battery Cost

In a July 2008 report on its Solar Energy Grid Integration Systems – Energy Storage (SEGIS-ES) program, Sandia National Laboratories estimated the current cost of advanced lead-acid batteries at $500 per kWh and the current cost of lithium-ion batteries at $1,333 per kWh. I'm aware of PR claims and forward looking statements that suggest lithium-ion battery costs may be lower, but I've not been able to confirm lower prices based on published price lists from first tier manufacturers or quantify the meaning of terms like significant and substantial. So while I'm not entirely comfortable that the Sandia values are right, I've not been able to find other numbers that I think are better. The following table compares the estimated cost of using advanced lead-acid and lithium-ion batteries in each of the principal HEV configurations.

Total Vehicle Cost

For most American consumers, I believe the most important number will be the incremental cost of an HEV over a comparable car with an ICE powertrain. The following table compares the estimated cost premium for each of the principal HEV configurations using advanced lead-acid and lithium-ion batteries.

The following graph summarizes the same basic information in a slightly different format.

(click to enlarge)

Market Forecast

Global market forecasts for HEVs vary widely and are evolving rapidly in response to new laws and regulations. In an October 2008 AW Briefing on "The Global Oil Paradox: Transforming the Automotive Industry," Anil Valsan of Frost & Sullivan presented a slideshow that included two highly informative graphs.

The first graph showed three growth scenarios for the global HEV market. At the time, the biggest unknown was the automobile industry’s response to EU legislation that requires manufacturers to reduce average CO2 emissions from the current level of 160 g/km to 120 g/km by 2012. Eight months later, it’s clear that the industry response has been a concerted effort to standardize micro and mild hybrid technologies throughout Europe. As I noted last week, the Obama administration has recently decided to accelerate CAFE standards by five years. That change can only serve to increase the rate of standardization for micro and mild hybrid technologies. Under current conditions, it looks like Frost & Sullivan’s “optimistic” view from last October will probably fall well short of the emerging reality.


(click to enlarge)

The second graph showed Frost & Sullivan's forecast of HEV sales through 2015 and confirmed my oft repeated argument that cars with plugs will not be a material segment of the HEV market for the foreseeable future and the major business opportunity is in micro, mild and full HEVs.


(click to enlarge)

In combination, the regulatory changes from Brussels and Washington DC have fundamentally altered market dynamics in the HEV sector and increased the critical importance of five facts.

1.Aggressive CO2 emission standards will increase the rate of HEV standardization in the EU;
2.Acceleration of CAFE standards will increase the rate of HEV standardization in the US;
3.The EU standards will be implemented before most proposed lithium-ion battery plants can be built;
4. Since adequate supplies of lithium-ion batteries will not be available during the 2009 to 2012 EU phase-in window, most major automobile manufacturers will turn to advanced lead-acid batteries for a substantial portion of their micro, mild and full hybrid product lines; and
5. Once advanced lead-acid batteries earn the first mover advantage in Europe, it will be very difficult, if not impossible, for lithium-ion batteries to overcome an entrenched and cheaper alternative.

I have consistently argued that budget conscious consumers would prefer cheap lead-acid batteries to smaller, lighter and more expensive lithium-ion batteries, particularly for HEV applications. The timing of the new EU regulations has put automakers in a position where they can’t afford to wait for “the battery of tomorrow.” Instead they have to go to work immediately and meet the CO2 emission standards with batteries they can buy today from established manufacturers. Under those circumstances, I’m convinced that advanced lead-acid batteries will dominate the HEV markets until a clearly superior battery technology is developed.

The market dynamic may change over the long-term if PHEVs become a dominant hybrid configuration. It may also be impacted by future changes in the relative price advantage of advanced lead-acid batteries. For the foreseeable future, however, I believe the lion's share of the revenue gains from the HEV revolution will flow to companies like Johnson Controls (JCI), Enersys (ENS), Exide (XIDE) and C&D Technologies (CHP) that have substantial existing manufacturing capacity in both Europe and the US, and from technology driven newcomers like Axion Power International (AXPW.OB) that can rapidly and inexpensively expand their production capacity to satisfy soaring demand from the HEV market.

DISCLOSURE: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide (XIDE) and Enersys (ENS).