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25 May 2022

LG Energy shift to LFP in homes

LG Energy Solution revealed this week that it has pivoted away from its existing lithium ion technology towards LFP (lithium iron phosphate) chemistry, which is rapidly gaining popularity because it is cheaper and less volatile than other Lithium chemistries such as NCM (Nickel Manganese Cobalt Oxide).

Just a couple of years ago LG was continually attacking LFP in brochures and in blogs on its website on the basis that the NCM cathode was simply more effective. Most lithium ion players are seeing the argument shift to one of thermal runaway and safety versus higher energy density, especially where grid batteries are concerned and where the highest energy density is not needed. Tesla has said it will use the highest energy density for the toughest jobs and LFP for the rest – however its real strategy appears to be more where it uses NCA (Nickel, Cobalt Aluminum) in competitive markets, such as the US, and LFP outside the them.

This may be an accident of supply arrangements with CATL pushing LFP more and more, and supplying Tesla Shanghai with batteries. While Tesla has designed its own 4680 battery cell, and has awarded Panasonic a supply arrangement for these, made in Japan and shipped to the US. CATL is clear that it plans to exceed NCM sales by growing LFP over the coming years.

Last month it reported a 26% fall in profits, due to rising cost making lithium ion batteries – and of the two LFP costs are lower. LG Energy solution raised $10.7 billion in January, and then promptly released Q1 numbers down 24%, for the same reasons. It is the rare earth metals led by Cobalt that is driving the switch to LFP.

On an explainer on the Samsung SDI site, the graphic below appears, showing the various chemistries it supports in li-ion cathodes and their qualities, clearly denoting LFP as worthy, but better still safe.

From the Grid Energy Storage point of view safety has overnight become a factor for LG, which provided both sets of battery modules for the fated Moss Landing site, which simultaneously registered the title of world’s largest grid battery and world’s biggest thermal issue in a battery, which both phases of the project failed due to sprinkler issues last year.

Last August, LGES was also involved in recalling 10,000 batteries from energy storage systems throughout the US due to lithium ion batteries smoking and catching on fire.

The organization of LG Energy Solution tends to be separate factories outside the US, one to make cathodes and others to produce the cell, and its partners to make these up into the more useful formats they need for a particular application, so the pivot may be somewhat less painful than for other companies – but it will still cost a lot of money

No surprisingly rumors of a shift to LFP have wafted around LGES for a year, and in its IPO documentation it talked up the risks of both going to LFP and not going to LFP – its Q1 numbers seems top have made up its mind for it as at a European exhibition last week senior executives of LG talked up LFP as its future and showed product for the first time off its stand, especially in connection with its RESU Flex, home battery. This battery LG disingenuously shows in adverts being installed “inside” a home, despite the continued potential for over-heating.

RESU Flex series began as an NMC battery but it said it now plans LFP-standard cells by October 2023 and LFP long cells by the end of 2024. In the LGES makes the RESU range in a factory in Holland, in Michigan.

So this makes this week’s announcement by Stellantis key to the car-makers future, with the location of the long awaited Samsung SDI plant to be based in Kokomo, Indiana in the US. Initially it will produce 23 GWh of battery and be in operation by 2025, rising to 33 GWh eventually. This represents another $2.5 billion investment for the two companies. This now means that both Stellantis and General Motors have relationships where they are reliant on LG for all or some of their batteries over at least the next five years.

These numbers are already included in our gigafactory count which paying subscribers can download from here.

Stellantis can hardly have LG producing LFP for its vehicles and have Samsung SDI produce a different battery chemistry? So we don’t expect the new factory to use LFP, more likely it will continue with NMC. But that makes it even less likely that the batteries can be used for anything else – such as home batteries, even after they are depleted in cars.

So most US battery factories will continue with NMC or something like it. LGES in its partnership with General Motors uses 1% Aluminum to create an NMCA cathode for the Ultium batteries.

But just how much safer is LFP anyway? All lithium ion cells experience thermal runaway, which is the tendency to get hotter fast, once they are already hot and while LFP in tests shows up best, it is only in line with its lower energy output. During thermal runaway batteries produce flammable hydrocarbon gases containing toxic CO and can burst into fire.

Rethink Energy has been saying that the rising costs of lithium ion batteries due to cathode materials scarcity, will lead to a suspension in the falling price of battery cells for two to three years. i.e. prices will stop falling, which in turn means EV car prices will also stop falling for a while. After a shift to LFP, lithium players are also expected to shift to solid state batteries which do not have a liquid electrolyte, and this will be another factory “re-kitting” process that they will have to start paying for in the 2025 time frame.

LG may push the idea that this is only for home batteries, but once you set up R&D into05 LFP, it will find that it can make a case for their use in cars.

While the lithium ion battery has virtually unlimited market growth ahead of it into the “$trillions,” any underfunded battery maker will be severely tested during the next 3 to 4 years, navigating these transitions – and this will create a lull in energy storage projects, quite simply because they will either cost too much, or be too worried about thermal runaway – opening up a brief opportunity to produce a safe alterative chemistry battery and drive down its costs below that of lithium ion, so that it retains the initiative in grid storage applications even after 2025. We expect at least 3 alternative non-lithium chemistries to build economic bases in China, the US and the rest of the world. Perhaps they will build a base as large as 100 GWh of manufacturing capacity by that time.

Most alternative battery applications have a lower energy density than lithium ion, so can’t rival them in vehicle applications. The beauty of using lithium in car batteries is that there is always someone present (the driver) paying attention to overheating alarms, although this may not be true once vehicles shift to “full self-driving.”5