EXCLUSIVE: Steven Minnihan: Lithium-ion To Take The Lead As Battery Technologies Focus On Backup/UPS Markets

As the grid storage market witnessed one battery failure and poorly valued acquisition after another, the uncertain future of battery technologies went from extrapolation to fact…until now. In an exclusive interview Steven Minnihan, Lux Research Senior Analyst, reveals what appears to be much more than a glimmer of hope for these technologies and where exactly their fate will lie. Amidst the tumult, battery technology developers, led by Lithium-ion, turn to different safe havens: backup and UPS markets. “When you look at the total market for backup and UPS, there are about 800 gigawatts of backup and UPS capacity already installed today and that's incredibly massive compared to almost any other energy industry because it's a very well understood and mature application”, explains Minnihan. The customers in these markets have been using these technologies for decades to ensure that UPS systems keep their critical loads up and running if power outages occur. These are mature and stable markets thus will allow moderate, yet steady, growth to take place in the battery industry. With this shift comes great power and responsibility. On the one hand, focusing on these markets paves the way for aligning global demand with anticipated supply. Here's the catch: Li-ion still needs to repair its tarnished reputation, which tends to precede it. Minnihan says, “I do believe that Lithium-ion can become the industry standard, but it really needs to clean up its reliability profile...We definitely do see Lithium ion being the go-to technology for UPS on a 10 to 20 year timeline. “ After all, in UPS markets especially, Li-ion has the upper hand due to its superior lifetime value proposition and smaller footprint compared to the current ‘go-to' battery, the lead-acid battery. As for the grid storage market, it's unlikely to be directly affected by this shift. The technologies adopted in the UPS and backup markets have strikingly different requirements in terms of the scale of the system, duration, and the environment, from those adopted in the grid storage market. The revival of the grid storage market lies in the palm of mandates such as the new California energy mandate, enacted in October 2013. “It comes down to project execution for these 2014 projects…the companies that have initial contracts in California must execute on a strong timeline and deliver a product that has the full software and controls capabilities to meet the utilities needs”, says Minnihan. When asked if there are still other up and coming markets to watch, Minnihan says, “We're kind of out of ideas for new markets. There's no other application on the horizon that hasn't been addressed yet.” The key is to combat slow project acquisitions by tapping into the demand of the mature markets and not diving into the next best unknown. As for Li-ion batteries themselves, “We're coming towards the end of Lithium-ion innovation”, says Minnihan. To be an enterprising, forward-thinking, and innovative developer in a decade in this industry is to look towards chemical systems technologies that are quite different from Li-ion, such as flow and molten salt batteries. Some may attempt to throw in the Lithium-air battery into the ring of contenders, but according to Minnihan, that technology is not nearly mature enough and is at least 10 years from commercial deployment. However, there are other metal “air” systems, such as the Zinc-air battery, that are making significant headway in their internal validation and may even be available as soon as 2015. Perhaps then Li-ion will be given a run for its money.