Energy Storage Boom Drives Battery Shift, Leaving Nickel, Cobalt BehindIn 2023, Fidra Energy acquired a 55-acre site in northern England to develop a 1.45-gigawatt energy storage facility, set to be Europe’s largest upon completion. The project, known as Thorpe Marsh, faced initial financial challenges. “We were struggling to make the economics work,” said Chris Elder, CEO of the Edinburgh-based company. However, a significant cost reduction in lithium iron phosphate (LFP) batteries, which dropped by nearly half in 18 months, has enabled Fidra to move forward. The company plans to begin installing battery units next year for the £600-million ($800-million) project.

A display shows lithium raw materials mined in Western Australia, which are used in the production of batteries for electric vehicles, in Perth, Australia, May 24, 2024.

LFP batteries are driving a surge in energy storage projects, outpacing the growth of electric vehicle (EV) sales. According to UBS, global storage capacity needs to increase eight-fold by 2030 and 34-fold by 2050 to support expanding renewable energy sources. While EVs currently lead battery demand, energy storage is projected to account for about 20% of the market by 2030, per Rho Motion. This growth supports stable power grids transitioning to cleaner energy, helping prevent outages like the one in Spain last month.

The rise of LFP batteries, which are more cost-effective and exclude cobalt and nickel, is impacting markets for these metals. “You’ve seen a truly monumental shift lower for nickel and cobalt in the intensity of commodity use in battery demand,” said Martin Jackson of CRU consultancy. Nickel prices have halved over the past three years, and cobalt prices have dropped by 60%, driven by oversupply and slower EV adoption outside major markets. Meanwhile, global EV sales grew 23% last year, but energy storage battery demand surged 51% and is expected to rise 40% this year.

The shift to LFP batteries supports greener national grids, crucial for net-zero climate goals. Their affordability and improved performance, with lifespans now reaching 20 years, enhance their appeal. “The share of stationary storage within the battery demand picture is growing very significantly,” said Iola Hughes of Rho Motion, noting its importance for lithium markets despite a 20% price drop in lithium carbonate this year due to oversupply.

Environmental and ethical concerns also drive the LFP shift. “There are expectations on the battery suppliers and the traceability over where all of this comes from,” said Lars Christian Bacher, CEO of Norway’s Morrow Batteries, highlighting issues with cobalt and nickel sourcing. Morrow plans to produce 3 million cells annually, enough to power 1 million homes for an hour when fully charged. Other manufacturers, like South Korea’s LG Energy Solution, are also expanding LFP production to meet rising storage demand.