At the outset of the most recent financial downturn in 2008 enthusiasm grew for funding materials science research into energy storage. The thought at the time was that manufacturing in this sector could ease employment concerns. Concerns about global energy pricing could be alleviated with cheaper storage, which would reduce domestic US dependence on foreign resources.
With Tesla’s recent announcement around the ‘GigaPlant’, which if successful will effectively double global lithium ion battery manufacturing capacity, shows that our ability to forecast the development of this industry was significantly off. Some of the beliefs that were held in 2008 include:
- There will be many winners in the industry, from both a technology and commercial standpoint.
- There will be many industrial winners (as opposed to consumer-facing winners) – companies will be created and exited that sell their technology to others, who then in turn sell to consumers.
- We will be able to combine lab scale research much like Legos – this in turn will create a compounding effect leading to even greater technical achievements.
- Demand will grow for batteries as they adopt new form factors.
What we find instead, six years later, is quite different:
- There looks to be a single large winner (albeit they have numerous supply chain partners).
- The winner has direct exposure to consumer desires – they are stimulating end demand for their product.
- Research has not yet provided large ‘step-function’ improvement. Rather, we see persistent improvement yielded from improvements in manufacturing and steady focus on small gains.
- The dominant player focused on working with established form factors (PC sized cells).
In hindsight, maybe we shouldn’t be surprised. Tesla’s ability to deploy such manufacturing capacity echoes that of Ford’s River Rouge Complex. The addition of this capacity should have a positive impact on the industry and the communities in which it is based, even if we didn’t anticipate its scale or composition.