In this blog series, I’ll explore these variables and their impact not only on the lead battery industry, but also on energy storage across multiple chemistries and technologies, and how the industry can navigate the disruption. Since electrification is at the heart of change in more industries than batteries, that is a good place to start.

The Age of Electrification

The “age of electrification” is driving the increased demand for power at record rates. Total U.S. energy consumption is projected to increase by 15 percent by 2050. What is really driving this increase in energy demand? It is a convergence of the movement to shift from energy derived from the earth’s elements to energy captured from the sun or wind and the race to digitize every aspect of our lives. Each requires massive amounts of energy to build the industrial base to support these movements.

Energy consumption in the industrial sector is expected to increase as much as 32 percent by 2050. Efforts to revive domestic manufacturing through federal funding of the CHIPS and Science Act, Inflation Reduction Act, and Infrastructure Investment and Jobs Act have led to record investments in manufacturing and industrial facilities that require a lot of energy to operate.

We are also seeing a rise in data centers and their increasing energy needs to accommodate our expanding reliance on digital technology and AI. It is estimated that AI responses require approximately 10 times the electricity of a typical Google search. Data centers could account for over 40 percent of U.S. electricity load growth from 2023 to 2028. The increased growth would require significant investments in new energy generation.

Electrification in the Transportation Market

Electrification is undoubtedly a megatrend, and more batteries are needed to support our mobile, unplugged lifestyles. The massive supply and the falling prices of lithium batteries have made this battery chemistry nearly ubiquitous across every aspect of our daily lives. From smart watches, cell phones and laptops to electric vehicles (EVs), each relies on a battery. Energy consumption in the transportation sector alone is projected to increase by as much as eight percent by 2050 as EVs gain market share.

However, industry analysts report that 57 percent of consumers are not likely to consider an EV. Charging infrastructure is one of the main roadblocks. Over 50 percent of consumers cited limited charging station availability and infrastructure as the top reason for not considering an EV.

While EV sales have slowed, consumers are showing greater interest in hybrid vehicles. Hybrid sales grew five times faster than EV sales in February 2024. Hybrids offer the best of both worlds. They can run on a charge much of the time, meaning drivers can reduce fuel costs and emissions. But a hybrid’s gasoline-fueled engine also gives drivers peace of mind on longer trips. These benefits are available at a lower price point than a brand-new EV.

Clean Energy and the Increased Adoption of Lithium Batteries

The clean energy transition movement is focused on adding more renewables to the grid to reduce emissions from energy generation. Solar energy is expected to make up 58 percent of the new capacity in 2024. Battery storage increased by 5 gigawatts in the first seven months of 2024 and is on track to double the existing capacity to 15 GW by the end of the year. That trend is projected to continue in 2025 to more than 40 GW of battery storage. This capacity growth is critical to meet the increased power demands of electrification.

The rise of the lithium battery and its association with clean energy efforts is at the heart of electrification. The trend will continue as more lithium battery manufacturing capacity is added and the cost of lithium batteries decreases. We will also see lithium further encroaching into the market share of marine, golf cart, powersport and lawn & garden applications within the transportation market, as well as industrial applications such as forklifts and stationary applications like backup power and renewables storage.

Addressing the Challenges Created by Electrification

As the world has become more dependent on lithium battery technology, we must recognize, and work to minimize, the impact of supply chain disruptions. China currently controls 77 percent of the global lithium battery production capacity. It is necessary to establish a domestic lithium battery supply chain, to reduce our dependence on “countries of concern.” Over the next five years, the U.S. is expected to increase capacity more than 10 times, moving into second place. Despite all the investments to compete, China is projected to remain in that dominant position.

China dominates not only battery manufacturing but also the entire supply chain, from the mining of metals to battery cell assembly to producing EVs. While U.S. auto manufacturers pull back on EV strategies due to high manufacturing costs and low consumer demand, China is gearing up to build plants in Mexico to manufacture EVs for the U.S. market. With new stringent EPA emissions requirements and eight states banning the sale of new gas-powered vehicles in 2035, consumers will likely be forced to choose between expensive domestic EVs and cheap Chinese imports EVs.

Investment inequity is also an issue. The Inflation Reduction Act (IRA) set aside $369 billion to help businesses and consumers transition to more sustainable energy sources and promote domestic manufacturing. To date, 180 projects, resulting in $115 billion in the total investment dollars, have been attributed to the IRA, with 68 percent of those dollars in batteries.

While there are some investments in non-lithium batteries, the vast majority of the IRA investments concentrate on EVs and the lithium supply chain. This focus does not address the aging grid infrastructure or the integration of increased renewable energy sources. In the next blog, I will outline the key areas for the battery industry to target for the future of energy storage.

By Melissa Floyd
Vice President of Communications and Digital Marketing