As the world’s demand for energy continues to grow, a new limitation is coming into focus – energy storage. Technologies that capture and store energy from intermittent renewable sources such as wind and solar are imperative to realize the world’s growing power needs. This will require an ambitious increase in the production and installation of technologies such as lithium-ion batteries. Scale and cost are just some of the challenges facing manufacturers of lithium-ion batteries that will play a pivotal role in the transformation of our transportation and energy grids.
“Gigafactories,” gigantic battery-production hubs that bring together multiple companies and component makers, are capable of delivering the necessary economies of scale for these massive energy storage needs.
Koch Industries is beginning a partnership with fast-growing, Norway-based company FREYR that aims to specialize in developing next-generation battery production hubs. The goal of this partnership: Evaluate the potential of building cutting-edge gigafactories in the United States.
Jeremy Bezdek, managing director of Koch Strategic Platforms, Koch’s recently created investment arm, explains that the 50:50 joint venture with FREYR could result in gigafactories boasting an initial production capacity of 50 gigawatt-hours per year by 2030. The facilities would make batteries for the U.S.’ burgeoning electric vehicle (EV) industry and storage-hungry grid.
Koch and FREYR aim to finalize the decision to build the manufacturing facility by 2022.
Tom Jensen, FREYR’s chief executive officer, says Koch’s broad and deep industrial expertise, commercial acumen and global footprint are a perfect fit for his company, which was recently listed on the New York Stock Exchange. “Koch is strong on supply chains, energy management, site selection, customer relationships, capital, strategic wherewithal and knowledge in the energy space in general,” he says. “Anyone who is a startup company in the battery space would want to team up with that kind of industrialization muscle.”
If anyone can achieve economies of scale for battery manufacturing, it’s Koch, says the FREYR executive. “Building gigawatt-hours of capacity allows you to drive down the unit cost of production, which is fundamental to profitability,” he says. Driving down cost of production makes the technology more accessible to the market.
Koch and FREYR are initially investing $50 million and $20 million, respectively. Additionally, the joint venture partners have secured a conditionally exclusive license to deploy 24M’s SemiSolid™ technology in the U.S. for EV and energy storage systems applications.
24M’s cutting-edge technology and hyperefficient production processes are crucial to lowering costs and scaling output. The earliest major applications for lithium-ion batteries were camcorders and other small handheld devices in the 1990s. But as Tom explains, today’s applications are much larger, with automakers deploying the batteries in EVs and utilities using the cells in sizeable grid-connected devices that store and discharge renewable energy.
Although the markets for lithium-ion batteries have changed over the past three decades, the production process has not. The traditional approach relies on large, energy-intensive facilities and a series of cumbersome manual processes. “This creates plenty of headaches for battery manufacturers,” Tom says. But 24M, which was co-founded by renowned material scientist professor Yet-Ming Chiang, is breaking the mold.
24M’s batteries harness large, thick, flexible electrodes that help to maximize their electrochemical potential. “It’s a very clever way of enabling the production of very large batteries,” Tom says. The U.S. battery-maker has improved efficiency on the production line by eliminating 10 of the 15 processes involved in manufacturing lithium-ion batteries, while improving quality and reliability of the batteries manufactured.
“It leads to a dramatic reduction in all the things required to produce a battery unit, such as capital expenditure, energy consumption, the number of employees and acreage,” Tom explains. FREYR already employs a similar business model for large-scale battery production in Europe, he adds.
The joint venture partners would also seek to maximize stewardship by potentially situating the hub close to raw-material supply sources, processing facilities and water treatment plants. “We want to have a localized supply chain and to build up competence close to where we are producing the batteries in the first place,” Tom says. Koch’s decades of expertise in building strong supply chains, robust logistics and industrial hubs for its businesses will be invaluable in this regard, he adds.
Tom says the target market for the batteries – the electricity grid, EVs and mobility applications within the U.S. – are all “huge opportunities in their own right.” By 2040, FREYR's executive says, market projections indicate global battery demand will be approximately 20 terawatt-hours (20 TWh), split roughly between energy system storage and mobility. “The growth trajectory looks like this,” Tom explains, raising his arm at a steep diagonal angle.
FREYR is relishing the opportunity to build its production footprint in the U.S., Norway and Finland. Offering battery supply from multiple locations will allow the Norwegian company to “reduce logistical costs, address security of supply issues and enhance our ability to produce localized variants and solutions,” Tom says.
FREYR’s listing on the NYSE also provides the company access to the world’s most sophisticated capital markets, Tom says. “We’re also very excited as to how we can industrialize some of the brilliant ideas that are being developed in Harvard, MIT, Yale or Stanford and elsewhere.”
Tom believes Koch and FREYR have the perfect recipe for gigafactory build-out. “Markets, energy, people, the right technology, industrialization skill and partnership – we have all those things,” he says. “Now it's up to us to identify the top locations and see how many of them we build and how fast.”
It’s not surprising the FREYR executive is eager to get started. “Koch understands industry. They understand scaling. They understand focus. They understand capital,” he says. “We couldn’t have asked for a better partner as we aim to build next-generation, cutting-edge battery solutions in the U.S.”