LG Energy Solution Capitalizes on Battery Storage Demand

Aug 17, 2023

LG Energy Solution will invest about $5.5 billion to build a battery storage complex in Arizona, consisting of two manufacturing facilities: cylindrical batteries for electric vehicles and lithium iron phosphate pouch-type batteries for energy storage systems.

Most people know about battery storage – the devices that store and release energy for shorter spurts of time. But other options are also emerging. Commercial and industrial enterprises use energy storage to harness electricity during the day and release those electrons at night, limiting the price spikes. So are utilities. The twin goals are to increase renewable power usage and to provide electricity during peak demand. But the high price remains an impediment.

As for LG, the cylindrical battery manufacturing facility aims to start mass production of 2,170 cells in 2025, mainly for electric vehicle makers in North America. It will be the first-ever US cylindrical battery manufacturing facility solely invested in by a Korean battery manufacturer. The manufacturing facility for LFP pouch-type batteries has high energy densities and is intended to last at least 15 years. Production will start in 2026.

"Our decision to invest in Arizona demonstrates our strategic initiative to continue expanding our global production network, which is already the largest in the world, to further advance our innovative and top-quality products in scale and with speed," said Youngsoo Kwon, CEO of LG Energy Solution, in a release. "We believe it's the right move at the right time in order to empower clean energy transition in the US"

Batteries have a critical shortfall: they cannot provide long-term storage. They can charge and discharge, keeping the electrons flowing for four hours at a time, although "flow batteries" can release energy for 15 hours compared to "lithium-ion" batteries. If a catastrophic event such as a wildfire occurs, then diesel generators can provide long-term relief, although they too have limits – the amount of available fuel.

Lithium-ion batteries dominate the market because they have higher energy densities and can store more energy. But lithium iron phosphate batteries are more durable – able to handle higher temperatures and harsher weather conditions. Those lithium ion phosphate batteries can be discharged between one to eight hours, depending on the power and energy requirements. And the solution is easily scalable. In other words, the battery bank is sized to fit the expected demand.

"Batteries are a short-term solution to a long-term problem," said Chris Allo, president of ElektrikGreen, a Colorado-based developer of hydrogen-based power storage solutions. "They work for temporary outages, and they wear out. With hydrogen, I can fill a tank and empty a tank a million times."

Hydrogen is stored in tanks while leaving a low-carbon footprint. Solar panels will generate excess electricity, which, through an electrolyzer, is turned into pure hydrogen. That gas is stored in a tank before being piped through a fuel cell. If solar is used, it is called "green hydrogen." But the goal is to ratchet down the cost of this whole process.

Beyond hydrogen, there is pumped hydropower – or the creation of large-scale energy reservoirs with water. There is also thermal energy, or the capture of heat and cold, to create energy on demand or to offset energy needs. And then there's mechanical storage, which harnesses kinetic energy to store electricity. The faster an object moves, the greater its kinetic or gravitational energy. Think river flows and the generation of hydropower.

Battery storage has taken the early lead, especially in Asia. According to consulting firm Wood Mackenzie, CATL, LG Chem, BYD, and SK Innovation are the three top vendors.

China is a lucrative market. China's President Xi Jinping has said his country would take a hacksaw to its carbon emissions as a percentage of its gross domestic product. In practical terms, this means that the amount of renewable energy that its people and businesses consume will jump to 25%. To do that, local governments in China need as much as 20% storage capacity.

Meanwhile, in Europe, the installed grid-scale battery storage capacity will rise to 42 gigawatts by 2030 and at least 95 GW by 2050. That's compared to the 5 GW of installed capacity today, according to Aurora Energy Research's latest European Battery Markets Attractiveness Report. The five most attractive markets for battery storage in Europe are Germany, Great Britain, Greece, Ireland, and Italy.

It says the average battery duration will last longer as the market expands. Batteries with more than four hours of storage capacity will account for 61% of total installed battery capacity in 2050, compared with 22% in 2025.

"Batteries represent an attractive investment opportunity in Europe's energy sector—new projects are announced on a near-daily basis as developers seek to capitalize on the need for storage in the energy transition," said Ryan Alexander, Research Lead, European Power Markets for Aurora Energy Research, in a release.

Regarding energy storage, batteries now lead the pack – illustrated by the LG Energy Solution. But storage comes in many forms. And with the climate pressures growing, the demand for renewable energy will get stronger – meaning other types of storage are knocking at the market's door.