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How a 'pinch of salt' can help the energy transition

Sophie Jamieson
Investment Associate

They are fundamental in powering our lives: lithium-ion batteries. Lightweight and durable, we use them in our phones, laptops and increasingly in our cars. Already, they seem embedded in our society, but the electric revolution is only just beginning.

Global energy demand is predicted to grow by up to 40% in the next ten years.1 Fortunately, much of this growth will come from renewable sources. However, meeting this increased demand is dependent on one aspect of the energy sector that can sometimes be overlooked: the continued research and development of batteries.

The trend of increased use of renewables in energy generation presents a significant area of growth for battery technology. The electrical grid will require large scale batteries to even out the imbalances between supply and demand that can arise. People using solar panels will not want to wait for the sun to shine before they have their morning coffee, the power needs to have been stored overnight.

Since their first commercialisation by Sony in 1991, lithium-ion batteries have been considered the pioneering technology for portable electronics and electric vehicles. At Ruffer, we have made successful investments in companies associated with lithium, electrification, and energy storage. Our investment in this area has ranged from pure play lithium producers such as Livent to electric vehicle component producers, battery storage operators as well as traditional original equipment manufacturers (OEMs) such as General Motors and Volkswagen, who are investing heavily in electrification and battery innovation. We believe these businesses will be key in transforming our digital electronic world as we strive for a greener planet.

Lithium batteries have dominated the battery market thus far due to their unparalleled chemical properties. Lithium-ions carry extremely high charge densities, meaning that a lithium battery can pack in more ions and so hold more power than a battery of equivalent weight made from another, heavier metal with similar chemical properties (for example sodium). Lightweight, they are perfect for mobile applications such as phones, laptops, and more recently electric vehicles.

With improvements in technology, falling costs and a growing list of countries announcing bans on the eventual sale of combustion engine cars, it is easy to see how demand for electric vehicles is set to increase in the coming decade (for more on this, read our Q2 Responsible Investment report).

So, will lithium be able to take on the challenge of fuelling the revolution? Not if they continue to be exploited in stationary applications where there is less of a requirement for their lightweight properties. To efficiently distribute global resources and alleviate pressure on lithium supplies we need to find alternative solutions for energy storage.

Whilst widespread vehicle electrification should prove highly effective in decarbonising economies, the increased extraction of lithium could also result in growing environmental and social risks too. One of the key issues is the lithium extraction process requires 1.9 million litres of water per tonne of metal extracted: a highly water intensive business in a world where fresh water is increasingly scarce and agricultural land is in drought.2

Another detrimental problem associated with lithium-ion batteries is their use of cobalt as a cathode. Cobalt is a rare metal and two thirds of it is mined in the Democratic Republic of Congo, where most of the miners work in extremely poor conditions.

All things considered, it is essential alternatives are developed to sustainably match the world’s growing energy needs. Whilst we do not see lithium battery production taking a back seat anytime soon, significant levels of investment have been taking place in battery research and development around the world, making it is quite possible other novel materials with higher theoretical charge densities and efficiencies will emerge in the years ahead.

One such possible alternative to lithium could even be common table salt, one of the world’s most abundant materials. Sodium is known as the most democratic of elements. Extracted from seawater, it provides an energy storage solution which is not as reliant upon geographically localised raw or critical materials. Cathode materials currently being used comprise of iron and manganese, which are more abundant and accessible than the cobalt used in lithium-ion batteries.

Further, given the fundamental similarities between sodium and lithium, it is no surprise there has been a sharp increase in interest into the exciting capabilities of sodium-ion batteries. Both are group 1 metals and +1 charged ions. Manufacturing processes of sodium-ion batteries replicate those of lithium-ion batteries which provides a considerable cost benefit given the use of already established supply chains.

The big drawback with sodium is it is a heavier element, therefore a battery with the same energy output as a lithium battery would be substantially heavier: perhaps not the best material for the next iPhone. But thanks to the abundance of sodium, low supply costs of battery components and improved thermal stability of the materials, sodium-ion batteries could well revolutionise areas in which weight and volume are not of primary concern, such as off-grid and renewable energy storage, load levelling and forms of transport.

The sustainability advantages to sodium-ion batteries are clear. Despite this, there are only a handful of businesses worldwide solely dedicated to developing their industrialisation, including UK-based Faradion
Another firm, Natron Energy, based in California, have created a sodium-ion battery using Prussian Blue, an ancient pigment used in dyes. The pores of the material are larger than sodium-ions, so the ions are able to pass through the pores with minimal resistance, giving it a significantly longer life than seen in previous prototypes. The beauty of this product is not only have they developed a better functioning battery, but it has essentially been created from household materials.

One of the world’s leading battery manufacturers, CATL, recently announced a breakthrough in producing their first generation sodium-ion battery for electric vehicles (EVs) in an attempt to ease pressure on lithium supplies.3

We expect to see sodium-ion batteries taking market share in applications and geographies where lower costs are paramount and higher weight acceptable. With interest growing in such materials, we believe a more environmental and socially sustainable shift away from our reliance on lithium is becoming closer to a reality. As yet, there are very few direct and liquid ways to gain investment exposure to the sodium-ion market, but we are keeping an eye on this, as well as other new developments relating to EVs, renewable energy and the battery storage market.

2021 Q3 report
In our latest quarterly report, Investment Associate Sophie Jamieson looks at one part of the energy transition story which is often overlooked – batteries. Specifically, we look at the merits of shifting from lithium-ion to sodium-ion technology. Elsewhere, we share details of our stewardship and engagement activities during the third quarter of 2021.
Read
Climate Change Framework 2021
Our inaugural TCFD Report introduces Ruffer’s Climate Change Framework and provides a response to the recommendations of the Taskforce for Climate-related Financial Disclosure. The report exhibits our climate-related activities over the past few years and provides an insight into how our understanding of the risks facing our investee companies has evolved.
Read
2020 Stewardship report
Our 2021 report highlights the depth and breadth of our stewardship activities. Our focus on engaging directly with company management has afforded us a deeper understanding of the companies in which our clients are invested.
Read

1. International Energy Agency 2019 IEA World Energy Outlook 2019 (Paris: International Energy Agency)

2. Harvard International Review 2020

3. Reuters

Past performance is not a guide to future performance. The value of investments and the income derived therefrom can decrease as well as increase and you may not get back the full amount originally invested. Ruffer performance is shown after deduction of all fees and management charges, and on the basis of income being reinvested. The value of overseas investments will be influenced by the rate of exchange.

The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument, including interests in any of Ruffer’s funds. The information contained in the article is fact based and does not constitute investment research, investment advice or a personal recommendation, and should not be used as the basis for any investment decision. This document does not take account of any potential investor’s investment objectives, particular needs or financial situation. This document reflects Ruffer’s opinions at the date of publication only, the opinions are subject to change without notice and Ruffer shall bear no responsibility for the opinions offered. Read the full disclaimer.

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80 Victoria Street
London SW1E 5JL
Edinburgh
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Edinburgh EH2 4ET
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75008 Paris, France