When Technology Disrupts Consumption

The post ‘When Technology Threatens Demand’ on October 13, 2020, delivered a warning to investors to watch out for new lithium ion battery technologies that could supplant demand for conventional components and materials.  Investors may need to be aware of more than just alternative anode designs and materials or new ways to mix electrolyte.  There may be even more disruptive innovations on the way that could displace the lithium ion battery altogether.

Sodium Ion Batteries  -  In June 2020, an improved sodium ion battery was introduced by researchers at the Lawrence Berkeley National Laboratory at the campus of the University of California Berkeley in San Francisco.  Sodium ion batteries have been around for a while.  However, lithium ion models have dominated the market with longer life and greater energy density.  Additionally, the cathode of a sodium ion battery ends up collecting inactive sodium crystals, eventually disrupting the energy transfer between the electrolyte and the cathode material.   

To correct the flaws of a sodium ion battery, the Lawrence Berkeley scientists came up with a layered metal oxide cathode.  They also mixed up a liquid electrolyte that holds additional sodium ions to engage in friendlier interaction with the layered cathode with no collection of sodium crystals.  In early tests, the new sodium ion design retained 80% of its charge after 1,000 charge-discharge cycles.  The team intends to make additional changes that could deliver even better performance. 

The sodium ion battery would bring a lower cost alternative to lithium ion.  All required materials are readily available around the world and at low cost.  The alternative design could be particularly attractive for large-scale applications such as power plant storage where expensive lithium ion batteries present a prohibitive cost.

Zinc-air Battery  -    A Canadian company called Zinc8 Energy Solutions (ZAIR:  CSE  or MGXRF:  OTC) is bringing a new battery to market using zinc as fuel.  Power from a renewable source is used to generate zinc particles that flow to a storage tank in a potassium hydroxide electrolyte.  Recombining the zinc particles with oxygen generates electricity. 

Zinc-air batteries have a tendency to form a zinc coating called dendrites on the battery cathodes.  Zinc8 leadership is using a well-proven path to technological success – if you cannot fix a fault, feature it.  The company has invented a process to remove the dendrites and transfer them to the storage tank.

Zinc8 management believes their improved zinc-air battery has clear advantages over lithium ion batteries in remote microgrids and for commercial or industrial back-up power.  They claim a capital investment of $60 per kilowatt hour is need for a 100 hour-system compared for a cost of $300 per kilowatt hour for the same capacity based on lithium ion technology.  The remarkable advantage of derives from how zinc-air systems are scaled up with a simple increase in the size of its storage tank and the volume of electrolyte.  There are limits to lithium ion battery size so large-scale systems require multiple high-cost lithium ion batteries.

The company has been given a chance to prove the point in pilot projects in New York State.  Zinc8 is building a 1.0 megawatt hour pilot project for a commercial customer of the New York Power Authority (NYPA).  Financed with $2.6 million in funding from the NYPA, the project is expected to be completed by 2022.  The New York State Energy Research and Development Authority (NYSERDA) is also sponsoring a 1.5 megawatt hour zinc-air system in Brooklyn, New York.  The system will be installed for clean-energy developer Digital Energy.

Investors can probably count on the invention of some new product to come along and replace the products of companies in their portfolios.  Making investment choices on the basis of demand alone puts an investor at risk of paying too dear for their stocks.  Alert leadership with the fortitude to adapt or pivot to new the new technological dynamic can be a saving attribute.  It also helps to have a strong balance sheet with modest debt burden and good cash resources so that management can act quickly to new opportunities or even against threats from new competition.  These two fundamental characteristics are as important as market opportunity in selecting good companies for investment.

Most of the technological innovation in batteries is carried out on laboratory benches at universities and small development companies.  Zinc8 is one of the few companies with publicly traded stock that could give investors in more mature competitors on the battery field a viable hedge against ‘the next big thing.’

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.