This Is The Challenge Of Securing The Battery Supply Chain

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

Tracy, the surging price of oil and other fossil fuels has certainly got a lot of people talking more about the energy transition, EVs, electric cars, renewable energy on the grid, solar panels, wind, et cetera. But it also seems clear that all that is going to be very expensive as well.

Tracy Alloway (0:40)

Yeah, this is the ultimate irony, just as oil prices are spiking and everyone's going, oh, we need to quicken the transition away from fossil fuels. It seems like all of the commodities that you actually need for that transition for decarbonization, those are spiking too.

Joe Weisenthal (0:58)

Yeah, not only are we seeing a surge in price, and if you look at all these crucial metals, whether it's nickel or cobalt or the price of lithium, all these crucial ingredients, not only are the charts mostly up and to the right, there aren't that many of them. It's not just that they're costly, it seems like these markets, again, kind of like oil, are extremely tight. There's not just a bunch of it to be easily procured, from what I can tell.

Tracy Alloway (1:23)

Well, so this is something that I'm really curious about. What exactly is the supply of these essential metals for batteries? Because I'm sure you remember the rare earths.

Joe Weisenthal (1:34)

Yep, yep.

Tracy Alloway (1:36)

I don't want to call it a bubble, because clearly there was something to it. But rare earth stocks were some of those.

Joe Weisenthal (1:43)

2009, 2010, yeah.

Tracy Alloway (1:45)

Yeah, everyone was like, buy rare earths, buy rare earths. There's only so much of them. And it just seemed a little speculative.

And so I'm wondering how much of that bull case was true. Is there actually a finite amount, or is it the case that it just takes long to get the mines up and going? It takes a while to increase production. I honestly don't know.

Joe Weisenthal (2:04)

With rare earths, I recall, a lot of the story, too, is they're not that rare, but they're very pollutant, the process of mining. And so which countries actually want to do that? And China seemed to be the most willing.

So the other thing that happened recently in battery news specifically is Joe Biden announcing that the Defense Authorization Act, sort of these tools the government has for procurement, would go to this space and American metal supply. So this is clearly a lot of interest.

Who gets to build the batteries? How costly it's going to be? Who has access to the metals? What it's going to take to ramp up production? Increased urgency clearly in this moment on these questions.

Tracy Alloway (2:44)

Absolutely, and all brought into focus by Russia's invasion of Ukraine and the subsequent sanctions and the fact that Russia holds something like, I think it was 11% of the world's nickel supply. But even that, I don't know what type of nickel they actually hold. I don't know if it matters what type of nickel you have in the market. I have so many questions and yeah, I'm eager to learn.

Joe Weisenthal (3:04)

Great. Well, let's dive right into this. We are going to be speaking all about batteries and the battery supply chains with James Frith. He is a principal at Volta Energy Technologies, a VC firm focused on this area. Previously, he headed up energy storage at Bloomberg NEF up until very recently. So James, thank you so much for coming on Odd Lots.

James Frith (3:25)

Troy, Tracy, great to be on here. And yeah, big time fan. So, very honored to be able to speak.

Joe Weisenthal (3:30)

Well, we spoke with your former colleague, Nat Bullard, earlier in the year. And when we asked him, who should we talk to about batteries?

He said, you are the man. So very excited about this.

Why don't we start, very big picture. What is, when we talk about the battery market, what is the market today? How much is EVs? How much is grid storage? Like, what are we talking about when we sort of take a big sort of eagle-eyed view at the battery market?

James Frith (3:54)

Yeah, so it's a great starting space. And I think probably what I'd start with is if we go back a decade, really the battery market was confined to consumer electronics. So your cell phone, your laptop, your iPad, that's what lithium-ion batteries went into. And at the time, kind of passenger EVs were almost nothing.

But by the time we got to the end of the last decade, so kind of 2019, 2020, what we found is that the kind of biggest demand sector for lithium-ion batteries had flipped and it was no longer that consumer electronics sector.