The case for more novel battery manufacturing startups

Northvolt, Europe’s best hope for a homegrown battery titan, collapsed into bankruptcy this fall. This failure was a big deal in its own right, but it also raises questions about the broader effort to jumpstart massive battery production in the West, years after China cornered the market.

The U.S. and Europe have poured billions of dollars of public and private capital into growing their own battery manufacturing bases, to localize the economic bounties of the energy transition, reduce dependence on China, and lower the carbon emissions from production. Both regions have also slapped steep tariffs on various Chinese electric vehicles to protect domestic manufacturers. Catching up to China was always going to be tough, and even considerable policy support from western governments hasn’t changed that.

Chinese companies have mastered NMC batteries — the lithium-ion chemistry long favored in electric vehicles — and taken LFP from fringe to mainstream in just the last few years. Their production scale and aggressive competition helped push lithium-ion battery pack prices down a stunning 20 percent this year, according to a new analysis by BloombergNEF. The global, volume-weighted average fell to $115 per kilowatt-hour, but BNEF found packs selling in China for as low as $45 per kilowatt-hour.

Northvolt’s demise doesn’t prove the West is incapable of developing its own lithium-ion battery supply chains. The U.S., for example, has seen some success in luring established battery players to build stateside factories, like Panasonic (in partnership with Tesla), and South Korea’s SK and LG.

But spinning up a homegrown battery behemoth is a harder task, and the Northvolt strategy might not be the best approach.

Northvolt, founded in 2015 by Tesla alums, was trying to replicate in Europe what China did years prior, and somehow compete on cost. It didn’t work. That outcome has given new weight to arguments from a small group of battery entrepreneurs who are instead pursuing a different goal: building out new or emerging chemistries or battery technologies.

“We are going to win with leapfrogging technologies,” said Keith Norman, chief sustainability officer of Lyten, an advanced materials startup that bought a former Northvolt factory to produce next-gen batteries there. ​“We are pushing for support for technologies that are not reliant on the same supply chain and provide a true performance benefit.”

Another startup, Peak Energy, has taken up the mission of bringing sodium-ion batteries to the U.S. This type of battery offers cheaper costs and longer operating life at the expense of energy density, so it looks more promising for stationary grid storage than for vehicles. Crucially, the technology is still up-and-coming in China — manufacturers there have only built tens of gigawatt-hours of annual production capacity, compared to terawatt-hours for lithium-based chemistries. That’s still a lead, but catching up is not as herculean a feat as with today’s conventional batteries.

Last week, Peak announced the opening of a cell R&D center in the growing battery-tech cluster around Denver, where scientists will design new sodium-ion cells for the company to produce in the U.S. down the road.

Scaling sodium-ion batteries, step by step

Peak Energy’s long-term goal is to build a domestic battery champion akin to LG and Samsung SDI in Korea, or CATL in China, CEO and co-founder Landon Mossburg told Canary Media. That’s hugely ambitious, but the near-term goal is more attainable.

“We’re starting with energy storage and really focused on sodium-ion as the next generation chemistry, but looking in general at how do we bring low-cost, high-performance, safe, reliable, domestically produced batteries,” Mossburg said. And he wants to do that ​“without too much exclusive focus on trying to catch up to where people are, but more aiming at where the market’s going on technology.”

Peak raised a $55 million Series A this summer to fund that push, and operates a 20,000-square-foot pilot line in Burlingame, south of San Francisco, where engineers are assembling battery systems filled with sodium-ion cells imported from China.

That’s the starting point, since there isn’t any commercial sodium-ion cell production in the U.S. today. 

Mossburg met COO Liam O’Connor when they worked at Tesla together, then spent five years at Northvolt, as chief automation officer and eventually president for North America. Peak Energy shares the same aspirations as Northvolt, but the leadership team has opted for a different strategy. Northvolt tried to do many hard, new things simultaneously: design its own cells, ramp up large-scale manufacturing, simultaneously open factories in multiple continents. It ended up failing to deliver on so many tasks at once.

“Trying to do everything in parallel — it’s high risk, and you go slower, because everything takes longer,” Mossburg said.

Northvolt raised $6 billion in private investment and billions more in public debt over nine years. It has something to show for that: The renewable powered Northvolt Ett gigafactory in Skellefteå, Sweden, started shipping cells to customers in May 2022. But the company struggled to produce 1 gigawatt-hour out of its 16 gigawatt-hour nominal capacity, per Benchmark Minerals. The other gigafactories Northvolt developed in Canada and Germany are still under construction and now facing delays.

Mossburg wants to get to the end state faster by moving through a series of steps in sequence. That starts with designing proprietary packs to maximize the benefits of Chinese-made sodium-ion cells. Phase two moves to licensing those cell designs to manufacture them in the U.S. Phase three would be manufacturing novel, proprietary cell designs to push the technology further.

“Every step of this is hard, but once you get that step done, you can go to the next step, and it doesn’t bog you down,” Mossburg said.

Phase one is underway, and seven customers have signed up for pilots of the Peak-made storage system in 2025. The company aims to start cell production in 2027 with the licensed design.

As for the timing on full, U.S.-designed and manufactured battery cells, ​“That one’s a little fuzzier, because, as anyone who’s worked on novel cell chemistries before knows, it’s hard to predict exactly when you’re going to launch,” Mossburg said. That’s refreshing honesty in a hardware sector characterized by bold promises and blown deadlines.

“Anybody who tells you that they’re scaling novel cell chemistry within two, three years, they’re probably lacking a bit of credibility,” O’Connor noted.

Challengers like Peak Energy also have to contend with the inexorable price declines lithium-ion has demonstrated: For every doubling of battery deployments, costs fall 18 percent, per BNEF’s latest report. Sodium-ion lacks the scale and maturity that enable such improvements, but it starts with a fundamentally lower cost structure based on the elements involved.

Sulfur battery expansion can repurpose conventional lithium-ion factories

Lyten uses proprietary techniques to custom-make graphene, a form of carbon useful for batteries. The company says its three-dimensional graphene recipe unlocks the highly energy-dense combination of sulfur cathodes with lithium metal anodes, by preventing the failure modes that held back those technologies before.

This is still rather speculative — the concept remains much further from commercial maturity than, say, sodium-ion batteries. But Lyten has raised at least $425 million from venture capitalists and strategic investors since its founding in 2015. The company put some of that money where its mouth was in November and bought Northvolt’s manufacturing assets in San Leandro, California, which that company had taken over in its 2021 acquisition of lithium-metal startup Cuberg.

Lyten expects to start lithium-sulfur production there and sell commercial batteries by the second half of 2025, Norman told Canary Media. In this limited sense, Northvolt’s demise created an opportunity for another startup to grow faster.

“We don’t think that’s an isolated incident — we think that’s a trend,” he said of the bankruptcy at the conventional battery venture. ​“There will be more assets coming onto the market.”

Lyten has been shipping samples to customers this year from a line it built in San Jose (the company has focused on defense and aerospace applications to begin with). That facility was initially designed for lithium-ion production, but the cost to convert it to lithium-sulfur was just 5 percent of the overall capital expenditure.

Now Lyten is working on a similar overhaul for the former Cuberg/​Northvolt factory. That site was designed to produce 200 megawatt-hours once fully built out, and comes with grid connection, dry rooms, lithium storage, and more. The acquisition plus equipment purchases will cost Lyten around $50 million, Norman explained. Lyten also is building a 10 gigawatt-hour plant in Reno, Nevada, targeting completion in 2027.

The key ingredients of sulfur and carbon can be readily and cheaply sourced outside of China’s sphere of influence, even within the United States itself. The chemistry’s high energy density means that a battery can store the same amount of energy at 40 percent lighter weight than NMC and 60 percent lighter than LFP, at prices comparable to the more economical LFP, Norman said.

The recent wave of American and European battery buildout had to start somewhere, and they didn’t have readily available next-gen chemistries that had proven themselves in the marketplace. But Norman stressed that lines built out for lithium-ion can still be adapted to produce newer chemistries like Lyten’s, though other chemistries like solid state might require more extensive overhauls.

Of course, the success of novel batteries is notoriously difficult to predict — there’s no telling if some new upstart won’t be buying up Lyten’s factory in a few years’ time.

But there is a lesson to be learned from this Darwinian turn: It’s a summons back to nimbleness. The U.S. and Europe don’t need NMC or LFP, per se; they need cost-effective batteries for the grid and vehicles. Five years ago, one strategy seemed like a surefire winner, but cutthroat commodity markets didn’t wait for Western battery makers to get into position. They kept moving, and they will keep moving, making it difficult to catch up — but the companies that can get ahead of major shifts in the market are the competitors likeliest to survive.

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