Next-Generation Battery Materials - Part 1: The Forces Fueling the Battery Revolution
The global energy transition is driving rapid innovation in battery technologies. As demand for electric vehicles (EVs), portable electronics, and grid-scale energy storage grows, limitations of traditional lithium-ion batteries (LIBs) have begun to surface. In Part 1 of our two-part look at next-generation battery materials, we explore the forces influencing innovation in the category.
Drivers for Innovation in Battery Materials
Cost, Performance, and Safety
The declining cost of LIBs over the past decade has been instrumental in their widespread adoption. However, critical raw materials like lithium carbonate and graphite remain significant cost drivers, with prices subject to volatility and geopolitical constraints. Emerging alternatives such as sodium-ion batteries and silicon anodes offer opportunities for cost reduction due to their abundance and lower raw material costs.
Performance trade-offs are also a key consideration. For instance:
Sodium-ion batteries: Lower energy density but safer and more cost-effective raw materials.
Silicon anodes: Higher capacity but prone to mechanical degradation due to expansion during charging cycles.
Safety remains paramount across applications. Solid-state batteries, which replace flammable liquid electrolytes with solid ones, have gained attention for their enhanced thermal stability. Similarly, aqueous batteries offer safer chemistries which may prove more suitable for densely populated areas or critical infrastructure.
Sustainability: A Core Imperative
As batteries play a pivotal role in decarbonization, their environmental impact has come under scrutiny. Emerging materials like sodium and silicon potentially offer more sustainable alternatives to lithium and graphite by avoiding environmentally harmful mining practices. Additionally, recycling end-of-life batteries is gaining traction as a strategy to recover valuable metals and reduce waste. Despite these efforts, challenges such as inconsistent recycling supply chains and underperforming technologies highlight the need for continued innovation.
The Role of Government Incentives
At the end of 2023, the estimated global manufacturing capacity for LIBs stood at 2.2 TWh, with a further 1.2 TWh either under construction or planned in 2024. China currently dominates this industry, holding a majority market share across many aspects of the battery supply chain. As such, U.S. and European governments – among others – have made funding available for next-generation battery technologies in an effort to regain control of this critical industry. In the U.S. in September 2024, the Biden-Harris administration announced over $3B to support the U.S. battery manufacturing sector; and in Europe in December 2024, a partnership between the European Commission and European Investment Bank pledged €200M in loans and €1B in grants to support EV battery cell manufacturing projects via InvestEU.
The new Trump administration's policies introduce significant uncertainty. The latest tariff announcements in April 2025 will have a large and as-of-yet unclear impact on almost every country in the battery supply chain. While an emphasis on domestic manufacturing could benefit companies developing new battery material technologies that do not rely on current international supply chains, the U.S. could see a slowdown in the adoption of EVs and energy storage systems as climate incentives are sidelined. BloombergNEF predicts that US demand in 2025 will necessitate importing almost all battery separators, 83% of battery cathodes, and 67% of battery anodes. Consequently, U.S. battery prices are expected to rise in the near term. All of this compounds the uncertainty created by the January 2025 pausing of IRA disbursements by the incoming administration.
Outside of the U.S., should battery majors from South Korea and Japan shift their strategy away from the U.S. market, it would become much more challenging for U.S. startups to partner with these international OEMs to bring their innovation to market.
Looking Ahead
In next week’s Part 2, we’ll examine the emerging technologies and provide a snapshot of some of the startups navigating the complexities of this evolving space.
