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Simple Economics Pushes Lithium-ion Adoption

Companies Mentioned: Balqon Corporation (OTCBB: BLQN), First Solar Inc. (NASDAQ: FSLR), Tesla Motors Inc. (NASDAQ: TSLA)

Lithium-ion batteries appear ready to transition from being just energy efficient to also being cost efficient in many applications. Recent studies have shown that lithium-ion batteries are more cost-effective than lead-acid batteries in high temperature environments, making them perfect for alternative energy and automotive applications.

Lithium-ion Beats Lead-Acid on Cost

Lead-acid batteries may cost just one-fifth of what a lithium-ion battery costs, but on a full lifecycle basis, the latter is cost-competitive in moderate climates and lower cost in hot climates, according to a white paper from AllCell Technologies. The study showed that costs were very modestly higher in moderate climates, but 40% lower in hot climates over five years. [1]

These lower costs could dramatically change the electrical grid with the falling cost of solar technology from companies like First Solar Inc. (NASDAQ: FSLR). The lightweight, long life cycle and deep discharge capacity of lithium-ion batteries are perfect for a range of mobile, portable and off-grid products and applications, making them economically feasible. [1]

Lithium-ion batteries are also replacing lead-acid batteries in vehicular applications. Lead-acid batteries have long been used in these applications, but they have many drawbacks that include poor energy and power density, large size and weight, and a short life. Lithium-ion batteries solve many of these problems for companies like Tesla Motors Inc. (NASDAQ: TSLA). [5]

Governments Push for Lithium-ion Adoption

The favorable economics surrounding lithium-ion batteries is further enhanced by a government push towards lithium-ion adoption. For instance, China recently introduced a new regulation that will cut the output capacity of lead-acid battery makers by as much as 30%, according to a report on ChinaDaily citing an industry group. [2]

A separate report noted that local lead-acid battery capacity will fall by 10% to 30% in the coming years after the number of Chinese producers fell from nearly 2,000 to less than 300 this year after new regulations shut down 90% of capacity last year. [3] [4] Less supply could lead to higher prices, making lithium-ion batteries even more competitive in the marketplace.


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