Lithium vs. Gasoline: Trading One Expensive Energy Source for Another

The IPO filing by Tesla Motors brings into sharp relief the current battle for hearts and minds between the new electric cars and the traditional gasoline-powered vehicles.

US and Japanese carmakers are pushing development of different designs to get to market with a compelling product at a price consumers will pay. Toyota Motors (TM), with its Prius, was first into the market and today the Prius is the best-selling car in Japan. Honda Motors (HMC) sells two hybrid electric vehicles and General Motors will soon introduce the Chevrolet Volt, a plug-in hybrid electric vehicle. Ford Motor (F) plans to introduce an all-electric Ford Focus next year.

Electric cars are hailed as meeting two important criteria in the car business. First, they would reduce CO2 emissions and second, they would reduce US reliance on imported oil. Both criteria could stand a closer examination before a winner is declared.

First of all, electric cars do reduce CO2 emissions. A gallon of gasoline has nearly 20 pounds of CO2, according to the US Department of Energy. A gasoline-powered car driven 12,000 miles per year with average fuel consumption of 30 miles per gallon uses 600 gallons of gasoline and emits about 5 tons of CO2.

The calculation for electric cars is not quite as simple because there are many kinds of electric cars either on the market or soon-to-be on the market. A hybrid electric vehicle (HEV) like the Toyota Prius driven 12,000 miles per year is estimated to consume about 240 gallons of gasoline and emit about 3 tons of CO2.

A plug-in hybrid, the Chevrolet Volt, driven 12,000 miles, about a quarter of which would be gasoline powered and the rest electrically powered, would consume 60 gallons of gasoline and emit a little more than 2 tons of CO2. A Nissan Leaf, a fully electric vehicle, uses no gasoline and would emit no CO2.

As in golf, less is better, right? Maybe, when looking at a single car and a single driver. However, when looking at a large number of cars, the calculation needs to take into account the number of electric vehicles that can reasonably be expected to be on the road.

And that’s where the second issue comes up. Reduced gasoline consumption needs to be replaced with an electric power source. That source is battery packs. Deutsche Bank has estimated that the global manufacturing capacity for automobile battery packs in 2015 is 36 million kWh.

With the exception of the Toyota Prius, most planned electric vehicles will use a lithium-ion battery. The primary advantages lithium batteries have over the NiMH batteries used by Toyota are weight high-energy density.

Using lithium-based batteries raises more than a few issues, but perhaps the first is the availability of the stuff. Global lithium deposits total about 24.5 million tons, and about half of that is in Bolivia. All told, about 75% of the world’s known deposits of lithium are in South America.

The US has very little in the way of lithium deposits, and would need to import the mineral if the batteries were going to be built in this country. Far more likely is that lithium would be sent to manufacturing facilities in Asia and the finished batteries exported to the US.

A Nissan Leaf EV would use about 20 pounds of lithium in its 24 kWh battery packs. A Chevy Volt uses about 15 pounds. A Prius battery pack holds just 1.5 kWh of electricity, but uses no lithium.

Now consider Deutsche Bank’s estimate that the global 2015 battery-making capacity is 36 million kWh. The amount of capacity would yield enough battery packs for 1.5 million EVs of the Nissan Leaf type; 2.25 million packs for a Chevy Volt plug-in hybrid type; and 24 million battery packs for a Prius-type vehicle.

How much gasoline does each type of vehicle save when applied over a global fleet of those sizes for a year. Here’s a chart taken from an article in Batteries International magazine:

Vehicle                        Gasoline Saved                       CO2 Reduction
Type                             (million gallons)                    (million pounds)

EV (Leaf)                    600                                       9,403
PHEV (Volt)               765                                       12,859
HEV (Prius)               3,840                                    97,344

That’s a pretty startling result. By far the most effective use of battery manufacturing, both from a gasoline savings point of view and from a CO2 reduction point of view, is a hybrid electric vehicle such as the Toyota Prius. The net effect of 24 million vehicles much more than offsets the overall effects from either a pure EV or a PHEV.

What to make of all this? Lithium, though relatively expensive, is also available in sufficient quantities for the near term. But if the automobile fleet were to transition to large numbers of EVs, the demand for lithium would rise dramatically and so would the cost.

Crude oil is also becoming scarcer and the price of crude is also rising again, but there is almost certainly a decades-long supply of crude left in the ground. Getting it out will be costly, but if it used more efficiently (in higher mileage cars, for example), demand for crude could continue to fall moderating the price of gasoline somewhat.

Using gasoline i with battery packs addresses issues of both gasoline and lithium cost and availability, and meaningful reductions in CO2 emissions. The US may not become energy independent by following this course, but it will certainly rely less on imported oil without becoming hooked on foreign sources of lithium.

Paul Ausick