> Scaling has worked for plenty of other commodities.
Besides transistors and other electronics, which commodities have seen consistent exponential growth relative to cost?
Besides transistors and other electronics, which commodities have seen consistent exponential growth relative to cost?
There is a fixed cost to extract a kilogram of lithium using a given method. When demand spikes, lithium suppliers will charge more and reinvest those profits into increasing mining capacity. If they had their way, they’d keep prices high, but anyone can open a lithium mine. Lithium is not hard to find. Those people will undercut the previous miner in order to attract buyers, which will force all miners to lower prices back to reality.
As long as prices are high, more and more mines will open as it is suddenly an attractive resource to mine. This will happen until prices start to drop to some percentage-over-cost where things stop being attractive, and the market reaches equilibrium again.
If lithium was profitable to mine for $X/kg for many years, then that is the price it will naturally return to. It is a commodity. There is no special value for getting your lithium from Corporation X or Corporation Y. The only value is the material.
That’s how commodities work. The price is determined by how hard it is to extract, and whether demand has recently spiked (or subsided). Gold is expensive because it
If this were some rare substance, extraction difficulty would increase noticeably with time, but we’re a long way from a shortage of ways to mine lithium. Some ways might be more expensive, so those mines will only open if the prices stay high, but the prices won’t rise indefinitely this century. That is such an illogical assumption. Perhaps the natural price of high volume lithium production is higher than we have today because those more expensive methods are convenient, but it won’t be enough of a price increase to matter in the grand scheme of things, and this assumption of a higher price is a pretty flimsy one to base predictions on even then.
Eventually, as batteries age, they will be recycled, and the need for lithium mining will likely drop sharply, bankrupting some of these mines until production and (profitable) demand are matched again.
This is not going to happen because, as you point out, lithium mining will only expand if prices climb higher to make otherwise unprofitable reserves profitable. And since raw materials now dominate the cost of batteries, this is going to increase the cost of batteries. There's no having your cake and eating it too: in order to increase lithium mining capacity, battery cost is going to have to grow, not shrink.
You edited your post after I replied, so I'll have to edit in response:
There's no one "difficulty of extraction" factor for each commodity. The reality is that there's a diverse variety of reserves all of which are easier or harder to exploit, even for the same commodity. "The price is determined by how hard it is to extract" is at best a huge simplification.
Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high.
> If lithium was profitable to mine for $X/kg for many years, then that is the price it will naturally return to.
Nope! This is completely wrong. Commodities don't "naturally return" to any price. Prices is a result of supply and demand. It could be we find some other battery chemistry that blows lithium out of the water. In that case the cost of lithium will probably collapse well below $X/kg. Conversely, if countries start to try and provision significant amounts of grid battery storage, the costs will grow even higher as more and more inaccessible reserves need to be exploited to supply market demand.
There is no "natural" price of commodities, whatsoever. If the demand for lithium is going to rise and keep rising, then the cost will rise and keep rising unless some breakthrough makes it way more efficient to mine. Given the fact that we've been mining for centuries and we have huge demand for minerals other than lithium, I'm not optimistic on a 100x improvement in mining efficiency.
> Understand that renewable activists are predicting that lithium battery production will not only increase exponentially, it will also exponentially drop in cost per KWh as this happens.
Battery prices don’t need to keep dropping for them to take over the world. They’re already cheap. Of course people would love for the prices to drop, and they have historically been dropping slowly, but the basic elements will cost a certain amount, so there is a price floor. I don’t know where that is, but it is lower than we’ve seen, because every step in the battery production chain has been making a profit up to this point, including the miners.
The fact that prices have increased only indicates a mismatch between supply and demand, not that the natural price needs to be this high, or that it needs to continue rising. As I pointed out, everyone was already profitable at a lower battery price than what we have today. If batteries are expensive because of lithium, more lithium mines will open and drop the price. If batteries are expensive because the battery makers are price gouging, someone else will undercut them.
The main concern for something like this is market distortion by patents. If the best way to make batteries is locked behind a patent, that can cause prices to be unnaturally high. This concern does not apply to elemental lithium.
> Higher commodity prices make it viable to extract the more inaccessible reserves, but those reserves will only be profitable so long as prices remain high.
You’re practically quoting my comment to me. I addressed that. It is possible that the price will settle higher than it is today if those methods play a big role, but it won’t matter. You don’t seem to appreciate how insanely cost effective batteries already are today. A modest price increase is fine, but it is still illogical to assume prices will stay high. Lithium is not hard to find. Why would the market settle on expensive extraction methods? It is a strange assumption to start from. We’re not talking about something that’s rare.
Either way, the outcome is unchanged unless batteries increase in price exponentially, as your earlier comments apparently assumed.
Here's a way to articulate this that might better mesh with your mental model. The "natural price" of a commodity isn't static. If demand increases and the only way to meet demand is to use more and more expensive mining operations, then this raises the "natural price". As per the above example, the "natural price" rose to $8. It won't drop back below $8/kg unless either we find a way to make mining cheaper, or demand drops back to levels that can be satisfied by my cheaper-to-operate reserve.
We’re not talking about gold or platinum, where your discussion points would be relevant.
I’m not wishing over here. But anyways, I’ve tried to explain the reason why the market disagrees with you, and why people are rapidly seeking to integrate batteries into the grid and into cars, which would not be possible if you were correct about lithium becoming insanely expensive.
Battery production will keep scaling at a huge rate, and the prices will be fine. A modest price increase is irrelevant to anything discussed here today.
Again, the market disagrees with you not me. Lithium commodity prices are rising, and so are battery prices. People are indeed seeking to integrate batteries into the grid - I'm not disputing that. I'm pointing out that these batteries are actually becoming more expensive [1], not less and it's unlikely this trend will reverse on a dime.
1. https://www.utilitydive.com/news/new-york-battery-storage-co...
Yes.
> causing more supply…
Yes
> which will cause prices to drop.
Nope! Remember, the expanded supply is only profitable to operate at higher prices. So the price will drop if demand drops and then supplier will operate the more efficient extraction sites. But if demand stays high, so will prices.
I will remind you that this is your absurd argument:
> By comparison, the entire world only produces ~400 GWh of batteries each year. So it'd only take a decade and a half of global battery production to satisfy the storage demands of just the USA. The rest of the world would be left with zero EV or electronics production for a decade and a half and no grid storage to show for it.
> Thanks for the site: it's a good tool to demonstrate just how unfeasible energy storage really is.
Which is totally different from "battery prices might increase a little", which I have repeatedly indicated is not a problem, and I even pointed out that it is a possibility a long time upthread from here.
If
You're proposing that the sky is falling, but it looks just fine to the rest of us.
The relationship between production and price is well established, and no, production does not move inversely to price. This is because the marginal cost in almost any of these areas is higher per unit of production as production increases. That also of course makes sense logically.
Gold as well, same thing. You start by grabbing gold nuggets of the ground. The effort to mine more gold has not gotten easier, it's gotten harder over time.
The abundance of lithium is nothing like the abundance of gold, and oil is a different subject altogether because we have extracted a truly staggering amount of it, and then burned it. We’ve extracted something like 135 billion tons of oil, and a “mere” 250 thousand tons of gold. So, hundreds of thousands of times more oil than gold has been extracted.
Lithium is about 20ppm (parts per million) in the Earth’s crust. Gold is about 0.001ppm: https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth...
Lithium is 20 thousand times more abundant than gold, roughly.
Lithium is reusable, analogous to how we handle aluminum. As demand is ramping up, we will need to ramp up extraction, but we’re not throwing it away, and eventually we will get a lot of our lithium from recycling.
I don't know lithium at all, but if you follow natural gas / fracking / oil production the question of what reserves are economically recoverable is HIGHLY price dependent (and highly variable). On low end $10-15/barrel cost of production or better. The only reason we have any production in the US is because oil costs more. If you said we would double oil usage prices would spike incredibly.
Same thing with solar net metering, Solar activists demand that soler gen (often during periods with solar curtailments already in effect) be reimbursed based on the same cost as electric rates during the evening (usually peak demand and low solar / wind). Again, depressing how economically nonsensical this all is for a supposedly scientifically grounded effort.
Anyways, rational heads (and economic forces) tend to prevail. I think we will see more TOU rates, and ideally this will at least create some market forces around storage.