Over the past two years, the price of lithium iron phosphate batteries used in electric vehicles has plummeted 70% in the Chinese market, from US$155 per kilowatt hour in 2023 to about US$45. That’s roughly half the current average price of $87 per kilowatt-hour for sodium-ion batteries.
In a paper published in Nature Energy in January this year, researchers at Stanford University predicted that lithium iron phosphate batteries are likely to maintain their price advantage in the mid-2030s or even beyond.
If their predictions are correct, the cost advantage of lithium iron phosphate batteries will continue China's control of the global battery supply chain. Some analysts say this would give China great influence in the Western automotive and defense industries, as almost all lithium iron phosphate batteries in the world are produced by Chinese companies.
Even if sodium-ion batteries cost less than lithium iron phosphate batteries, existing technology may still dominate, said Sam Adam, director of battery materials at battery metals research firm CRU Group. He said in an interview: "Even if sodium-ion batteries are suitable for certain application scenarios, since there are already extremely low-priced and mass-produced lithium iron phosphate batteries, is it really necessary to invest in a new supply chain?"
Around 2021, as lithium prices began to surge amid growing demand for lithium and concerns about a decade-long shortage, so did a push to develop sodium-ion batteries to replace lithium-ion batteries. From the beginning of 2021 to November 2022, China's lithium spot price increased nearly 13 times.
Until now, battery and car manufacturers have not considered sodium as a battery material because sodium has a much lower energy density than lithium, shortens the range of electric vehicles, and is prone to performance degradation during battery charging and discharging. However, Chinese companies including CATL are still committed to the research and development of sodium-ion batteries because sodium is 1,000 times more abundant than lithium in the earth’s crust and can be found almost everywhere. Based on this consideration, sodium is expected to alleviate the tight supply of lithium and thereby reduce the cost of electric vehicles.
More than a year ago, Chinese automakers surprised their Western counterparts by launching a small city car powered by sodium-ion batteries. They claim to have successfully improved the energy density of sodium-ion battery chemistry so that it can be used in commercial products including electric vehicles.
This has prompted the emergence of a number of US sodium-ion battery companies that have received venture capital, such as Bedrock Materials, Peak Energy, Standard Potential and Unigrid. All of these startups aim to beat lithium iron phosphate batteries on price for stationary energy storage.
However, Adrian Yao, a doctoral student at Stanford University, said that sodium-ion batteries used in electric vehicles are more expensive than lithium iron phosphate batteries, and the industry still has a lot of work to do in reducing costs. He pointed out that due to the low energy density of sodium and the continued decline in the cost of lithium iron phosphate batteries, although sodium is abundant in reserves, it does not mean that the price of batteries made from it is lower.
Adrian Yao said in an interview: "We believe that it is necessary to avoid another rush of funds blindly pouring into the wrong areas and instead focus on projects that are truly worthy of investment."
Prior to entering Stanford University's materials science PhD program, Adrian Yao was the co-founder and chief technology officer of EnPower, an Indiana-based anode materials startup. “The goal is to learn from my past experience as a battery entrepreneur while being clear that there is a lot of false hype in the industry,” he said.
In the paper, Adrian Yao and two of his mentors at Stanford University, environmental science professor Sally Benson and materials science professor William Qiu, pointed out that they simulated more than 6,000 scenarios, covering possible rises and falls in the prices of sodium and other metals and minerals, as well as other potential market factors. They concluded that there are only three ways for sodium-ion batteries to defeat lithium iron phosphate batteries: significantly increase the energy density of sodium-ion batteries; not focus on the battery cells, but on the entire battery system, so that sodium-ion batteries have advantages at the system level; or emphasize the performance advantages of sodium-ion batteries and ignore cost factors.
Natron Energy, a sodium-ion battery developer based in Santa Clara, California, relied on the third strategy-performance advantage to win the market. Natron sells its batteries to artificial intelligence data centers. The company's sodium-ion battery electrodes are made from Prussian blue, a crystalline substance originally used as a pigment, and the battery is capable of releasing large amounts of energy in two minutes and then charging quickly. It releases five times more energy than lithium iron phosphate batteries, allowing AI data centers to make expensive chips handle more computing tasks per second.
PeakEnergy co-founder Cameron Dales said that Peak purchased sodium-ion batteries from a Chinese supplier. Although these batteries are more expensive than lithium iron phosphate batteries, Peak's suppliers expect that as sodium-ion technology improves and lithium prices rise, sodium-ion batteries will be less expensive than lithium iron phosphate batteries by 2027. He also said that in any case, Peak's strategy is to produce battery cells in the United States in the future and compete with lithium iron phosphate batteries at the battery pack level.
Battery manufacturers have demonstrated that optimizing battery pack design, such as removing unnecessary filler materials, can increase energy density and reduce costs. Bedrock Materials has been working hard to increase the energy density of sodium-ion battery cells, which is the second approach suggested by Adrian Yao. CRU Group's Adem said Chinese battery manufacturers like CATL have increased the energy density of sodium-ion batteries, but not at the same rate as lithium iron phosphate batteries.
Andrew Leyland, managing director of battery metal research company SCInsights, said there is a fourth way for sodium-ion batteries to challenge lithium iron phosphate batteries: if lithium prices surge again, battery manufacturers will once again seek alternatives, and sodium-ion batteries may be the first choice.
But at present, Bedrock CEO Spencer Gore said that even if Chinese sodium-ion battery manufacturers lower their prices below lithium iron phosphate batteries, it will take a long time for Western companies to reach the same technology level.
"The hope for sodium-ion batteries lies in second-generation material technology," he noted.