Solid Power Stock: Pure Play on a Solid-State EV Battery
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Nothing gets Nanalyze readers charged up like battery technology. We can’t explain it, but we always strive to give our lovely readers what they want, especially those who help pay the bills. No doubt many of our astute premium subscribers saw QuantumScape (QS), a company attempting to commercialize solid-state lithium batteries for electric vehicles (EVs), jump more than +20% earlier this week. The speculation is that the big bump came thanks to the newly passed $1.2 trillion U.S. infrastructure bill that earmarked $7.5 billion for a half-million EV charging stations nationwide.
QuantumScape was one of several energy storage stocks that we profiled last year. It typifies the hype and volatility of special purpose acquisition companies (SPACs) currently bloating the public markets. QuantumScape stock briefly bolted north of $130 a share shortly after it went public at the end of 2020, very briefly dipped below $20 per share in August 2021, and is now cruising in the $30-something range. Here’s the thing: QuantumScape has generated zero revenue and doesn’t expect to commercialize its batteries until sometime between 2024 and 2025. Yet its market cap is about $15.5 billion, similar to well-known companies with actual products and services like soy sauce supplier Kikkoman (2801.T) and Grubhub (GRUB).
So we’re already on high alert as we review yet another pure-play manufacturer of solid-state EV batteries – Solid Power.
Lithium-ion Versus Solid-State
We’ve been writing pretty steadily about lithium-ion battery technology since about 2015, which includes solid-state batteries, but it’s worth a quick recap of how these batteries work to evaluate what Solid Power is doing. Keep in mind that it has taken decades to develop these technologies, so the few sentences here that we’ve cannibalized from more knowledgeable sources aren’t meant to turn you into an engineer.
Rechargeable lithium-ion batteries are made up of power-generating compartments called cells consisting of four components – cathode, anode, separator, and electrolyte. The cathode contains lithium and other materials, while the anode usually contains carbon, and the separator divides the two. The electrolyte is the liquid chemical medium through which ions move when the battery is charging and discharging. The design makes lithium-ion generally more efficient than the old lead-acid and nickel-metal hydride batteries that powered your transistor radio, including longer battery life and higher energy density, a measure of how much energy a battery can store.
But lithium-ion batteries are still heavy due to the liquid electrolyte, which is also flammable and unstable in extreme temperatures. There’s no quicker way to end a road trip than your Tesla’s EV battery catching fire. One thing that’s not particularly fast is the current technology for charging batteries on the go (though that’s changing), which is why Chinese EV automaker Nio (NIO) opted to go with a “battery not included” model where customers swap batteries rather than charge them. Energy density is good overall but still not great at about 300 miles per charge on a good day and mostly going downhill.
In theory, solid-state batteries can solve or improve many of these issues by “simply” replacing the carbon anode with one made from lithium, silicon, or some combination of these or other materials. However, this requires a bit of tinkering with current battery design by essentially turning the separator into a solid electrolyte. While solid-state batteries are used in some small devices like pacemakers – where an unstable lithium-ion battery could really ruin your day – the technology hasn’t scaled to support electric vehicles. Yet.
About Solid Power Stock
That brings us back to Solid Power, a Colorado company founded a decade ago that has raised $186.5 million. Its most important investors are BMW Group (BMW.DE) and Ford (F), which are also engaged with the startup on jointly developing solid-state batteries for their future all-electric fleets. Those two companies alone sell more than six million vehicles globally each year, so that certainly puts Solid Power on solid ground when it comes to a ready-made customer base. It closed a $135 million Series B earlier this year. Added to the funds promised by the SPAC, Decarbonization Plus Acquisition Corporation III (DCRC), Solid Power is expected to enter the public market with about $600 million on its balance sheet and a valuation of $1.2 billion.
The company claims that should be plenty of cash to bring its solid-state battery technology to fruition – a long-lived EV battery that won’t blow up, but is capable of traveling nearly 500 miles on a single 15-minute charge. How can Solid Power do it?
Solid-State Battery Technology
The company’s core innovation involves a proprietary sulfide solid electrolyte, a material favored by a number of companies also pursuing a solid-state EV battery, including Toyota and Hyundai, among others. While reportedly not as high-tech as the ceramic-based separator developed by QuantumScape, sulfide is good enough to get the job done, not to mention cheaper and easier to manufacture. In addition, sulfides have the highest conductivity of any other solid ion-conducting material, according to Solid Power, so that means they can move lithium-ions as fast (in theory) as today’s liquid electrolytes.
In fact, Solid Power is building its entire battery platform around sulfide solid electrolytes, so that it can incorporate different anode and cathode materials into existing and future designs. The company plans to start with silicon in the anode, which is seen as the next step in improving lithium-ion batteries. Solid Power is developing anode compositions containing more than 50% silicon by weight, which enables energy densities approaching that of lithium metal cells. Silicon also has major advantages in areas like fast charging times. The next iteration would use a lithium metal anode, which delivers the highest energy on a mass basis.
The company is also looking to change up the cathode chemistry as well, including materials such as iron sulfide, which would provide further gains in specific energy, while also being incredibly inexpensive and sustainable. By eventually eliminating high-priced metals, like nickel and cobalt, Solid Power believes it could reduce the costs of cathodes by 90%, which is key to achieving cost parity with current batteries – sometime in 2030.
Should You Buy Solid Power Stock?
A decade is a long time to wait, which is what early investors will likely be doing for some time while Solid Power attempts to execute on its vision and start generating real revenue. However, it is worth noting that the company isn’t relying on building expensive factories to manufacture finished solid-state batteries as its sole source of income. In fact, finished product manufacturing is only a small part of the plan. Instead, Solid Power intends to license its cell designs and manufacturing know-how to third-party commercialization partners. The process leverages existing lithium-ion equipment, which the company believes will be an easier sell to customers.
The largest revenue stream, however, will come from selling the company’s proprietary electrolyte materials to anyone developing sulfide solid-state batteries, including not just BMW and Ford, but other battery manufacturers and automotive OEMs. Still, Solid Power doesn’t expect to make significant revenue from its sulfide electrolyte until 2025, while revenue from its battery cells won’t really start coming in until the year after that.
There’s buy and hold, and then there’s buy and hold out hope that the whole thing works as planned. And that’s exactly what Solid Power is asking investors to do. We’re not entirely pessimistic about the company. It has two solid automakers in its corner and an innovative strategy for generating income. But we can’t afford to help continue funding the company’s R&D, which is pretty much what you get with a pre-revenue tech company like Solid Power. It’s just not a solid investment in the near term.
Conclusion
We’ve made similar arguments about other potentially game-changing green technologies like carbon capture and fusion energy. While solid-state batteries aren’t quite the moonshot tech as those other ones, the timeline is long and keeps extending out ever so slightly into the future. That won’t change stock-speculating Robinhood-types from bidding up companies to unrealistic valuations like with QuantumScape or another solid-state battery company we covered back in the day called Ilika (IKA.L), which is developing both micro solid-state batteries for electronics and larger EV cells. Amazingly, the company’s stock is up about +80% since our original 2015 coverage (versus more than +200% for the Nasdaq), despite only about $3 million in revenue in 2021 after more than 15 years in business. It might as well be a research company run by a bunch of MBAs. Now that’s a SPAC worth investing in.
If the SPAC merger goes as planned, Solid Power will start trading under the ticker SLDP by the fourth quarter of 2021.
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Three more battery technology companies to watch.
Britishvolt, the startup aiming to build the UK’s first “gigafactory” making batteries for electric cars, is poised to choose London over New York for a float next year after being encouraged by the chancellor’s planned reforms to stock market listing rules. The company, which recently secured investment from global commodities trader Glencore, plans to invest up to £4bn in building a large-scale battery factory by the North Sea in in Northumberland, northeast England, to serve the market for electric vehicles and energy storage.
Desten, a Hong Kong, China-based battery company founded in 2015, teases its battery cell technology, which is promised to offer ultra-fast charging at some 10C, in less than 5 minutes. The company says that its batteries can be recharged from 0% to 80% state of charge in 4 minutes and 40 seconds. Desten does not explain the details (chemistry), but the batteries are expected to be used in the upcoming Piëch GT, which is supposed to have a 75 kWh battery and capability to recharge in 5 minutes. The range of this car will be 500 km (311 miles) of WLTP, which would be 150 Wh/km (241 Wh/mile).
StoreDot is an Israeli lithium-ion battery company based in Herzliya. Founded 2012; 9 years ago. The company develops battery assemblies made of a lithium-ion battery and a fast charging component. StoreDot’s fast-charging component can be fully charged in five minutes, and then it partially charges the lithium-ion battery at a conventional rate. Fully-charging the lithium-ion battery requires multiple charging cycles of the fast-charging component. Rumored to be going public via SPAC.
Cheers for the heads up. Last time we looked at StoreDot they were developing quantum dots. Maybe that’s an ultracapacitor they’re working on?
https://nanalyze.com/2020/04/skeleton-technologies-ultracapacitors/
As for Desten, they’ll be a lot tougher to follow like any company that targets the Chinese market. Britishvolt we hadn’t heard of – founded in 2018 with $70 million in funding.
Rest assured whatever battery / battery tech companies go public worth looking at (gauged by competency and/or investor interest) we’ll profile.
any news on AMBRI’s liquid metal battery going SPAQ or IPO?
Good question Keith. We haven’t seen any mention of this yet but will cover if it happens.
SES Holdings, manufacturer of high-performance hybrid Lithium-Metal rechargeable batteries for electric vehicles to list on NYSE under the ticker symbol ‘SES’ through business combination with SPAC Ivanhoe Capital Acquisition (NYSE:IVAN) at a valuation of $3.6B.
The transaction is expected to be completed in the third or fourth quarter of 2021.
Added to our research queue, thank you for the heads up!
LionVolt : 3D solid-state technology for next-generation batteries that are 100% safe, weight 50% less, with 200% higher performance than state-of-the-art Li-on batteries. LionVolt is developing battery based on 3D technology and solid-state layers. Compared with currently used lithium batteries, these 3D Solid-State Thin-Film batteries are lighter and safer. They recharge rapidly, have a higher energy density, are intrinsically safe and have a long product lifespan. Energy density over 450 Wh/kg. 15 minute charge enabled by thin films.
Solid-state market seems quite saturated now – not with actual batteries, but with companies planning to build batteries.
Solid Power may deserve some attention now. The share price is down: around $2.5 comparing to around $10 when it started trading in May 2021. The recent news (in November) was its CEO is leaving and that put some pressue on share price. Apart from that: Solid Power seems to be doing quite well. That was even mentioned in the recent Nanalyze article: “Wanted: A High-Growth Energy Storage Stock” :
“Perhaps the brightest star of the bunch is another solid-state battery producer named Solid Power which has handily beat their 2022 revenue estimates of $3 million with year-to-date revenues totaling $7.6 million. While the current market cap is well below our $1 billion threshold, we’ll likely revisit the firm sometime next year provided they exceed $10 million in 2022 revenues.”
Q3 2022 revenue was $2.8M. So if you annualize it, you get $11.2M – that’s well above $10M threshold ..
“We’ll likely revisit the firm sometime next year provided they exceed $10 million in 2022 revenues.”