A previously ignored battery chemistry is now surging in popularity. Here’s why

Last week, during its Q1 earnings call, Tesla announced a stat most battery experts wouldn’t have predicted just a few years ago.

In the first three months of 2022, nearly half of all its vehicles produced globally were built with lithium iron phosphate (LFP) batteries, an increasingly popular lithium-ion battery chemistry that tends to be safer and less expensive—though less energy dense—than the common EV battery chemistries today.

“When [Elon] Musk—I think maybe two years ago—started talking about iron phosphate, we didn’t believe it. And now I do,” Jeff Chamberlain, CEO of investment firm Volta Energy Technologies, told Emerging Tech Brew. “It’s coming, and it’s coming strong.”

Driven by a combination of factors including rising materials costs, safety considerations, and engineering advancements, LFP batteries have been gaining traction at a surprising pace. It became the dominant chemistry for batteries produced for Chinese EVs last year and automakers in the US and Europe are also signaling a shift. They’re also common in energy storage systems (ESS).

What is LFP?: Unlike today’s dominant nickel-rich EV battery chemistries, such as nickel manganese cobalt (NMC) and nickel cobalt aluminum (NCA), LFP batteries do not contain nickel or cobalt in the cathode, whose prices have been ballooning recently. Instead, they are made out of iron and phosphorus, both of which are more abundant and less expensive.

LFP battery packs can cost less than $90 per kWh—well below the average cost of NMC and NCA batteries, which have hovered around $130 per kWh. Beyond the cost savings, this combination of battery materials provides some advantages over NMC and other nickel-rich chemistries, such as safety and longevity. But the trade-offs include lower energy density, meaning lower range, which had so far limited its use in EVs.

How it works

Lithium-ion batteries charge and discharge by moving lithium back and forth between the negative-side anode and the positive-side cathode. The reactions from this transfer cause the battery materials to degrade over time, meaning there is a limit to the number of charging cycles before a battery becomes unable to retain enough energy to power an EV over a sufficient range.

But the process of moving the lithium through iron and phosphorus is not as destructive as moving it through nickel and cobalt, meaning that LFP batteries have a longer lifespan.

“The end of life on an LFP battery…that’s sold in a car right now—you probably won’t have to even have that conversation for about 60 years,” Taylor Ogan, CEO of green-tech hedge fund Snow Bull Capital, told us. Because even once they reach the end of life for EVs, LFP batteries can be used in ESS applications where they can last for many more years.

In fact, LFP chemistry is the direction most ESS battery-makers are working in already.

“Because the material is so stable, you can use [LFP] batteries for high-power applications. You can move energy in and out without too much concern about damaging material, as opposed to nickel-rich materials,” Chamberlain said.

That means LFP batteries can charge faster and charge up to 100%, which isn’t possible with other battery chemistries. It also means LFP batteries are considerably safer and perform better in extreme temperatures.

The rise of LFP

So if they have so many strengths, why haven’t more people been talking about LFP batteries before now?

“There’s always a trade-off. If you want energy density, or range, you’re going to give up power. If you want power, you’re going to give up the amount of energy [the battery] can hold per mass or volume,” Chamberlain said. “So the big weakness in iron phosphate is range.”

LFP batteries were invented back in the 1990s, but spent a long time on the shelf because of their lower energy density. That is, until 2020.

“You can almost think of it as the ‘COVID battery,’ because that’s the timing of it. So it really started around March 2020,” Ogan said. “That’s when there is just this huge spike in demand for LFP and the supply of LFP batteries. And that was driven by BYD.”

In March 2020, Chinese battery and automaker BYD unveiled a new LFP design called the Blade battery, which it touted as a much safer, much less expensive alternative to nickel-rich batteries that could achieve comparable range. By July 2020, BYD began putting the Blade batteries into its EVs. And by April 2021, the company was running the battery packs over with trucks to prove their safety and durability.

“Today, every single new car that BYD sells has [the] Blade battery in it,” Ogan said. “So the transition was incredibly fast.”

BYD is the fourth-largest battery producer in the world. The first is Chinese battery giant CATL, which quickly followed suit with its own LFP design. In October 2020, Tesla began using CATL’s LFP batteries for its EVs built in China.

Battery-making in general is concentrated in China, but LFP-manufacturing is even more so—the country produces more than 90% of the world’s LFP batteries

But there are signals that the chemistry could gain popularity in the West. Last year, Tesla offered an LFP option to customers in North America, and Ford, Volkswagen, and Daimler plan to build EVs with LFP batteries.

Clash of the chemistries

As demand for batteries continues to skyrocket, the trend toward LFP batteries is not likely to hinder the growth in NMC production, Chamberlain said.

“I don’t think iron phosphate will replace NMC. NMC is going to continue to grow, and so will iron phosphate,” he said.

But LFP batteries could become the most common type of lithium-ion batteries used in EVs this year, overtaking batteries with nickel-rich cathodes and remaining the dominant EV battery choice for the next five years or more, Ogan said.

“One of the things is, it exists right now. Most of the cars that will be sold this year, or next year, will have this chemistry in them,” he said, adding that.

Last year, China accounted for more than 50% of global EV sales, and BYD and Tesla—both of which have embraced LFP batteries—are the No.1 and No. 2 sellers in that market.

In the long-term, there will be applications for a variety of energy-storage technologies, from nickel-rich batteries to hydrogen cells, Chamberlain said, not one single winner.

But at least for now, Ogan sees an obvious front-runner.

“The winning chemistry, in my mind, is the one that everyone uses and  everyone wants,” he said. “And that’s very clearly LFP.”