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Business | September 13, 2012

Strong market potential for standardized Li-Ion battery systems

Nearly all cell phones, laptops or MP3 players currently run on Li-Ion batteries. And the emerging trend toward e-mobility is hardly conceivable without the use of Li-Ion batteries in vehicles.
Compared with traditional electricity storage solutions (like NiMH or lead batteries), Li-Ion batteries offer significantly longer product life and much higher energy efficiency. Yet Li-Ion technology has by no means reached its full potential.

This finding emerges from a joint study by Roland Berger Strategy Consultants and the German engineering association VDMA. It concludes that the way forward in developing this potential is standardization. Action is urgently required to establish a standard for modular Li-Ion batteries with the widest possible industry reach.

"As a rule, companies can't turn a new technology into industrial applications without first having to shoulder high development costs and up-front investments," explains Dr. Thomas Schlick, Partner at Roland Berger Strategy Consultants. "It's crucially important here to build up a critical mass of users of the new technology as soon as possible."

But that presents smaller industries and smaller companies with a problem. Experience shows that they can reach critical mass only very slowly. "This situation makes investments by individual companies a lot more risky," says Schlick. "Only when as many manufacturers as possible join together can companies make the costs of development and initial outlay pay."

This certainly goes for the Li-Ion technology. Although Li-Ion is far superior to traditional battery technologies, the business case still doesn't add up for many companies. As part of the solution, VDMA recommends a joint initiative coordinated by the association.

"Looking at the Li-Ion technology segment, we can observe two strategies now being pursued to minimize costs and risks," notes Bernhard Hagemann, Director of VDMA E-mobility Forum E-MOTIVE: "On the one hand, we find companies looking for individual alliances within their industry. On the other, there are also a lot of firms trying to create general cross-industry standards for Li-Ion technology – but without any certainty as to the result. This is where the industry associations can come in. Especially in sectors with a strong SME presence, the associations can step forward and coordinate joint R&D efforts at the pre-competitive stage to get the new technologies in shape to penetrate niche markets. This is the challenge we've taken on at VDMA."

Wide spectrum of applications with high market potential

The range of applications for Li-Ion technology is indeed quite remarkable. "We've so far seen this technology being used almost entirely in consumer electronics and, more recently, in the automotive sector. But Li-Ion batteries offer potential solutions in all sorts of other applications – delivering real benefits to users in, say, leisure boats, forklift trucks, cleaning equipment or mobile power sources," says Schlick.

Li-Ion batteries can also be deployed for stationary storage. Completely new possibilities are being created not least for operators of systems that generate renewable energy (e.g. solar installations).

"Our study estimates that the new Li-Ion battery applications alone will generate a market volume of EUR 4 billion by 2020 – a figure that does not include rising sales in consumer electronics or automotive," says Schlick.
Standardization: key to new business models

To leverage the new sales potential successfully, VDMA proposes a standardized and modular system for Li-Ion batteries. A standard of this kind does not currently exist, but Hagemann is convinced it can be defined: "In terms of technical requirements, the various fields of application for Li-Ion batteries are directly comparable. A modular-based system ¬standard would be capable of equally satisfying the performance specifications for different applications."

Schlick agrees that standardization and modularization can enable volumes to be bundled across different industries: "By making Li-Ion batteries more competitive in this way, standardization allows new business models to emerge – for energy service providers, for instance." Hagemann adds: "The engineering sector in particular offers exciting possibilities for mobile machines and for automation technologies with battery handling systems in various applications."

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