Energy Storage Beyond Lithium-Ion

September 2020 • FailUp Capital Research Team

Lithium-ion batteries are one of the most successful technology commercializations of the past three decades. From the first consumer electronics applications in the 1990s to the electric vehicles and grid storage systems of today, the lithium-ion paradigm has delivered consistent improvements in energy density, cycle life, and cost — enough to enable a revolution in mobile computing and begin a revolution in transportation. The Nobel Prize in Chemistry was awarded to the technology's pioneers in 2019, a recognition of how profoundly it has changed the world.

And yet, lithium-ion batteries are not enough. The energy transition — the wholesale replacement of fossil fuels with renewable electricity and the storage systems required to make variable solar and wind generation reliable — demands energy storage at scales and cost points that current lithium-ion technology cannot meet. Long-duration grid storage requires eight to twelve hours of discharge capability at costs that lithium-ion cannot achieve. Aviation electrification requires energy density beyond what any current battery chemistry can provide. Solid-state batteries promise both higher energy density and improved safety, but have resisted commercialization for a decade.

The race to develop next-generation energy storage is one of the most important and most competitive areas in all of deep tech. Tens of billions of dollars of public and private capital are flowing into battery research and manufacturing. And the companies that succeed in commercializing transformative new battery technologies will be among the most valuable deep tech businesses ever built.

Solid-State Batteries: The Long-Awaited Breakthrough

Conventional lithium-ion batteries use a liquid electrolyte — a lithium salt dissolved in an organic solvent — to transport lithium ions between the positive and negative electrodes during charging and discharging. This liquid electrolyte works well but has significant disadvantages: it is flammable, limiting the safety of high-energy cells; it has relatively low ionic conductivity at low temperatures, limiting performance in cold climates; and it limits the electrode materials that can be used, because many high-capacity candidates react destructively with liquid electrolytes.

Solid-state batteries replace the liquid electrolyte with a solid ionic conductor — typically a ceramic, glass, polymer, or composite material. This change enables the use of lithium metal anodes, which have nearly ten times the theoretical energy density of the graphite anodes used in conventional lithium-ion cells. It eliminates the flammability risk of liquid electrolytes. And it opens the door to electrode materials that are incompatible with liquid electrolytes.

The challenge has been finding solid electrolytes with sufficient ionic conductivity at room temperature, combined with good mechanical properties, chemical stability against both electrode materials, and the ability to be manufactured at scale. Decades of research have identified several promising material classes — sulfide-based ceramics, oxide-based ceramics, and polymer-ceramic composites — each with different trade-offs between performance and manufacturability. Several companies are now reporting prototype cells with energy densities and cycle lives that suggest commercial viability is approaching for specific applications, particularly in aviation and premium automotive segments where high energy density justifies a premium cost.

Sodium-Ion Batteries: The Abundant Alternative

Lithium is not inherently scarce, but its geographic concentration creates supply chain risks. The majority of the world's lithium reserves are in a triangle of South American countries — Chile, Bolivia, and Argentina — along with Australia. As demand for electric vehicles and grid storage scales dramatically over the coming decades, questions about lithium supply adequacy and cost are legitimate concerns.

Sodium-ion batteries offer an alternative that avoids the lithium supply question entirely. Sodium is the sixth most abundant element on Earth, available at effectively unlimited quantities from seawater or mineral deposits worldwide. Sodium-ion battery technology is conceptually analogous to lithium-ion — it uses similar electrode structures and the same fundamental electrochemical principles — and many of the manufacturing processes are directly transferable.

The trade-off is energy density: sodium ions are larger and heavier than lithium ions, and current sodium-ion cells have lower energy density than comparable lithium-ion cells. For stationary grid storage applications — where weight and volume are less critical than cost per kilowatt-hour — this trade-off is acceptable. For mobile applications like electric vehicles, the lower energy density limits the addressable market. Several companies are now demonstrating sodium-ion cells with performance competitive with lower-end lithium-iron-phosphate cells, which is sufficient for many grid storage and lower-range electric vehicle applications.

Flow Batteries for Long-Duration Storage

Flow batteries store energy in liquid electrolytes that are pumped through electrochemical cells to generate current. The key architectural advantage of flow batteries is the decoupling of energy capacity from power rating: increasing energy capacity simply requires larger storage tanks, while increasing power output requires more electrochemical cells. For long-duration storage applications — eight hours, twelve hours, even days — this scalability makes flow batteries potentially much more cost-effective than conventional battery architectures.

Vanadium redox flow batteries are the most mature flow battery technology and are already deployed in some grid applications. Their limitation is cost: vanadium is expensive, and the vanadium electrolyte represents a large fraction of system cost. Research into alternative chemistries — iron-based, organic, and hybrid flow batteries — is aimed at dramatically reducing electrolyte costs while maintaining performance.

The market for long-duration storage is expected to grow dramatically as renewable penetration increases. As grids approach and exceed 50% renewable generation, the variability mismatch between generation and demand creates needs for seasonal storage and multi-day storage that no current technology addresses at acceptable cost. Flow batteries are among the leading candidates for this application, along with compressed air energy storage, pumped hydro, and emerging thermal storage concepts.

The Intersection of Materials Science and Battery Performance

Every advance in battery technology ultimately comes down to materials. The cathode material determines the voltage and energy density of the cell. The anode material determines how much charge can be stored and how quickly it can be released. The electrolyte determines ionic conductivity, thermal stability, and electrochemical stability. The separator determines safety characteristics. Advances in any of these components can translate directly into performance improvements or cost reductions.

This is why materials science companies and battery companies are often the same companies, or closely linked. The most advanced battery startups typically have deep materials science capabilities — often rooted in academic research programs — that allow them to engineer new electrode compositions, electrolyte formulations, or separator materials with targeted property combinations. Computational tools for predicting electrochemical performance are increasingly powerful, accelerating the experimental discovery cycle.

Investment Considerations for Battery Technology Startups

Battery technology startups face a particular challenge in the venture capital world: the development timeline is long, the capital requirements are substantial, and the competitive landscape includes incumbent chemical companies, established battery manufacturers, and automotive OEMs with enormous R&D budgets. The question for early-stage investors is not whether next-generation battery technology will be commercialized, but which teams and which specific approaches will succeed.

At FailUp Capital, our evaluation of battery startups focuses on the specific technical risk each company is taking: is the core scientific question genuinely answered, or is the company betting on solving a materials challenge that has defeated many well-funded efforts before? We look for companies that have demonstrated their key performance claims in laboratory conditions using commercially relevant cell formats — not just coin cells, but full-size prototype cells with validated cycle life data. And we look for a credible manufacturing scale-up path, ideally one that does not require the invention of entirely new manufacturing equipment.

Key Takeaways

• Lithium-ion batteries, while transformative, are insufficient for the full scope of the energy transition — particularly long-duration grid storage and aviation electrification.
• Solid-state batteries enable lithium metal anodes and improved safety; commercialization is approaching for premium applications despite decade-long development timelines.
• Sodium-ion batteries offer an abundant-resource alternative with performance competitive for grid storage and lower-range EV applications.
• Flow batteries address long-duration storage through architectural decoupling of energy and power, with cost reduction in electrolyte chemistry as the key development challenge.
• Materials science is the core competency of the best battery startups; computational tools are accelerating the pace of discovery and development.