Sparks Fly -- Are Lithium-Ion Batteries Safe?

Bloomberg terminal, or via the b NF app. Just as a quick reminder, BENNF does not provide investment or strategy advice, and we have a complete disclaimer at the end of the show. I am Dana Perkins, and you're listening to Bloomberg Switched on the ben EF podcast. I'm joined today by Yi Sine and she leads b NFS researched on decentralized energy, alongside James Frith, who leads our research on energy storage. Let's hear from our guests. Yea YOI thank

you for joining us today. Thank you for having me and James, thank you for being on Switched on Hi Data, Thank for having me. So let's start at the very beginning here. What inspired you guys are actually got you guys to think that this was an important thing? To start researching and looking at now, which is a lot of the battery fires for a stationary storage in South Korea. Yeah, I can take that just to kick off and give some context. The energy storage market is clearly growing quite rapidly.

In particular, Korea has been a leading market in terms of total deployment in the world over the past two to three years. This year is probably going to fall off the ranks. But in that context, the market growing so rapidly also means that there is I suppose some slowness with regards to safety regulation or to safety certification that has to kind of keep up with the place of development of the market, and in Korea in particular, that that has been an issue because we've seen multiple

fires by this year. UM and in May we actually walk Korea experience the twenty nine better fire incidents, which is quite alarming. So twenty nine different fires in different installations in Korea. UM. So that really comes put into question the development of the industry and what has to be done to ensure that we're deploying safe energy storage systems.

And this is twenty nine fires across you said two years. Yes, since seen at least in Korea, we've seen that these incidents happening, and I guess in context, what we saw was a market that really boomed at the back of really generous subsidies in the market, which meant that a lot of like generally and experienced developers or integrators were were essentially rushing to to build out a lot of battery projects in the country, which also led to kind

of rush on the edges to actually deploy these systems. UM. And at the back of that, of course, we've we've ended up seeing a sad a sad outcome around around the battery fires. So we're gonna be speaking specifically about South Koreatia today. I mean, I guess it's more of a case study. But have there been fires elsewhere that

are notable that provide context as well. Yeah, So I think the reason why, in particular, I guess at the twenty five at twenty nine incidents, this becomes particularly relevant.

But I think what's more relevant contemporarily is Arizona Public Service or utility in Arizona here in the US, they released a reports regarding a battery fire that they had last year in April and UM and the results of that, I think we're quite um, we're quite helpful for us to understand the context of safety and certifications, not just in Korea, but elsewhere as well. So that's kind of

why we wanted to bring that conversation here today. I think one thing to kind of just jump in and add as well is that, um, you know, I think I think we kind of are talking about battery fires focusing on Korea. Obviously there's the a p S one Energy had a battery fire one of the islet testing facilities as well, and it gets a lot of well in the battery community and the en George community, it

gets a lot of attention. But actually the twenty nine five that we're talking about in Korea effect you know, roughly about five percent of the total deployed capacity. So although you know, it's a lot of attention, it's actually a readatively small amount of kind of deployed projects or affected. So James and this brings us to a good point for us to try and understand why do we think

that these fires are happening. I mean, even within that five percent, ideally they're very difficult to put out and people really don't want these to be happening. So I suppose diagnosing what could be the issue is probably step one. Can you provide us with some insight there? Yes, certainly, And I guess this is the kind of the million

dollar question. And I guess I kind of literally mean that because there's obviously, you know, huge kind of insurance liabilities associated with these fires, um and determining you know, what the causes actually influences you know, who whose insurance or who is liable for you know, the project catching fire in the kind of any you know, resulting costs that the recurring products. And I think there's kind of I suppose a couple of the things to look at here.

There obviously reports off the back of the fires and Korea, but as the AO mentioned, there was recently, you know, the the APS fire report that was published about a month or so ago, which was quite enlightening, should we say, in the kind of cause of the fire. But just starting with the Korean fires, obviously, you know the twenty nine fires there, there's a lot of work was done on that to try and understand, you know, what caused them.

And while that work was going on, you know, there were certain safety measures put in place by the you know, the authorities in Korea to try and prevent this from happening. You know, one part of that was limiting the capacity of the storage systems that could be used. About the total capacity. It is actually just as they lifted those regulations that we had the fire earlier this year in May,

so that's quite interesting to see. But off the back of the kind of fires in Korea, there's a report that came out and identified I guess four key areas that could be behind these fires, and just to kind of run through them them quite quickly and then I can dive into a bit more detail. The first thing that they identified was exposure to humidity. Obviously, moisture and electronics don't mix that well. Moisture in the inside of batteries mixed even worse. So that's the first thing that

they identified. The next thing would then be kind of defectory defective battery cells or modules kind of building on the detector cell. I guess, you know, they said that potentially there could have been external damage caused to the either the system or the cells and modules during construction. And finally, you know, it's possible that the battery management system was faulty and didn't control the systems within the

kind of parameters that they were meant to. So this was kind of what was identified in the Korean fire incidents. And actually that kind of covers the full value chain from cell manufacturer down to kind of integrator and indeed

battery operator. So there's a range of different areas to look at there, and also you know, off the back of that different recommendations on how you could prevent this from happening again, you know, leading on from the defective battery cell, and this is what a lot of people suspected could be behind it, because you know, although there is a huge amount of safety considerations that go into designing batteries and building the cells themselves and modules are

packed and everything else, you know, you essentially have a lot of energy contained within earty in mind battery and if something goes wrong with that battery, it can it can kind of get out of hand pretty quickly. Could you explain really quickly what out of hand means? Because I know that you know, for everybody listening, I know they're very difficult to put out, so you can't just have a fire truck come up and throw some water on it. But what else does out of hand mean

in this context, yes, certainly. So at the kind of base level, you have to consider the chemistry and particularly chemistry the cathode to understand the kind of safety requirements and implications of Littingman battery. There's essentially two families of cathode chemistries that are used. You have your nickels based cathodes and your misty mind phosphate based cathodes. So the nickel based cathodes are considered to be high energy, don't see.

They have what's called kind of transition metal oxide based materials, and what happens is when the material itself is heated above a certain point, you find that oxygen start to be evolved from that cathode material. So the listeman phosphate materials, there is oxygen in there, but it's locked in in what's called a kind of phosphate an iron, and it's hard u for that oxygen to be released. You have

to go to kind of higher temperatures. So with the nickel based material, once that oxygen starts being released, once it gets hot enough and actually kind of oxygen is just released from the cathode, that's what then can cause the Litta mind battery fire to fuel itself. If you know, even in the case of adding water from a firefighter, for example, some people out there, you know, might be familiar with I think they call them cherry bombs in the US, where you can chuck them in water and

the fuse will still burn. It will it will kind of go bang at the end. And you know, that's the kind of self propagation that you get with the lity mind battery. It feeds its own kind of fire. So it doesn't matter if this water, it's still gonna keep going. So on the topic of preventing these from happening, there is a lot of attention on trying to figure out which one or maybe all four of the potential

causes is actually the primary cause of these fires. What's then happening from a regulatory stand point, because presumably there is a place that in terms of trying to ensure safety for the end consumer, since you know five percent of these actually are catching fire, that the government maybe has to play in South Korea, and and what do you see coming down the pipe? Yeah, I can, I

can give some contexts there. So I mentioned something earlier, which is the industry tends to develop and because it's such a new industry, it's it's developing at a more rapid pace than certifications and often regulations, so it's a bit of a game of trying to catch up with the pace of growth UM and responding quite quickly when

incidents happened. In the case of Korea, for example, what they immediately immediately did was stop issuing some new permits for new projects, and then at the back of that also required that the existing and operating facilities reduced their

operating parameters. So essentially you're not charging it up to or probably you're you're only charging it up to or, which is a bit of a problem as well, because the way the incentive systems might be designed might might actually favor projects actually operating at a higher higher operating range, which isn't great. But they try to kind of compensate for that as well, so there's kind of that immediate

response that that has to happen. Then kind of secondarily is okay, so now we have to review all the safety standards that are in place, make adjustments, and UM kind of push it out to the industry as a requirement.

And these requirements tend to be either i a international or be local, so international in the sense of there are a few international bodies issuing certification so I e. SE and and UEL as well, So they essentially set up of different certification metrics or certification standards for different parts of the system as well as the system as

a whole. UH and and essentially battery developers or system integrators are trying to get their systems certified by these body is that generally have certifications that are accepted across

different markets. At a more local level and perhaps at a more dramatic level, you might see something like New York City having much more restrictive certification and safety requirements, which might actually mean you it just takes too much longer for you to get the permits and all the additional paperwork that you might need to to actually get

the systems installed in the first place. And are they certification systems essentially leading to more reliable units being installed, So I mean they're more compliance with the safety certifications that have evolved over time. So in a way, yes, they are more safe than probably what you would have

seen installed five years ago. There's a general recognition in the industry that there's still work to be done UM and a lot of it is is kind of trial and error as well, and trial and error error not necessarily meaning a battery fire, but but definitely doing a lot more testing and understanding kind of the operations of

in place. And you mentioned certification and actually the South Korean government noting that they are not installing anymore at least for the time being until the figure out kind of I guess what the problem is. And the next question I have on that is are these units being exported to other countries and is this a fairly robust

international marketplace for these that's kind of originating in South Korea. Yeah, I'll just correct that they positive for for a period period of time, which is when they were basically doing the investigation to understand the group causes for the battery fires, after which they essentially issued new rules that new battery projects have to comply with UM and then reopened permits for new new project development. So since then there has

been additional projects kind of being permitted. Okay, so we're back on good Yeah, I know, But but I will say that the twenty ninth battery fire incidents happened in the context of kind of the new regulations in place, So it's it's a bit of a blow in the

industry in that sense. But regardless, I think on your points in question regarding exports of batteries and the role of Korean manufacturers overseas is I think, for for a lot of time, especially because Korea was that kind of first moving, bigger market in the world, we had thought of the battery fires as erroneously probably as a potential career problem, which is why in the context of the

APS for battery incidents this became more relevant. So, yeah, l G CAM times, I guess see, I a lot of the Korean players are major players in the global market and supply battery modules too, larger utility scale, and the animator projects globally as well. It's in a way there was a lot of concern any company or developer who was integrating a storage system if they really cared about what was happening in Korea one among these twenty nine fires. And I guess the yeah, you're saying, it's

across the industry. So my question has to do with which companies are associated with these fires. Is there a correlation between a few or is it just kind of across the lithium ion universe. If you will. I mean, I think we can be specific with with what we know. So just to give an example, and I know, we keep going back to the APS facility. So the APS facility was integrated by FLUENCE, which is a joint venture between a S and semens that particular facility, and these

are all publicly disclosed information. That facility used ALGICM batteries, and so I mean, you could try to put your finger and say this is an algacam problem. But as you like, from reading the report, you'll see it's not just about the battery cells themselves. The safety of a system entails a lot of components that within them is ensuring the batteries it's safe. But as James kind of broke down in the in the career example, you have to ensure all the other elements are in place as well.

So you have to have some form of suppression system which is appropriate for batteries and not necessarily just for a regular fire. So looking into this, surely there are some things that sort of came to your mind. And I know that you know we're researchers and we are not regulators, but what recommendations would you say that you guys have for the industry, and how would you like to see this carried forward. I mean, it's it's an

interesting question. I think what we certainly don't want to see is the industry being derailed by what is a relatively kind of limited problem. You know. I think we

talked about the twenty nine fives in Korea in particular. Okay, there's the example of APS in the US and the Energy's pilot plant, but generally, you know, listening miland battery project kind of are fine and we don't see these fires, and so you know, I think it's more that we shouldn't scare the industry off and put people from buildings these but just being more aware of, Okay, what what are the risks and how can we prevent this from happening?

And I think for me, you know, the main risk is this issue of list of mind battery being able to kind of sustain its own or propagate its own fire. So really it's about thinking of how you how you can kind of mitigate that from happening. So what improved

fire fighting techniques can you you put in there? And one of the things that people often highlight is being able to cool the cells down more so you can't put it out with water, but if you can take the energy away from that cell, it won't get so

hot that it will release oxygen. And so people are looking at using what's called liquid cooling in spacially storage projects, and this is something that's used in electric vehicles already, but to date, generally saciary storage projects have used kind of air conditioning systems essentially because it's cheaper and easier to install. But I think we'll probably move in the direction where we see more of these liquid cooling systems coming into place. Can I just make a comments under

liquid cooling versus air cord systems UM? And this is

more of a person or anecdotes. So we talked about the APS facility, and actually, like four days before the fire incidents in the APS facility, I had visited the sister facility, which is kind of like very similar respects to the one that actually had the battery and the battery fire incident, which is kind of scary actually because it was like just four days after and then I was like, I was just at a facility that was very similar to it, but just to give you kind

of a mental image of what that's like, It's a facility that's pretty much located in a very desert like zone, so it's in the middle of a lot of like sands um It's close ish, but you you only in the distance, could see like neighbor a specific neighborhood, which is essentially what they were trying to test with the

battery facility. That particular neighborhood has a lot of rooftop solar, so they were trying to test different things on their distribution feeder, try different types of services with the batteries themselves. It's also from a temperature perspective, it's like forty plus degrees in the summer at peak times see celsius more than a hundred fahrenheit, which I mean for me just looking at that facility, if you imagine it wasn't it's not a container. It's like a building system, but it's

like under a beating sun. And so what really struck me going into that facility was actually the noise of the fans. It was actually hard for you to like talk to each other within the facility because there was so many, so many of the fans that are located at the module level as well, that those are just like ringing into your ear, So it's like quite loud.

So thermal management on a consistent basis obviously is important, but it's also quite interesting to see if we moved towards a liquid cooling system, maybe we don't see as loud systems as as the one I visited. Okay, let's let's continue to go down that road. Take my mind to this physical space. How big is it physically? And then secondly, how much capacity does it actually store? Like how meaningful are these is a part of the grid. Yeah, maybe I'm painted it as a bigger facility than it

actually is. So it's a two megawat too megawat our system physically we can look at at the checks I don't off the top of my head, but it's more or less imagine like a container, um a little bigger than a container in case like essentially, yeah, you imagine a container with like walls built around that container. That's essentially kind of the size of the facility. So it's technically not a big facility compared to a lot of the large scale storage systems that we're starting to see

come online today and in the coming years. So it's fairly small in that sense. We're talking specifically in this context really though again about South Korea, but there are definitely other manufacturers that are looking to play a bigger role in this space, so specifically within the battery manufacturing

rather than the automotive manufacturing of liftium ion batteries. Can you discuss maybe some of the other countries that might be looking at this as a opportunity and maybe the sorts of things they need to do or the sorts

of opportunities that are available to them. As there's those regulatory focus on the South Korean market, I think probably the company or the countries to look at here is the two large battery manufacturers are really Career and China and Korea, or the Korean manufacturers produced these nickel based chemistries that I've mentioned, Whereas for the stationary storage market, the Chinese manufacturers are trying to push lithium and phosphate

chemistry that I mentioned earlier, and lithium or some people kind of consider lithium are and phosphate to be slightly better suited for use in statory storage because it's kind of not quite so prone to release oxygen as the nickel based chemistries, and so it's it's kind of safety performance is slightly better than than the nickel based chemistries.

And so the Chinese company is trying to you know, deploy this in the in the staciary storage market, and actually at the same time they're trying to expand globally because at the moment, the Chinese stationing storage manage factories or manufacturers of batteries are very much focused on the Chinese market, but they want to grow as as the stationary storage market grows around the rest of the world and the EV market, and so this awareness of the

kind of safety of stationary storage projects could be the opportunity for Chinese manufacturers to kind of enter the global storage market. That being said, you know, there's an increasing focus on local manufacturing of batteries, and you know, although companies generally fart off by talking about manufacturing batteries for ev s locally, if you have a battery manufacturing facility, it could produce them to evs or equally, you could

start producing them to stationary storage as well. So we could see you know, a shift in who's supplying cells for statiary storage systems as a result of this. And maybe this goes without saying but can you just for our listeners some up quickly. Why you think it's important for the stationary storage space to take off for the rest of the grid. Perhaps, yeah, I think. I mean

it's a it's a pretty known story. I guess the growth growth of renewables and the context of de carbonizing our power system, part of that will require more flexibility in the way we operate our systems because renewables essentially aren't a flexible technology. That's essentially where batteries come in.

Take advantage of dropping costs, you can start adding lower cost systems um and so from from a grid empower system perspective at energy storage to balance the variability of the grid is kind of an important and increasingly important part of how we're going to construct our our grid of the future. Well on that night, Joy and James, thank you very much for joining switched On today and gears to hoping they figure out what is causing the fires so we can see this important and critical industry

take off. Thank you day. Today's episode of Switched On was edited by Rex Warner whom Graytak Media. Bloomberg an e F is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed, as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberg an EPP should not be considered as information sufficient upon which

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