A startup run by a Tesla veteran and backed by Bill Gates is promising to build a long-duration battery that's 50-100 times cheaper than lithium-ion

• There's a reason lithium-ion batteries are in nearly every electronic device - they're energy-dense, lightweight, and don't degrade quickly.
• Where they fall short is in the storage of electricity on the grid for multiple days. At that duration, lithium-ion is too expensive.
• Without cheaper long-duration batteries, it will be challenging to stop using carbon-emitting power plants.
• Form Energy, a startup run by a Tesla veteran, promises to solve this problem by developing long-duration batteries, which it says will be 50 to 100 times cheaper than Li-ion batteries at certain durations.
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Chances are, you're reading this story on a device powered by a lithium-ion battery. Your phone? Yep. Your computer? For sure.

These batteries dominate the market. In 2018, lithium-ion (Li-ion) made up 95% of stationary energy storage technologies, according to the consulting firm Wood Mackenzie.

"Lithium-ion technology has benefited from the economies of scale," Daniel Finn-Foley, head of energy storage at Wood Mackenzie, told Business Insider. "It's become the de-facto chemistry for stationary storage and it will be for the next five years at least. Nobody's really close to catching up on it."

For what they do, Li-ion batteries are nothing short of incredible. In an iPhone XR, for example, the battery weighs just 46 grams, yet it can power the device for up to 25 hours.

But in a world trying to overhaul its electrical grid, Li-ion batteries have a serious drawback: They don't get much cheaper as they scale to longer durations.

As more renewables energy is added to the grid, utilities and other electricity providers will need big batteries that last for tens or hundreds of hours. They'll count on those batteries to kick in when there's a lull in power, such as if it's cloudy for days in a region that relies on solar energy. And at that demand, Li-ion is just too expensive.

That's why a raft of startups backed by billionaires is racing to come up with cheap, long-duration storage. Whoever gets there first will win big, Finn-Foley said.

"There's a big bet that long-duration energy storage is the future," he said. "The first company that can do that is going to win. They are going to be able to benefit from scale because they're first to market."

Form Energy: A buzzy, Bill Gates-backed startup that's studded with battery royalty

In front of the pack is a buzzy startup called Form Energy, which has raised around $50 million and has a post-money valuation of $110 million, according to PitchBook. It's backed by investors including the Bill Gates-led coalition Breakthrough Energy Ventures, the energy giant Eni, and Saudi Aramco.

Form is led by a star-studded team, including Mateo Jaramillo, who built Tesla's energy storage business; Ted Wiley, the co-founder of Aquion Energy; and Yet-Ming Chiang, one of the world's most prolific battery inventors.

Lessons from Tesla led Form's CEO to a 'trillion-dollar' opportunity

Jaramillo spent seven years at Tesla. In that time, he discovered the shortcomings of Li-ion batteries for grid-scale storage, he said.

"We'd talk to regulators and they were like, 'How do we get rid of coal?'" he said. "At the time, people would say, 'Cost-effective long-duration isn't possible, which is why we'll never get rid of coal and natural gas.' I didn't accept that."

Instead, he started looking into what it would take to replace thermal power plants on the grid. In the process, he realized that - unlike the batteries that go into cars and electronics - grid-scale storage isn't as limited by space, which opens up other, cheaper options that might not be as energy-dense.

That realization led him to what he calls a "trillion-dollar" opportunity. After leaving Tesla in 2016, he spent a short stint with another venture he founded called Verse Energy, before starting Form.

"If you could wave a wand and get a battery that would allow you to use only renewables - wind, water, or solar - to replace that thing, that's the biggest opportunity you can think of," he said. "That's a trillion dollar capex opportunity. And that's also the most meaningful thing you could do. Happily, those two things are aligned."

Form Energy is developing a handful of battery chemistries, most of which it won't reveal

Jaramillo refused to reveal much about Form's batteries - "the world doesn't need another overhyped battery startup," he said - though he mentioned that it's working on a handful of different battery chemistries and "there is one very lead one."

At least one of those technologies is an aqueous sulfur flow battery, which Form has been developing in partnership with the US Department of Energy. Jaramillo says its duration would be on the scale of tens of hours.

Flow batteries store an electrical charge in two tanks of liquid electrolyte - in this case, one of them is likely a chemical mixture containing sulfur. When the battery is plugged in, charged atoms called ions flow between the two tanks, generating an electric current.

The big benefit to flow batteries is that they scale, Scott Litzelman, a program director at the Advanced Research Projects Agency-Energy (ARPA-E), said. That makes them cheaper for grid-scale storage.

In a typical cell, such as a Li-ion, the charge that generates electricity is confined inside the battery, whereas in flow batteries, the charged electrolyte comes in through an external tank. For a longer-lasting battery, you just need a larger tank.

"The key thing about flow batteries is that the power and the energy are decoupled," Litzelman said. "The cheaper the materials are, the bigger the size tanks you could have at the same cost."

What it takes for battery startups like Form Energy to succeed

It won't be easy for battery startups to compete with Li-ion, even for long-duration storage.

"The challenge facing these alternative battery technology companies is how do you compete with the economies of scale that lithium-ion has been able to create?" Finn-Foley said. "It all comes down to cost."

If you're looking for a 100-hour storage system fit for the grid, Litzelman says the power produced by the battery needs to cost around $5 per kilowatt-hour (kWh).

That's well above Li-ion grid-sized batteries, which MIT Technology Review reports cost hundreds of dollars per kWh.

Jaramillo didn't mention the specific costs Form is targeting. But for the time durations the company is working on - tens to hundreds of hours or more of storage - he said its batteries will be "50 to 100" times cheaper than Li-ion.

Finn-Foley says Form is well-positioned to create a cheap, long-duration battery, but he still has a "healthy skepticism" that the startup will be able to achieve those kinds of cost reductions.

Since 2010, the cost of a Li-ion battery pack has fallen by 85%, according to Wood Mackenzie, and will undoubtedly continue to fall, he said, though only by about 5-6% in the coming years.

"What benchmark are they comparing things to?" he said. "Because lithium-ion prices are not just going to sit where they are."

'These markets don't really exist right now'

Jaramillo said Form is still a couple of years away from its first pilot project. By then, the market for long-duration storage may still be years away, Finn-Foley says.

"These markets don't really exist right now," he said. "Lithium-ion is going to dominate for the next five years, at least, but then we'll start seeing the value of long duration increase dramatically."

That value is tied to what portion of power is generated by renewables in a given region, he said. Once it hits 70% to 80%, and beyond, the intermittency issues become more pronounced. At that point, power providers will all need grid-scale batteries.

"What's the biggest market you can think of that no battery is addressing right now?" Jaramillo said. "It's that one."