Last year about 43,000 electric vehicles were sold around the world. Of course, that’s tiny as a percentage of the global vehicle market, but that’s going to change: you can expect to see a lot more battery-powered vehicles in the next few years. In fact, Barclays Capital reckons that by 2020 there could be some 4.8 million of them.
This is partly to do with high energy costs and environmental concern – government incentives are heavily promoting electric vehicles, for example. But the real driver of this growth will be what’s under the bonnet.
Significant improvements in battery performance are crucial to the performance of electric vehicles, and plenty of research dollars are being launched at the problem.
They’ve reached the limits of old materials
On 26 January I described a small UK company that is doing its best to improve battery performance – since when its share price has defied the wider market by notching up an 18% gain.
This is Southampton University spin-off Ilika (AIM: IKA). Now a research note has passed my desk that is arguing for a further doubling of the share price to a target of 116p. This was written by Dr Tom McColm, an analyst at Allenby Capital, and he sounds rather better qualified than I to pass judgement. “Having worked in a high tech materials R&D business myself”, reveals Dr McColm, “I have experienced both the importance and difficulty of the rapid and effective execution of materials development and optimisation programmes”.
The performance of many products is limited by the properties of the raw materials that make them. “Be it the memory squeezed into an electronic chip, the temperature resistance of a protective coating, or the conductivity of an electrode”, explains McColm, “ultimate product performance is always bounded by the functional limits of the constituent materials”.
Better batteries need better materials
Nowhere is this a greater issue than in batteries. Recharging the battery of mobile phones has become part of the daily routine, but the appeal of an electric car is seriously undermined by the need to plug it into the mains every night. For a step-change in battery technology, researchers are working on solid state electrolytes in lithium ion batteries.
The key to this – I’m reliably informed – will be to find a solid-state electrolyte material with increased ionic conductivity that remains thermally and mechanically stable. Success could extend the battery run time tenfold and make it possible to recharge batteries in minutes rather than hours.
Ilika is working with Toyota to develop just such a material using its state of the art materials discovery platform. Today sheets of new material, each with slightly different properties, are produced one by one, and then tested. This is a slow process, but it also raises the danger that each sheet could be produced under slightly different conditions, which would alter the final outcome. What Ilika is able to do is produce one hundred variations of a sample material simultaneously and under strictly controlled conditions.
This is through a process called ‘molecular beam epitaxy’, by which atomic layers of elements are slowly laid down upon a substrate within a vacuum. Within one hundred different windows on a single substrate Ilika can lay down materials with one hundred slightly different properties. Each of these can then be tested for properties such as thermal resistance and conductivity. This process is far faster than the traditional method.
Ilika is tapping into a huge market
Ilika has some big names including Toyota, Shell, Toshiba and Energise among its customers and charges them for its development work. This generated £2m of revenues last year, and further growth could see it cover Ilika’s costs within two years.
But the real reward will come if products that are based on Ilika’s materials hit the market. Ilika has plenty of irons in the fire. It is making progress with metral hybrid materials that can store hydrogen; with lead-free piezoelectric materials; and with cheaper fuel cells that require substantially fewer precious metals. But it is batteries that offer the most excitement, and not only for vehicles.
Ilika is now working with the armed forces. On average a soldier currently carries up to seven different types of battery weighing a total of 10kg in aggregate. Now military planners want to halve this weight while also improving battery performance, and Ilika is now collaborating with the research arm of the UK’s Ministry of Defence. The potential market for rechargeable batteries in the defence sector alone is estimated to be worth $2.5bn by 2015, while that for the vehicle market would dwarf this number.
The world badly needs better batteries. Ilika looks like it’s rising to the challenge. Dr McColm thinks that investors could profit along with them. It’s certainly a stock to watch.
• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
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