Lithium startups are betting on high demand in a battery-powered future

As the world moves towards electrification, it will need more lithium. A key ingredient in the batteries that power everything from electric vehicles to mobile phones, demand is projected to accelerate over the next decade.

To deal with it, a new group of startups is working on new ways to produce the precious metal and promises to open up untapped sources of lithium. It’s also battling economic headwinds, pushing its technology forward amid a current market downturn.

Direct lithium extraction (DLE) is an innovative approach to recover material from brine that is found on the Earth’s surface or is pumped from underground. There are a variety of techniques, ranging from using beads that attract lithium to using membranes that selectively filter out the metal. Although startups have pursued DLE for years, only recently has the technology matured to become potentially competitive with existing lithium mining methods.

“Right now, the technology is on the verge of commercialization,” said Sung Choi, metals and mining specialist at BloombergNEF.

Even so, most startups operate at the lab or pilot level, reflecting the long road ahead to play a significant role in the industry. Lithium has traditionally been mined from brine in open air evaporation ponds or mined directly from rocks. Countries like Argentina and Chile have been lithium-producing powerhouses, responsible for most of the lithium imported into the US because they have more concentrated sources of the metal. (Australia is the largest producer of lithium in the world.)

While lithium demand is around 1 million tonnes annually today, BNEF estimates it will reach 3 million by 2030 and over 6 million by 2050 in its economic transition scenario, which assumes no new deployments policies to accelerate the clean energy transition. Lithium is currently oversupplied due to, among other things, a slowdown in electric vehicle sales, meaning that enough is produced by traditional methods to meet demand in the short to medium term. But innovation is needed to meet the long-term demand driven by the energy transition, Choi said.

Until recently, most DLE techniques have largely relied on solid materials that can attract lithium chloride, which is refined for use in batteries. Those approaches were only able to recover modest amounts of the metal, and some materials also attracted unwanted substances that have a very similar chemical structure, such as magnesium.

A handful of new startups say they have overcome these technological challenges with new DLE approaches that capture lithium and only lithium. While still expensive, companies believe they can compete in the lithium market because they use less water and resources than traditional production methods and can work with lower-quality brine with less concentrated amounts of lithium. DLE startups believe their techniques can open up new markets by diversifying the lithium supply chain.

SpecifX is one of those startups. Co-founded by Professor David Jassby of the University of California, Los Angeles, the company has developed a membrane material that uses an electric field to move ions while allowing only lithium to pass through the “gate”. Although North American brines are generally “more challenging” when it comes to lithium extraction, SpecifX’s approach can work using them, Jassby said.

Beyond being able to extract lithium from low-concentration brines, DLE has another potential advantage over traditional production methods such as hard rock mining and mass evaporation ponds: environmental impact. Membrane separation technology is the “Holy Grail of lithium extraction” because it eliminates the need for water and chemicals, said Charles McGill, chief executive of Rio Tinto-backed ElectraLith. The Melbourne-based company is also developing a membrane-based approach to DLE.

By comparison, traditional mining techniques are incredibly water-intensive, using up to half a million gallons of water per ton of lithium produced. Drought-prone countries such as Chile are beginning to restrict water use in lithium mining, encouraging miners to adopt DLE. Some mining companies are already committing to reducing water use as well as reducing their reliance on traditional brine extraction methods. The world’s largest lithium producer, Albemarle Corp., for example, has pledged to reduce its freshwater use intensity by 25 percent by 2030, while SQM, the world’s second largest, is in the process of to choose DLE technologies for implementation.

It is not just membrane-based DLE methods that are trying to address the environmental impact of lithium production. Another startup, Princeton-based PureLi, relies on evaporation, but its approach avoids losing brine water to the atmosphere. The startup runs the liquid over a string with a special coating that allows it to differentiate the lithium from other parts of the brine while harvesting water. Lithium chloride moves faster and farther toward one end of the wire, while other substances remain or crystallize. Princeton researcher Zhiyong Jason Ren, who is leading the effort, calls it “a rock candy approach.”

In addition to the technological challenges, triggering DLE has proven difficult from an economic point of view. Today, lithium is cheap and widely available, following a price crash in 2023. At its peak, lithium hydroxide for batteries reached $80,000 per metric ton before falling to $14,000 in April 2024 in the US and Europe.

The collapse in lithium prices has rattled investors, creating a challenging funding environment for startups in the space. Continuing the challenge, using DLE to produce lithium still costs more than traditional evaporation pond techniques, although in some cases DLE is comparable to hard rock mining. But industry advocates say focusing on current oversupply is short-sighted, and producers need to invest and expand new approaches now to be prepared to meet future demand.

“The smart money is on investing now, when resources are relatively cheap to acquire and building capabilities that would be brought online in three to five years,” said Raef Sully, chief executive of Lilac Solutions Inc., a DLE company backed by Bill Gates. Breakthrough Energy Ventures and one of the largest in the space. (Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, is an investor in Breakthrough Energy Ventures.)

Lilac, which has completed four pilot projects and two demonstration plants, has raised more than $300 million to commercialize its DLE technology, which relies on ceramic beads to absorb lithium. It is currently working on building a 5,000-ton plant at Utah’s Great Salt Lake, which is slated for completion in late 2026. When built, it will be the largest DLE production facility in North America, it said Sully.

Some are skeptical that Lilac—and DLE as a whole—can provide lithium cost-effectively. The startup’s technology was the subject of a short-seller report published in 2022 that said its approach didn’t work, a claim the company denies.

“Investors still lack evidence that Lilac DLE technology works at scale and, if so, at what cost,” J Capital Research wrote in its report. “If the DLE technology works, then the number of ‘cycles’ the extraction medium can be used for will be a key cost driver. If the medium can only be used for a few hundred cycles, then the costs can be prohibitively high.”

Lithium recovery rates have remained consistently high in lab tests, pilot and larger-scale demonstrations, and the ceramic beads used to extract the lithium have lasted thousands of cycles, Sully said.

He hopes the completion of the Utah plant will instill confidence in DLE. “People are rightly skeptical,” he said. “I think there’s some reluctance for big companies to come in and use our technology without seeing it themselves.”

Photo: A worker holds lithium hydroxide. The material will be key to the energy transition, and a number of startups are working on new techniques to produce it. Photographer: Cristobal Olivares/Bloomberg

Copyright 2024 Bloomberg.

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