Rethink Energy 230: Flying cars to redouble all-solid-state R&D; VPP progress to accelerate EV adoption via V2G

Speaker A: Hello and welcome to the Rethink Energy podcast. I'm Azev for your host Andries Vantanaar. And once again I'm not joined by Chahoon Kim because she's actually finished her internship with us. Uh, she's also finished her degree at the London M School of Economics and she's going to work at the, I think it was the International Energy Agency, which is rather nice. Uh, and we're actually closing down Rethink Energy as a weekly publication. Next week is the final issue of Rethink Energy. For the foreseeable future, the podcast may continue intermittently based on interviews more so than the weekly news. And I'll still be around, so you can still email me, you can still invite yourself onto the podcast. Uh, we will also be publishing a forecast pretty soon on um, data center, uh, power demand and how that's going to be met. Obviously, data centers are the centerpiece of uh, energy demand growth in the West. They're basically equal to the entire new growth, if there is any. And it's so big that it may even revive the nuclear industry almost single handedly. So we're not going away completely. You can still contact us, but the weekly newsletter is ending. It's been a bad investment environment for two years and that's been reflected on uh, our subscription and renewals figures, sadly. Also, I should say that uh, Rethink Technology Research isn't going anywhere because Rethink uh Energy was only the third of our three publications. So we've still got Wireless Watch and Fault Line, the other one that's still going strong. And we may bring back Rethink Energy in the not so distant future. Anyway, that's enough about us. I'd better get on to the actual weekly news. I'm going to start with flying cars. Now, before you roll your eyes, the real topic, uh, being discussed here is actually all solid state power batteries. Really energy dense, potentially three times the energy density of today's high grade lithium lithium iron phosphate batteries. So what are these flying cars that I'm talking about? Well, there are now multiple Chinese companies saying they will launch test flights this year, or at least next year, but in many cases this year. And the latest, uh, of those announcements is GAC Motors, which has announced it will sell the Govee Air Cab starting with, uh, mass production by the end of 2026 from a price point of $234,000. The company has also mentioned that it received 1,000 orders in the first 24 hours. The batteries are to charge in 25 minutes. Which is quite interesting because that's actually a bit on the slow side. The fuselage is to be made of carbon fiber. They haven't specified the range, but you can find images of this electric vertical takeoff and landing craft, the Govee Airjet evtol online. This and a few and several other products. They're going to be premium products. It's like a smaller, uh, helicopter in a sense, so this won't be an enormous industry, but $234,000 a pop. Well, that's a much higher price point than an ev and it still only transports a couple of people. And because of the high price point, this may be very useful or even necessary to support the development of really high quality batteries and maybe also autonomous driving in a way that terrestrial EVs, with a more sensible price point that uh, isn't several hundred thousand dollars, they can't really support it in the same way. And before I go on about batteries more, I need to specify. So the reason I mention autonomous driving is because if it gets totally reliable, and that might be easier actually in the air than on a road, you don't need to carry the driver around. So you're removing what, 70 kilograms, uh, from the, from the weight of the transport, which is pretty useful if you're trying to keep something aloft with battery power. You know, autonomous driving is disproportionately useful in these flying cars, just like energy density in a battery is disproportionately useful and they are disproportionately rewarded in terms of, um, the distribution of money and profit and production cost and sales. As the industry tries to develop all solid state batteries. That's going to be a story that takes really a whole decade to shape out. Right now the industry is all about LFP batteries, which are uh, pretty much below 300 watt hours per kilogram energy density. And that is kind of already good enough. And it's already very cheap, it's already reliable enough, it charges fast. They are researching all solid state. All solid state is nice. They might as well research all sol state for the mainstream EV industry. But what if all solid state is a technology that is just more expensive and difficult to produce in large quantities? And it's not really solving a problem with LFP batteries because there is no longer a big problem with LFP batteries. Like there's no such thing as range anxiety for Chinese EVs. That's not really, really an issue anymore. That's a very outdated concept. If all solid state is just like, oh yeah, it's Got twice or three times the energy density, but you don't really care about that. And also it's more expensive and also it can't be mass produced. Then that really won't be supported very well by an EV industry that's pursuing um, massive, massive unprecedented industrialization at low prices using the mainstream LFP technology. But this all solid state technology, expensive small batch size, triple the energy density, that absolutely can be rewarded by a flying vehicle that really, really needs that energy density to even stay in the air for a few extra minutes. And also the price point of that flying vehicle up at $234,000 instead of 20,000, some of that can go to the all solid state. And however much the all solid state battery costs, there's kind of room in the profit margin in the price point to pay for the all solid state battery development. And so I guess my point here is that yes, uh, if these flying vehicles didn't exist as a concept, the uh, EV industry would still research all solid state, but it would take a lot longer for mass production to be something that's actually worth doing. Whereas here's an option for the industry to actually make a profit off of making all solid states and then feed that back into the research into these really elite batteries. Because like I said, um, the, the um, current day mainstream is like 250 watt hours per kilogram energy density. That's already good enough. Also uh, state and semi solid state are pretty interesting when they get to 300 watt hours per kilogram, even 400 maybe next year. But when you talk about 700 watt hours per kilogram by like 20, 28, as some of these companies are doing, it just kind of feels unnecessary and perhaps a bit too much difficult. And so it's very useful to all the solid state batteries to have these EVTOLs providing a lucrative niche to reward the sort of spearhead technology. It's a bit like uh, you know, in solar, if perovskites uh, are having trouble broaching, breaching into the mainstream, well maybe they can get onto satellites, maybe they can get into indoor devices, maybe they can get into transparent windows, maybe they can get into high power per square meter installs on telecoms towers, all of those have been considered or in uh, wind very niche example. A little while ago I wrote about the idea of wooden wind turbine towers instead of whatever they're normally made out of, which I think is steel. And I came to the conclusion, well if people aren't using wood it must be because it's expensive. They talk about 1000 layers of millimeter thick wood. And it sounds a bit difficult to make that, but they have a pretty clear. This was some German company, I think it was, or Swedish, but they have a pretty good idea of how they could bring that to market, which would be in the form of mountainous installations because uh, their wooden turbines can be modular. So you can easily bring them and assemble them on some hilltop where um, pulling up a huge steel wind turbine tower on an enormous truck is uh, a bit difficult, you know, if it's 100 meters long or whatever. So it's just a general concept. When you're looking at a future technology, obviously there's always a question of will this really happen or not? All solid state technology is one of those. So um, so much more powerful than the current thing that you wonder if they can really get it done. You wonder if they can really get up to 700 watt hours per kilogram. So there's this question of will they do it or not. And I think the scale of interest and investment that's going on into this R and D, the scale of the EV industry, the fact that there's these flying um, EVTOLs being sold within the next 12 months by GAC, uh, Motors and some other ones. What were they? I've got them listed. Xpeng FAW Group, Chery and um, Changan Automobile. Those are all big EV, uh manufacturers. There's also Ehang which has actually already delivered some EVTOLs to market their EH, 216S model. So I think, I think the all solid state batteries are actually going to make it. And it's almost hard to care that much because of how good the current lithium, uh, the current LFP batteries already are for your typical mainstream evidence. But it's always nice to have um, even greater uh, technology in the future even if range anxiety has already been solved. So uh, the next topic I'm going to cover is the EU's 6.3 billion investment into uh, critical minerals mining operations. This uh, is a bit of an old story actually because it was announced back on June 4th by the European Commission. They want to hand out billions of dollars, or Euros rather, across 13 major strategic products to provide critical minerals such as uh, lithium, manganese, cobalt and Graphite. So there's 13 projects, 10 of them are very relevant to battery manufacturing. So what is Europe? Well Europe is a huge source of demand for energy storage and power batteries and it can develop downstream manufacturing if it wants to. With this new um, critical mineral strategic investment, uh, it can certainly secure the raw Material. So it has downstream manufacturing, potentially. It has demand, it has the raw materials. What is it missing? It's missing the upstream manufacturing things like refining, which is very energy intensive, uh, and companies like Northvolt which make the batteries themselves instead of just buying in batteries from China. And so yeah, I mean it's kind of interesting to see the EU do this, but at the end of the day I feel like I don't really know what the point is of a reshoring strategy that has this huge gaping hole in the upstream energy intensive manufacturing as you can't organically fix that because Europe's energy costs are still fairly high. Europe just doesn't have the money to throw around to fix that, especially if there's another hike in the oil price for geopolitical reasons in the Straits of Hormuz. So it's kind of, it's just the European Commission being kind of weird in my opinion. Uh, uh, sorry if that sounds flippant, but it's a bit like solar manufacturing. We can provide the raw material which is polysilicon. We can easily build up module manufacturing and even cell manufacturing if we wanted to. But then you're left with this sort of upstream manufacturing segment, the wafers, which is 98% dominated by China because it's energy intensive. And it's just, what is the point if it's, if it's all based on paranoia about trade with China? You have to get it out of China. You can't trade with China for the wafers. What is the point really of getting halfway there, reshoring everything else. Well, I guess you can say once the cells are reshored, uh, into Europe or wherever else like India, US maybe you're looking at French shoring. Well then you can reshore wafers because now you've got some domestic uh, cell manufacturing to sell to instead of uh, trying to sell your, your wafers into China, which wouldn't work because of the price differential. Look, I hate to say it, I was quite favorable towards these reshoring efforts at one time, but it's just always being half assed and it's always kind of feels pointless. China is just so dominant. If you want to change that, you have to go all the way. And all of these half measures, honestly annoying to even think about. So with that I'm going to, sorry if that sounds a bit flippant and negative. With that I'm going to change, uh, on to the next topic, which is actually another China manufacturing topic. It's about electrolyzers. So the international Solar Photovoltaic and Smart energy conference, um, or exhibition that the snack exhibition was held in Shanghai for the 18th time. It's an annual conference, uh, always produces a lot of news. I didn't actually cover the solar element of this so much because it feels like the solar industry has kind of plateaued in terms of scale and cost and even technology to some extent. So what I'm looking at this week from the SNEC exhibition is this time it's actually, uh, hydrogen electrolysers. And to speak in very broad terms, in, uh, the past the Chinese have been more about providing alkaline electrolyzers and PEM electrolyzers, the proton exchange membrane electrolyzers, which are more expensive but theoretically better. I'm speaking in very broad terms. They've been pursued more in the west. And of course the central problem for green hydrogen production through electrolysis is it's just too expensive. In the west, it's, uh, I would say two or three times too expensive and we just don't have the money to bridge that gap. In China, it's not that the gap is actually shrinking because a huge fraction of this, of the gap, uh, in cost between gray hydrogen and green hydrogen that we have to close if we want to adopt green hydrogen. A, uh, huge proportion of that is just the electricity cost. And of course China, unlike Germany, has a desert that it can build its solar power plants in. And also the desert is very windy. Inner Mongolia is a plateau and Xinjiang is pretty windy as well. For whatever reason, I don't really know why. So when you go up there, uh, you've got like, I don't know if I should call it Central Asian labor costs. But Inner Mongolia and Xinjiang are pretty low wage places. Still is incredibly good natural conditions. And so the energy costs are low and you end up with, in China, the grey hydrogen production cost. Last time I checked, which admittedly was about six months ago, last I checked that was $1.25 per kilogram. So that's what green hydrogen has to get down to. And if China can build solar plus storage cheaply enough, uh, to reach like $45 per megawatt hour levelized cost of electricity, that's with storage, then they can produce green hydrogen at 1.$37 per kilogram. So only about 10% too expensive compared to gray. That is the kind of production, marginal production cost gap that can and will be closed with just a little bit more gain in terms of the cost of the electrolyzer, the cost of the electricity, the efficiency, um, the process involved. And so this, this problem that has hung over the green hydrogen industry for maybe five years now of it's just too damn expensive. That may be about to change and we could actually reach a commercially viable green hydrogen industry in northern China. And once it exists in northern China, uh, it can spread, it can spread to Gujarat, where there's also cheap renewables, cheap labor, good renewable energy, um, conditions. And once it spreads to Gujarat and what's the other one next to it? Is it, oh, you have Rajasthan in India. Once it spreads there, it can spread to the Gulf states as well, and it can go to other places that have really good renewable, uh, energy. I'm trying to think if it's offshore wind based, maybe the Taiwan Straits with offshore wind, but offshore wind's kind of expensive, so. And maybe maybe north Europe, um, maybe the North Sea can start doing some hydrogen, uh, production. But then it's a lot more expensive compared to solar power in the desert. Anyway, I'll get back to the actual news, which is, um, you've got shine hydrogen and you've got some other companies displaying PEM electrolyzers. And so the Chinese are coming in to electrolyzer manufacturing. And if the Western OEMs can't provide really cheap electrolyzers that are sort of mass produced efficiently, there's overcapacity in, uh, the manufacturing because of course there is in China. That drives down the price in a rather hideous way. But at the same time, they're figuring out the quality of the technology and the reliability of the equipment, so it's not totally compromising on the quality of the product. Even though, uh, they've got this vicious cost competition. Well, you know, that can really help to, um, to make green hydrogen a real industry. Now, according to the Hydrogen Council, working together with consultancy McKinsey back in September 2024, they found that 434 green hydrogen projects had received backing so far that year last year, and that was up 10 times compared to 2020, when there were 102 projects for $10 billion instead of 433, uh, 434 for something like $75 billion. So the investment scale of green hydrogen is there. And actually that's quite big. I mean, solar installation, the solar industry must be worth about, what, $1 trillion. So 75 billion. Uh, it's not completely tiny anymore. It's got a long way to catch up to wind, solar, or even energy storage, actually. But I feel like we're not that far away from green hydrogen becoming a real industry, which, to be honest it just isn't when it's more, uh, expensive than grey hydrogen, even with carbon taxes and incentives thrown into the mix. And so the last topic, I'll just move on to the last topic for this week, which is virtual power plants. And I always find it interesting with virtual power plants that they are being pursued and expanded in very, very different market conditions. They're just good everywhere. Whether it's China that doesn't even have the market structures set up for them really yet, or whether it's Europe, which very much does, or whether it's um, the USA places, uh, like California doing it because they have to develop micro grids because California's uh, transmission infrastructure is a century old and it's causing wildfires. It's all very different. And so you have things like the New York Independent System Operator stating that demand response assets grew from 1.3 gigawatts in summer 2024 by 16% in one year to this year's summer. And yeah, if it's 16% this year, I think it will probably be another 16% next year. And so this can happen very swiftly. Uh, you've got China's authorities, the NDRC and the NEA stating that by 2027 they want to have 20 gigawatts of virtual power plant regulation capacity. I think that means reliably available dispatchable capacity rather than the normal nominal capacity of all aggregated assets. They want that to rise to 50 gigawatts a few years after. I think by 2030 nominal capacity, I think it's usually five times as much as the regulation capacity. So that means by 2030, uh, China has a target of about 200, um, maybe even 300 gigawatts of assets under demand response and virtual power plant systems. What's China's national capacity? Right now it's about 3,000 gigawatts. By 2030, maybe it'll be 4,000 VPP integrated assets will equal roughly 10% of China's total, uh, generation capacity in 2030. And one thing to bear in mind with these, uh, virtual power plants and these demand response initiatives, when you see them growing by 16% is that this is with still a relatively minor EV fleet existing in the market. Whether it's China, whether it's us where they, it's the EU, the scale of EV charging depth available to VPPs in the future through uh, vehicle to grid market structures, it's so big. I mean, I did a report on vpp, so you might as well go and look at the stats in there. If You're a subscriber. It's all a bit speculative, but we're looking at like 10x100x the current scale of things in a decade because the prevalence of signup is going to go from effectively nothing to a very high prevalence. You'll get it in some kind of package deal when you buy your ev, uh, or you can integrate it with your home solar and battery installation. You know, all of these things don't really exist at scale yet, but in the Future the uh, EVs can easily dwarf really every other type of energy storage on the grid added together for the simple reason that, you know, what's a Tesla Powerwall? Uh, a Tesla Powerwall is 13 and a half kilowatt hours. What is a EV battery? Well it's at least 50 kilowatt hours. And will EV ownership actually be more frequent than domestic battery energy storage? Quite possibly. So just by comparing those numbers, you can say that the energy storage available to virtual power plants, uh, from EVs can easily be five times the energy storage depth available from battery energy storage systems. In the residential sector. You know most battery energy storage so far is utility scale, but that's another story. And uh, you know, just like I said that in 2030 something like 10% of all of China's generation capacity will be integrated into VPPs. Well actually a lot of that is demand response on the VPP side. So the amount of demand response, you know, integrated assets, which includes loads, not generators, that will be equal to about 10% of China's generation capacity. In New York, uh, there was a rather interesting report from Brettle Group commissioned by state authorities and they found that by 2040 they could maybe reach 8.5 gigawatts of grid flexibility assets, uh, leaning on EVs and uh, air conditioning and that uh, the scale of this demand response could be equal to 20% of winter peak demand. And so this whole virtual power plant concept is something that doesn't need extra physical investment because it's a sort of digital financial and software structure superstructure on already existing ass. And it can, it can kind of directly addresses the most crucial part of group development, which is the, the limitations of the transmission, uh, infrastructure that we're starting to face. And it also addresses the most marketizable, uh, and sort of crucial type of renewable energy, which is actually the batteries. So it's something that just has this enormous potential that you can't even guess at. If you judge it by the scale of uh, how big it is now, which is actually the scale is trivial. And I guess the energy storage industry is already doing fine, really well actually, in many markets. Uh, even the US has a lot of potential if they, uh, if they just feel like easing up on the tariffs on Chinese equipment supply or, uh, scale up their domestic manufacturing. The energy storage manufacturing is not actually being hit as hard as some other elements of, um, the renewable, uh, energy transition by the Republicans, uh, cuts to the IRA that they're planning. So energy storage would kind of do fine even without some VPP transformation. Probably the more interesting thing is how VPPs can really change, uh, the cost of buying an EV. I mean, if you buy on a finance deal and then you're making some constant revenue every night, uh, based off plugging your battery into the grid, I mean, maybe that can make it a lot easier to purchase an evidence in the future. Speaking of rapidly growing industries, uh, we have the latest statistics from China's battery manufacturing industry. So in the first four months of the year, uh, according to China's Ministry of Industry and Information technology, China manufactured 110 gigawatt hours of energy storage batteries. I think that was up 40% year on year. If you look at the physical manufacturing figures like anode materials, uh, came to 1.15 million tons, cathode materials to 760,000 tonnes. Separator production came to 8 billion square meters, electrolyte production came to 470,000 tons. All of that was up 40% year on year. In terms of the value of battery exports that only grew by 25% year on year to $21.6 billion. But that's probably because the price per unit, per gigawatt hour fell. Um, we also have battery grade lithium carbonate production up 60% to 270,000 tons. And lithium hydroxide actually down 14%, uh, to 90,000 tons, which I assume is just because of, uh, technological, uh, changes with the rise of lfp and. Oh yes, and then we have some more data from the China Automotive Power battery industry association. 241.4 gigawatt hours of power batteries installed, uh, into EVs in the first five months of 2025. And that's up again, uh, 43.1% from the first, uh, five months of 2024. And 80% are still ternary batteries. The remaining 81.6 uh percent is lithium iron phosphate, LFP. And there's also some, uh, there's some interesting economic figures which is that Chinese coal production in the first five months of 2025 was 2 billion tons, 1.99 billion tons. That's up 6% year on year. Um, the car sales are up 11% in China this year and electricity demand is up 6.8%. Now electricity demand is, I actually prefer it as an economic measure to gdp, even though it gets uh, messed with by the weather. The weather alters it because of heating and cooling. But even so, uh, I think last year it was quite weak, wasn't it? Something like 4.6% growth in electricity consumption in China last year. That's pretty bad. Um, this year though apparently so far it's 6.8%. That's over five months in 2025. And there is some seasonal variation, but if uh, you look into that, that cuts both ways actually. And it looks like China's economy, uh, in terms of real output, in terms of things like coal and electricity, well, it's not growing at a nominal GDP rate of what, 4% or something. Pathetic. Um, I mean that's partly because they have deflation. I think the real growth rate of actual activity, physical activity and produced goods and so on. Energy is 6 or 7%. So isn't that nice? That is quite nice. And the population isn't growing. So um, you actually they're getting wealth of significantly wealthier per capita. And that's why something like car sales, which requires you to be above a certain uh, wealth threshold that's growing by 11%. Uh, that's all car sales. That's not specifically EVs. Uh, the EVs though I will mention they are uh, up by 35% year on year as opposed to car sales which are up only 11%. So the share of EVs is now more than 50% of all sales in China. The EV penetration rate is over 50% in that country. And each month they're selling, they're not selling 1 million EVs per month to Chinese, uh, consumers, they're selling 1.3 million. And with that I think I'll end the podcast. Uh, so like I said, we are ending, uh, Rethink Energy's weekly news coverage. But do feel free to invite yourself onto the podcast because I will, I will continue doing the occasional interview based podcast. I've got another one coming up with the uh, nuclear analyst, uh, Ed Ho. So we'll in the first podcast with him, I actually rambled for an entire hour with him about um, sort of the current state of nuclear. Of course we ended up rambling with that sort of topic. Uh, in the second interview I'll do with him, I'll try to make it a bit snappier a bit more focused and we'll discuss what angles are most promising for immediate near future nuclear developments. So, anyway, that's, uh. That's enough. That's enough for this week, as ever. You can find us at rethinkresearch Biz in the Energy section, and you can contact me at andreessinkresearch Biz. A N D R I E S. Or you can message me on LinkedIn. Have a nice week.