Much of the global electrification is focusing on electric vehicles (EVs). However, another catalyst for lithium demand comes from grid-scale storage batteries.
Power grids are an essential to meet widescale electricity demands for businesses and consumers. As such, it’s key that electrical energy is stored via power grid batteries. And that should charge up lithium demand moving forward.
“While EV applications are expected to be the dominant demand driver for lithium, the fasting-growing source of lithium demand comes from grid storage batteries (see Figure 4),” a Sprott Insights report noted. The report added that the “International Energy Agency (IEA) forecasts total annual global lithium demand will rise to 1,382 Kt by 2045 compared to 130 Kt in 2022 (962% cumulative growth, or 11% per year compounded).”
“Most of this demand (around 86% by 2035) is expected to come from the EV sector (1,582% cumulative growth to 2045, or 13% per year compounded),” the report noted. “Grid battery storage [should]grow even quicker (2,373% cumulative growth to 2045, or 15% per year compounded), rising from 2.6% of total lithium demand to 6.3% by 2040.”
Spillover Effect
A decline in costs was a common barrier toward adoption of alternative energy sources. However, those costs are declining, which should provide another catalyst for growth. Like lower costs, the solar power industry is already experiencing a spillover effect affecting the cost of electricity.
“BloombergNEF estimates that the mid-case levelized cost of electricity (LCOE) for a four-hour utility-scale battery will decrease by 45% from 2023 to 2030 ($144 MWh to $79 MWh),” the report said.
Figure 4. Expected Boom in Grid Storage Will Drive Demand for Lithium (2022-2050E)
Grid Storage Battery Growth Under IEA Net-Zero Scenario
Source: IEA Critical Minerals Market Review 2023. Included for illustrative purposes only. Past performance is no guarantee of future results.
Capitalize on Lithium Miners
Lithium is an essential component for the manufacturing of electrical components. In turn, this should increase the demand for miners. Given this, an investment case exists for the Sprott Lithium Miners ETF (LITP).
LITP seeks to provide investment results corresponding to the total return performance of the Nasdaq Sprott Lithium Miners Index. That index aims to track the performance of a selection of global securities in the industry. That industry includes producers, developers, and explorers.
LITP gives investors an all-encompassing option to capture the growth potential in lithium miners without having to choose individual stocks. The exposure comes via an ETF wrapper. ETFs offer dynamic exposure without overconcentration in one or a few stocks.
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