Lithium & Battery Tech: At the Intersection of Megatrends

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Lithium at the Front Line of Power Expansion

BOTTOM LINE

Lithium and battery technology are emerging as critical inputs in the current phase of global power expansion.¹ Incremental electricity demand from AI data centres, electrification and grid resilience is outpacing long-lead supply (eg. nuclear), creating a near- and medium-term capacity gap.² The fastest scalable solution has been to deploy renewable generation paired with batteries, a shift that redirecting lithium demand away from cyclical EV sales, towards more structural Energy Storage Systems (ESS).³,⁴

As renewables scale, ESS have provided a practical way to manage intermittent power generation, enhancing grid reliability and stability.⁵,⁶ As a result, storage has moved from a discretionary add-on toward a repeatable component of grid investment, supporting a more durable, infrastructure-like demand profile for lithium and battery technology.⁷

The investment opportunity spans the value chain. Lithium markets are small relative to the capital flowing into grids, making prices sensitive to supply discipline, favouring low-cost miners and integrated chemicals producers.⁸,⁹ Concurrently, battery cells and control software have benefited from the scaling of storage deployments.¹⁰ Diversified exposure across mining, processing and battery technology captures the full power-system build-out, rather than relying on any single segment.¹¹

1) Energy Storage Systems: From Optional Add-On to Structural Imperative

Why ESS demand is scaling

• Structural power demand is accelerating:
• AI data centres, electrified industry and EV charging are adding round-the-clock load to grids.¹²
• Long-lead solutions take time:
• New baseload generation and major grid upgrades operate on multi-year timelines.¹³
• Renewables fill the gap & batteries make them practical:
• Solar and wind are fast and cheap to deploy; batteries reduce intermittency and improve reliability.¹⁴
• No clear saturation point:
• Storage requirements scale with renewable penetration, peak demand and grid complexity, rather than unit sales (like with EVs).¹⁵

What’s changed

• ESS is rebalancing battery demand: ~20% of lithium demand now comes from ESS, up from ~10% three years ago, which is materially faster than EV growth rates.¹⁶

Persistence of demand

Unlike EVs, ESS demand is not capped by fleet size or replacement cycles. As power systems evolve, grids can keep adding storage to manage higher renewable shares, peak loads and resilience requirements, reinforcing structural, non-saturating demand.¹⁷

2) Electric Vehicles: A Scaled, Still-Growing Demand Engine

Why EVs still matter

• EV sales are still growing and remain the dominant driver of battery demand.¹⁸
• Global EV penetration continues to rise, supported by:
• Cost declines in batteries.
• Expanding model availability.
• Regulatory pressure on ICE fleets.¹⁹
• Battery demand growth from EVs has proven resilient, even through periods of weaker auto sales.²⁰

What’s different now

• EV demand is large but more cyclical than ESS – it’s sensitive to consumer affordability, interest rates and incentives.²¹
• Chemistry shifts moderate per-vehicle lithium intensity, but are offset by:
• Rising vehicle volumes
• Larger battery packs
• Growing commercial and fleet electrification.²²

Persistence of demand

EV adoption remains a multi-decade transition rather than a one-cycle theme. Fleet turnover is slow, replacement demand compounds over time, and emerging markets remain underpenetrated relative to developed markets.²³ While EV demand is more cyclical than ESS, it continues to provide a large, growing base-load of lithium consumption.²⁴

3) Renewables Variability: The Problem Batteries Are Being Built to Address

The challenge

• Solar and wind output is inherently variable and often misaligned with demand peaks.²⁵
• Higher renewable penetration therefore increases:
• Grid instability
• Curtailment risk
• Price volatility²⁶,²⁷
• What ESS has provided in practice:
• Firming of renewable generation
• Frequency and voltage regulation
• Peak shaving and congestion relief
• Improved system reliability during stress events.²⁸

Why this matters for lithium

As storage shifts from discretionary to repeatable grid investment, lithium demand may become increasingly tied to infrastructure deployment rather than consumer-led adoption cycles.

4) What This Means for Battery & Storage Companies

Where value is accruing

• Companies supplying batteries designed for stationary (rather than mobile) use.²⁹
• Storage developers and integrators that design, build, and operate grid-scale battery projects.³⁰
• Enabling technologies: power electronics, thermal management, and control software.³¹

Why this is different from the EV cycle

• ESS deployment is infrastructure-led, not consumer-led.³²
• Revenues are increasingly tied to long-term contracts, tenders and regulated frameworks.³³

5) What This Means for Miners

Pricing leverage as discipline returns

• Tighter supply conditions and structural deficits improve operating leverage for producers.³⁴
• This means that integrated miners and chemical processors may bebetter positioned to defend margins.³⁵

Strategic capital is re-entering

• Lithium is increasingly viewed as a long-duration strategic input to meet power needs.³⁶
• Government-backed financing and long-term offtake agreements (e.g. Lithium Americas) appear to be de-risking western supply and setting a template for future projects.³⁷

This document is not intended to be, or does not constitute, investment research as defined by the Financial Conduct Authority.