Lithium iron phosphate industry application field analysis and prospect forecast

The main application areas of lithium iron phosphate can be divided into two categories: power battery and non-power battery. Among them, in the field of power batteries, lithium iron phosphate is mainly used as the anode material for the power system of various models of pure electric and plug-in hybrid new energy vehicles; in the field of non-power batteries, it is mainly used in the energy storage of 5G base stations, energy storage of new energy power generation, and the replacement of the lead-acid market for light-duty power.

1、Power Battery Field

In the field of power battery, LFP is mainly used in the power system of new energy vehicles. According to the different segments of the application field, the proportion of LFP utilization is also different.

(1) Passenger car field: the proportion of LFP-equipped models is increasing.

In electric passenger cars, which have higher requirements for battery energy density, NCM materials have dominated in recent years. However, with the impact of subsidies and other policy factors, the cost advantage of LFP began to emerge, and more vehicle manufacturers began to launch new energy models equipped with LFP, such as lithium iron phosphate version of Model3, BYD Han, Hongguang MINI and so on.

According to the catalog of recommended models for the promotion and application of new energy vehicles issued by MIIT in 2020, a total of 1,126 passenger cars were selected, of which LFP-equipped models accounted for 14.12%, and NCM accounted for 63.59%; in the catalog of recommended models for the promotion and application of new energy vehicles issued by MIIT in 2021, 169 passenger cars were selected, of which LFP-equipped models accounted for 40.24%, and NCM accounted for 40.24%, and NCM accounted for 40.24%. A total of 169 passenger cars were selected in the catalog of recommended models for the promotion and application of new energy vehicles released in the first and fourth batches in 2021, of which the models equipped with LFP accounted for 40.24%, and NCM 42.01%.

From the catalogs of recommended models for the promotion and application of new energy vehicles in recent batches, with the clarification of the new energy subsidy policy at the end of April 2020, LFP models started to gradually make an impact, and the proportion of models grew rapidly and gradually exceeded that of NCMs.

(2) Bus field: LFP absolutely dominates

According to the 1-13th batch of recommended models for the promotion and application of new energy vehicles released by the Ministry of Industry and Information Technology (MIIT) in 2020, a total of 2,079 buses were selected, of which the number of models equipped with Li-FePO4 batteries was 1,835, accounting for 88.26% of the share; and in the 1-4th batch of recommended models for the promotion and application of new energy vehicles released in 2021, a total of 156 pure electric buses were selected, of which the number of models equipped with Li-FePO4 batteries was 1,835, accounting for 88.26% of the share. A total of 156 pure electric buses were selected in the catalog of recommended models for popularization and application of new energy vehicles released in 2021, of which 132 models were equipped with lithium iron phosphate batteries, accounting for 84.62% share.

In general, for the consideration of safety and cost-effectiveness, LFP batteries are absolutely dominant in domestic new energy buses.

(3) Special-purpose vehicle field: LFP dominates, NCM supplements

According to the 1-13th batch of recommended models for popularization and application of new energy vehicles released by MIIT in 2020, a total of 1,912 new energy special-purpose vehicles have been selected, of which the proportion of models equipped with LFP is about 81.90%, NCM accounts for 10.88%, and other battery models account for 7.22%; and in the 1-4th batch of recommended models released in 202134 , a total of 357 plug-in hybrid vehicles have been selected, with a total of 1,912 models. A total of 357 plug-in hybrid special-purpose vehicles have been selected, of which the proportion of models equipped with LFP is about 86.00%, NCM accounts for 6.16%, and others account for 7.84%. In the field of special-purpose vehicles, power batteries show the application pattern of LFP mainly and NCM supplemented.

2、Non power battery field

In the field of non-power battery, LFP is mainly involved in three directions of application: 5G base station energy storage, new energy power generation energy storage and lead-acid market replacement.

(1) 5G base station energy storage

New energy power generation and grid-connected energy storage, 5G base station backup power storage market has increased significantly, driving the power generation side and user-side energy storage in the electrochemical energy storage market share. Considering the performance of lithium batteries and energy storage cost of electricity, the current domestic power supply side energy storage projects have been put into operation more than the use of lithium iron phosphate batteries, in addition to the three major operators 5G base station construction planning and bidding project requirements, lithium iron phosphate batteries have become the optimal choice of base station standby power energy storage batteries.

The Ministry of Industry and Information Technology (MIIT) said in August 2020 that promoting the use of lithium iron phosphate (LFP) energy storage batteries in communication base stations is of positive significance for promoting the green and high-quality development of the communication industry. This confirms the dominant position of LFP in 5G base station energy storage applications at the official level.

From the level of network coverage, by the end of 2021, China had built and opened a total of 1,425,000 5G base stations, built the world's largest 5G network, and realized coverage of all prefecture-level cities in urban areas, more than 98% of counties in urban areas and 80% of townships in townships. The total number of 5G base stations in China accounted for more than 60% of the world's total, and the number of 5G base stations per 10,000 people reached 10.1, nearly one times higher than that at the end of the previous year. More than 300 cities have launched the construction of gigabit fiber optic broadband networks. It is expected that by 2025, the number of 5G base stations in China will exceed 7 million.The demand for LFP materials is about 35,000 tons.

(2) Energy storage for new energy power generation

New energy power generation is characterized by intermittency and instability, due to the increasing installed capacity of new energy and the problem of consumption, energy storage occupies a crucial position.

Take wind power as an example, the original output power of wind farms has intermittent, fluctuating and other unstable factors, if directly into the grid will cause impact on the grid, affecting the power quality of the grid. Therefore, it is necessary to use the energy storage system to suppress this power, to avoid the normal operation of the grid impact. Energy storage system can realize "peak shaving and valley filling", improve the utilization hours of power generation, effectively solve the problem of wind and light abandonment and improve the income of the power station.

From the current domestic existing energy storage projects, pumped storage is the most important means of energy storage technology. China's proportion of pumped storage accounted for 91.6% of the total proportion of energy storage projects, electrochemical energy storage accounted for only 6.8% of the installed capacity of the existing energy storage projects, of which about 85% of the share is lithium batteries. At present, most of the power-side energy storage projects that have been put into operation in China use LFP batteries. Considering the economy of LFP, the future is still expected to become the main direction of domestic energy storage battery. The new installed capacity of electrochemical energy storage in 2021 will be 2.5/3.4GW, and the cumulative installed capacity is expected to reach 35.52/55.88GW in 2025, and the electrochemical energy storage field will add 13.0-23.1Gwh of demand space in 2025, which corresponds to the demand for LFP materials of 3.0-5.4 million tons.

(3) Lead-acid market replacement

Lithium iron phosphate battery energy density can reach 4 times that of lead-acid batteries, cycle life is also 3-4 times that of lead-acid batteries, energy conversion efficiency up to 97%, and more environmentally friendly. Previously the biggest advantage of lead-acid batteries is the low cost, and now the price of lithium iron phosphate batteries close to lead-acid batteries, considering the cost of a single cycle, lithium iron phosphate batteries less than 1/3 of the lead-acid batteries, replacing lead-acid batteries is the general trend.

2020 China's lead-acid battery production 227.36GWh, corresponding to more than 130 billion replacement space. About 33% of them are used in light power batteries, mainly used in the power system of electric two-wheeled vehicles. The average selling price of lithium battery monomer has been lower than RMB 0.6/Wh in 2020, while the selling price of lead-acid battery is RMB 0.3-0.4/Wh. However, lithium batteries are significantly better than lead-acid batteries in terms of energy density, service life, quality and volume, etc., so the market penetration rate is rapidly increasing. 2020, the production of lithium version of electric two-wheeled vehicle in China reaches 11.36 million, and the overall penetration rate is 23.5%, up 84% year-on-year. In 2020, the output of lithium-ion electric two-wheelers in China reached 11.36 million units, with an overall penetration rate of 23.5%, up 84.7% year-on-year.

The market penetration rate of lithium-ion electric two-wheelers is expected to approach 60% by 2025. With the rapid growth of lithium-ion version of electric two-wheeled vehicle production, lithium battery shipments for electric two-wheeled vehicles are also growing at a significant rate. Statistics show that in 2020, China's lithium battery shipments for electric two-wheelers reached 10.7Gwh, up 91.1% year-on-year, and demand for lithium batteries for electric two-wheelers is expected to reach 45.9Gwh by 2025.