(BRK.A), (BRK.B)
What Saudi Arabia’s oil fields are to the fossil fuel era, lithium reserves are to the dawning battery-powered electric vehicle era.
A dying California lake could be the Saudi Arabia of lithium if new extraction methods prove viable, and Berkshire Hathaway could be in position to profit handsomely from the coming boom in the metal.
With the rise of the electric vehicle, global lithium demand is projected to grow tenfold by 2030, as lithium-ion powered EVs move from the fringe to the dominant mode of transportation, eclipsing fossil fuel powered vehicles.
The transition is already underway. California, which has the most car registration in the U.S. with over 15 million, recently announced that it will phase out the sale of all gasoline-powered vehicles by 2035.
With the demand for lithium-ion batteries growing rapidly, the need for raw lithium is increasingly under pressure. As of 2020, 95% of global lithium extraction comes from Australia, Chile, Argentina and China.
However, California may be on the verge of taking its seat at the table.
Key to meeting worldwide lithium demand may be the Salton Sea, a roughly 400 square mile inland sea that was accidentally created in 1905 when high spring flooding on the Colorado River crashed the canal gates leading into the developing Imperial Valley. For the next 18 months the entire volume of the Colorado River rushed downward into the Salton Trough. By the time engineers were finally able to stop the breaching water in 1907, the Salton Sea had been born. Over a hundred years later, the Salton Sea now has a higher salinity than the Pacific Ocean.
The lake has one asset that may turn it from environmental disaster to one of the key assets in the global climate change battle, and that’s an abundance of lithium. Its briny water may contain enough lithium to meet one third of the world’s current lithium demand if it can be economically extracted.
The Salton Sea’s Riches Have Not Gone Unnoticed
A group of investors is hoping to turn the area into a “Lithium Valley” that may join Silicon Valley for economic impact. The goal is to make the Salton Sea area of California a world-wide hub in lithium extraction and battery production. It is a goal already supported by state officials, and Gov. Newsome recently signed a bill to create a “Blue Ribbon Commission on Lithium Extraction in California.”
On October 6, 2020, New Energy Nexus an international non-profit that supports clean energy entrepreneurs, released a report “Building Lithium Valley.” The report notes that the U.S. is only “1% of global lithium supply. But according to the USGS, the U.S. has 8.5% of the world’s lithium resources.”
The report goes on to state that a “Lithium Valley anchored ‘Clean Energy Hub’ focused on attracting battery component, battery cell and electric vehicle manufacturers to Imperial County could supercharge the state’s financial recovery while also promoting the sustainable wellbeing of a county with the highest unemployment rate in the state.”
Among the key companies already involved is Oakland, California-based Lilac Solutions, which is commercializing a new ion exchange technology for lithium extraction from brine resources that it claims is significantly faster, cheaper, and more scalable than existing technology.
The technology was developed by CEO Dave Snydacker, a battery expert and materials engineer focused on bringing lithium extraction into the 21st century.
Ion exchange technology has been in operation for 80+ years in various industries including mineral recovery, and Lilac tailored this technology to be highly selective for lithium achieving recovery rates of about 90%. Lilac states that it has successfully demonstrated the technology at large scale, and with dozens of brine resources from around the world.
Money is already pouring into Lilac to see if they are right. In February 2020, Lilac raised $20 Million in Series A funding that included money from Breakthrough Energy Ventures, a Bill Gates-founded fund with more than $1 billion in committed capital to support bold entrepreneurs building companies that can significantly reduce emissions from agriculture, buildings, electricity, manufacturing, and transportation.
Berkshire Hathaway’s Role in Lithium Extraction
Berkshire Hathaway Energy owns ten geothermal energy plants in the Salton Sea/Imperial Valley area of California, putting it at the heart of a potential lithium boom. The plants sell power to Southern California Edison Company, City of Riverside, Salt River Project, Sacramento Municipal Utility District, Imperial Irrigation District (IID) and Arizona Public Service.
Currently, the wastewater from geothermal energy plants is reinjected into the geothermal reservoirs from which it came. However, this wastewater is rich in lithium and other minerals, including manganese and zinc.
The goal of extracting commercial quantities of lithium from the Salton Sea is already moving forward. The California Energy Commission awarded $6 million to Berkshire Hathaway Energy for a demonstration project to produce battery-grade lithium carbonate.
BHE Renewables, a wholly owned subsidiary of Berkshire Hathaway Energy, is working on modifying its existing geothermal power plants operating in the Salton Sea for lithium extraction. These power plants are operated by another wholly owned subsidiary, CalEnergy, and will serve as the site for BHER’s pre-commercial geothermal brine pre-treatment for the lithium recovery.
BHER is working with AquaMin to scale up its lithium recovery technology to process 100 gallons per minute (gpm) of geothermal brine from the Region facilities to recover lithium chloride and convert it into lithium carbonate, and BHE Renewables currently produces 350MW of its 4,000 MW of renewable power with geothermal generation in Imperial Valley.
There is an estimated 5.5 year timeline until full commercialization, measured from end of Q2 2020. Initial operating plant estimated to be operational after 30 months and reach capacity of 1,000mt in the following year. The initial plant will serve as pilot and example for cash generation to validate full scale plant ideas.
According to the Nexus report, BHER’s resources alone could produce as much as 300,000 metric tons per annum of high-quality, battery-grade lithium carbonate equivalent.
If good luck comes down to being in the right place at the right time, Berkshire Hathaway certainly seems to be in for some very good luck.
© 2020 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.