The answer is… transportation.
The lithium boom signals a shift in manufacturing and energy in the United States—but the popular mineral is facing some obstacles when it comes to heavy air and rail regulation.
There’s no underestimating the significance of lithium in today’s energy market. Companies like Tesla are embracing the cheap and hugely efficient energy alternative, setting the stage for an explosion of suppliers and investors. But before lithium can meet its full potential, the problem of transportation must be addressed. Many of the country's railroad tracks and services are still not fully equipped to handle dangerous chemical transportation, and regulators are hurrying to catch up with the burgeoning market.
Lithium use continues to multiply, and it’s now used in laptops, smartphones, tablets and other consumer electronics. Its growth—use increases by 11% per year—has ignited a battle among companies to produce the cheapest alternative source: batteries. Recent developments in the research of lithium show that the potential to produce cheap batteries may not be far off, and low costs are tied to mass production and gigafactories like Tesla’s. The company’s US $5B factory offers backup batteries for homes, businesses and utilities, all powered by lithium.
Still, lithium batteries and similar goods are categorized as dangerous goods, which imposes restrictions and compliance requirements among airlines, ground handlers, freight forwarders and shippers across the supply chain.
Hazardous materials—components that are corrosive, flammable, toxic, infectious, or explosive—remain a crucial aspect of U.S. manufacturing. But without stringent regulation, the storage and transportation of dangerous goods can lead to disasters—just look at the Tianjin explosions in August. Movement of dangerous chemicals and good poses threats to the supply chain risking rail carriers, shippers, airlines and the general public. Inability to quantify the cost of danger also hard presses companies into minimizing transportation to at least manageable quantities.
Recently, air companies warned of the risks involved in transporting large quantities of lithium by air. According to a study by Boeing, a fire caused by one or more packs of lithium batteries would be unresponsive to current firefighting technologies on planes. Until safer transportation methods for lithium are developed, Boeing said, it would be unwise to carry large shipments.
Companies like Tesla, using the gigafactory, could source lithium from local suppliers in Nevada for a fully closed supply chain. But they also have a deal with a lithium mine in Mexico, and there are many lithium sources located in Central and South America. So, for the majority of lithium users, the mineral needs to be carried over long distances.
As the demand for lithium rises and larger shipments become necessary, freight trains remain as the next most efficient option. But rail is facing problems of its own. Dangerous goods are subject to tariffs, and run far more expensive than non-hazardous parts. Much of the liability is placed on the rail companies themselves, so they’re reluctant to ship hazardous materials without having suppliers assume some of the cost.
The issue is not the supply of goods themselves,
but how to supply them.
In an attempt to allow transportation ability to meet growing demands, the U.S. has introduced legislation called efforts like Positive Train Control (PTC). PTC is a system of functional requirements on the control and tracking of train movements for increased safety and is the responsibility of train lines to implement by the end of 2015. Rail companies are expected to modernize their technology and monitoring capabilities to allow for more oversight of shipments and trains.
But most train companies aren’t properly equipped. According to a study from the U.S. Government Accountability Office (GAO), the majority of railroads are still not ready to implement the technology by the end of the year. GAO suggests that many freight and commuter railroads may require one to five years to finish implementation.
Lithium producers will likely have no choice but to take responsibility for transportation. Air companies cannot ship large quantities of lithium without putting planes at significant risk—there needs to be a safer way to transport the mineral. The same goes with rail: the safer lithium is to store, the easier it will be for companies to work with their logistics providers.
Lithium is set to change the way we use energy—we just have to learn how to transport it first.
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