Global Lead-acid Battery Trend and Component Advances Through the Lens of a Component Supplier_Final (3)

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Global Lead-Acid Battery Trends And Component Advances - Through The Lens Of A Component Supplier Dr. Pete SmithMay 3rd, 2016

2016 Daramic, LLC. ALL RIGHTS RESERVED

2016 Daramic, LLC. ALL RIGHTS RESERVED#

Energy Storage HistoryLi-ion has Performance Advantages but Lead-acid Retains Significant ShareWhy the Consternation about the Lead-acid Battery Industry?

Invented in 1859

Developed in 1970s

Invented in 1967/ commercialized in 1990sNiMH: Nickelmetal Hydride; Li-ion: Lithium-ion

Lead-acid battery VRLA lead-acid battery NiMH batteryLithium-Ion battery

Invented in 1970s/ commercialized in 1990s

Performance ComparisonLead AcidNiMH/Li-ionWh/kg35-40140-150Wh/liter70400Charge Efficiency75%97%Deeper Discharge Toleranceup to 80%up to 100%Discharge CycleX2XCostX3XLi-ion/NiMH has significant advantages over lead-acid battery on energy density, charge efficiency, deep cycling and discharge cycles

MWhHighest growth in Li-ion in last decadeGlobal Battery Market GrowthSource: Avicenne Energy and UltraLife

2016 Daramic, LLC. ALL RIGHTS RESERVED#Lead-acid AttractivenessLower Energy DensityLimited Charge EfficiencyNot Very Deep CyclingProduction EnvironmentLead-acid Battery


Capital Investment ExamplesEnterprise Value/EBITDA: JCI (~10X)Enersys (~8.3X) Private equity sponsor investment Trojan, Exide Technology, C&D

Capacity expansionLead-acid Industry AttractivenessContinuing Capital Investments and Expanding Capacity in the Lead-acid IndustrySource: Johnson Controls and Enersys 10K, Company official website, Daily Register, BEST magazine, Yahoo Finance

2011201420132012

Johnson ControlsEnersysIndustry Property, Plant and Equipment Investment

JCI: announced the investments of $555 million between 2011 and 2020 to expand capacity Johnson Controls Official Website (2015)

$, millionEnersys: announced acquisitions in Australia, South East Asia, South America and built plant China in last 5 years (2010-2015))East Penn looking at $66.8 million dollar expansion in Oelwein Daily Register News (2015)Significant investment and valuationsSignificant and sustained investment

Daramic: new capacity expansion in China and India


Lead-acid Industry InnovationSignificant Innovation Increases in the Last 10 Years across All RegionsWorld Wide Patent Filings Related to Lead-acid Batteries Overview

1995-2005196%2006-2015World Wide Patent Filings Related to Lead-acid Batteries by Region

EuropeKorea1,0822,378USChinaInternational

Patent Filling (2006-2015)Patent Filling (1995-2005)217%

217%133%154%519%809%

Source: Keyword patent searchStep change increaseGlobal innovation


Lead-acid Battery PatentsMix of Conglomerates, Lead-acid manufacturers, Suppliers and Application Owners Invested in Patents

JOHNSON CONTROLSTOSHIBAGS YUASAPANASONICDARAMICASAHI KASEISANYO ELECTRIC.IQ POWERLG CHEMSHIN KOBEITM SEMICONDUCTop filers in International lead-acid battery category 2005-PresentLi-ion battery makersSeparator makerSeparator maker (cross IP)# of independent patent

Source: Keyword patent search

Lead-acid battery makers

2016 Daramic, LLC. ALL RIGHTS RESERVED#Why Does Innovation Happen Now?Lead-acid BatteryLarge investments in the industry and highest patent filing in history


Start-Stop in Automotive requests battery always in PSOC

Battery Working Pattern ChangesBoth Automotive and Industrial Batteries Evolved with Higher Usage Frequency and Higher Power Output under PSoC*

AutomotiveIndustrial

Battery working pattern (1995-2005)Battery working pattern (2005-2015)

Battery mainly for starting vehicle low discharge percentage and always fully charged

Battery (forklift) operates in an organized way, enough time in charging and cooling down

Forklift battery needs to work more efficiently with faster chargingRenewable energy also has limited time to charge battery

*PSoC: Partial State of ChargeDepth of dischargeDepth of discharge


Battery Discharge Depth ChangesWider range of partial state of charge and higher energy output and discharge deeper across automotive and industrial applicationsBattery Working Pattern Changes in All Key Lead-acid Applications

Depth of Discharge %80%10%50%Fully chargedFully discharged

Battery working pattern (1995-2005)Battery working pattern (2005-2015)AutoIndustrialMotive PowerStationary

AutoIndustrialMotive PowerStationary

2016 Daramic, LLC. ALL RIGHTS RESERVED#What Is The Future And Implication?Lead-acid BatteryWorking pattern changes will drive battery performance changes across applications in future

2016 Daramic, LLC. ALL RIGHTS RESERVED#New Insights/Changes in AutomotiveIncreasing Auto Electrification Requires Lead-acid Improvements of Charge Acceptance, Durability and Power OutputVehicle Electrification Requirement

Lead-Acid Battery

Li-on / Ni-MH / etc.

Heat ResistanceCost Reduction

Charge Acceptance

Power Output

Cycling in PSOC**Partial State of ChargeImprovementImprovement

Other Key Component

Battery management system became critical to impact battery performance/life


New Insights/Changes in Motive PowerBetter Utilization Requires the Improvement of Rechargeability and Higher Output while Maintaining Long Life %Working hourWorking hourForklift Traditional Working PatternDepth of discharge%Forklift New Working Pattern* (Trend)Lead-Acid BatteryHistorical Battery Utilization Requirement

In work(discharge)Off work(charge)In work(discharge)Off work(charge)

In work(discharge)Off work(charge)

Depth of dischargeImprovement

Longer Life in faster chargeLonger Life with higher capacity

Other Key Component

Charger needs to deliver more and impact on battery life


New Insights/Changes in StationaryBattery Needs Better Cycling and Lower Maintenance

TelecomRenewable EnergyTelecom and renewable energy mainly work in remote and hot area - requires no/low maintenanceRenewable energyUnstable charge/discharge which leads to PSOC operationDeep cycling

Lead-Acid BatteryImprovement

No/Low maintenanceRechargeability & deep cycling

+10.1%2018F2014

Stationary+Renewable EnergyM, cell

Source: Transparency Market Research & Daramic Internal Analysis

Battery diagnostic system needs remote tracking on performance

Other Key Component


Through The Lens Of A SupplierLead-acid Battery ComponentInnovation is occurring in battery operating cycle, battery design and battery application. - What does this imply for the supply base?

2016 Daramic, LLC. ALL RIGHTS RESERVED#Evolution Of Lead UsageCost efficiency is a major target in Automotive SLI, especially better utilization of the main component, lead, which price increased 300% in last 10 yearsSimultaneously, battery life/performance must be retained while reducing lead quantityEspecially in the heavy duty applicationsMajor Cost Component, Lead, Used More Efficiently

Punched

300%+Lead Price EvolutionLead price ($)Better utilization of lead (Cost Efficiency)_+

Cast

Expanded Metal

PunchSource: LEM Lead Price

2016 Daramic, LLC. ALL RIGHTS RESERVED#Innovation Drivers From BOMTwo Categories of BOM Innovation to Achieve the Performance Goals Battery Bill of Materials/Performance Related MaterialsMost of the Bill Of Materials (BOM) are commoditiesThe Industry has focused on leadWhat does drive the future?Innovation drivers: separator, battery management system, additivesBOM CategorizationAcidLeadPP caseSeparatorBMSAdditives(Carbon)

2016 Daramic, LLC. ALL RIGHTS RESERVED#BOM Innovation vs. Industry NeedsInnovation Drivers can Impact the Requirement Demanded by Emerging Lead-acid Battery Applications

SeparatorAdditives(Carbon)Battery Management SystemLaminationPoly caseHot-meltAcidOther chemical additivesPlate equipmentPasting paperPartial State Of ChargeXXHigh Power OutputXXLonger LifecycleXXDynamic Charge AcceptanceXXNo/low maintenanceX

Industry NeedsAutomotiveIndustrial


Length scaleTime scale10-9 10-6 10-3 100 (nm) (um) (mm) (m) 100 (sec)

10-3 (msec)

10-6 (msec)

10-9 (nsec)

10-12 (psec)

10-15 (fsec)Fluid dynamics,Finite element analysisCharge transferStress Strain Behavior of Materials

Plate design and arrangementMechanical properties of battery components

Electrochemistry on battery surfaces

Redox reactionsSeparator Phase Engineering

Acid stratificationHow Does A BOM Innovation Approach Industry Needs?Physical/Chemical Phenomena over Wide Length/Time ScalePotential Improvements Represent Industry OpportunitiesFrom atomic scale(nm/fsec) to real life scale (m/sec)


Molecular Dynamics Simulation


SummaryAfter 100+ years as an energy storage technology, lead-acid is still attracting investment, adding capacity and focusing on innovation. Continuous investments and capacity expansionSignificant innovation (patent) increases in last 10 years

Some of the innovation is a response from the threat from other technologies (e.g. Li-ion)

Some of the innovation comes from use models for lead-acid batteries

Regardless of the history or the technological threats, the lead acid industry is attractive and innovative

In the past 10 years, the lead-acid industry has become pioneering with respect to innovation With new applications emerging and battery working pattern changes, batteries in both Automotive and Industrial evolved to higher usage frequencies and to supplying more power output under partial state of chargeLead-acid batteries are also required to discharge deeply

2016 Daramic, LLC. ALL RIGHTS RESERVED#Summary (Contd)Technical changes drive the battery performance improvement across applications moving forwardBetter dynamic charge acceptanceGood capability in partial state of chargeLonger lifecycleHigh power output

From the supplier/BOM viewpointLead utilization has been optimizedOpportunities to meet emerging industry needs reside in the separator, battery management system and additives

To guide supplier development, we think a fundamental approach focused on length scales and time scales in the battery will yield the most innovative component technology and a more robust and competitive lead-acid battery and lead-acid battery industry


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Global Lead-acid Battery Trend and Component Advances Through the Lens of a Component Supplier_Final (3)