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Profile: Li-ion Battery and Pack Supplier Valence Technology

by Bill Cooke

The olivine structure of one of Valence’s lithium iron magnesium phosphate materials. The view is looking along an axis of the crystal structure. The polyhedra aid the eye in seeing the ions grouped as (green) Fe/Mg-enclosing octahedra and (yellow) phosphate tetrahedra. The (blue) oxygen ions are made very small to permit viewing of the arrangement of the other ions. Click to enlarge.

Green Car Congress had the opportunity recently to have a discussion with Mark Donaghy, the Global Marketing Manager for Valence Technology, Inc., a provider of lithium-ion batteries, modules and packs. Founded in 1989, and headquartered in Austin, Texas, Valence has facilities in Nevada, China and Northern Ireland.

Valence differentiates its lithium-ion products through its cathode (positive terminal in discharge) material, a lithium iron magnesium phosphate (LiFe1-xMgxPO4). Iron phosphate is well regarded for its safety characteristics; A123Systems is another significant supplier of cells derived from this chemistry.

Donaghy noted that Valence has shipped some 70 MWh of Li-ion battery capacity since 2005—equivalent to 200,000 batteries, or enough for 1,500 3.5 ton trucks. “We believe we are the number one shipper of lithium phosphate batteries in the world right now,” he said.

There are a number of companies offering lithium phosphate R&D. Our differential is in the magnesium, which is a doping compound, which enhances the performance in cycling and durability. We have test data showing that at 100% depth of discharge, we can hit 2,800 cycles with 80% of start of life capacity.

For reference, a typical lead acid battery can survive 500-800 cycles while 2,800 cycles is almost 8 years of use assuming one cycle a day. The USCAR/DOE long term goal is 5,000 cycles.

Valence’s Saphion technology, commercially introduced in 2002, refers to the processes and materials used in developing the novel patented lithium iron magnesium phosphate cathode materials. Epoch technology is Valence’s energy management platform. Introduced in 2007, Epoch is the cell control logic enabling integration of electronics, firmware and software.

Valence currently has two manufacturing facilities in China, both wholly-owned; each facility is 50,000 square feet and located next to each other. The first plant is the cathode materials plant; Valence uses two or three proven partners to manufacture the cells, Donaghy said. The second is the module/pack manufacturing plant. Two global fulfillment centers—one in Rotterdam and one in Dallas—can ship product to customers within 72 hours.

Valence is strengthening its automotive accreditation by working towards TS 16949 accreditation in 2010. ISO/TS 16949 is the quality management system created by the International Organization of Standards to monitor the design, development, production and servicing of automotive components.

Valence is investigating manufacturing opportunities in EU and the States and plans to take advantage of any local subsidies.

We don’t want to abandon China, there is a lot of infrastructure set up there already [but] we feel that our manufacturing is scalable and transferable and we can set something up very quickly.

—Mark Donaghy

Smith Electric Vehicles. One of Valence’s most prominent commercial vehicle customers is Smith Electric Vehicles. The two companies have had a relationship since 2005. Valence maintains a team of seven application engineers on the ground in Ireland. “We have a lot of time working with Smith as we believe technical support is a key to smooth integration,” Donaghy said.

The Edison (left) and the Newton (right). Click to enlarge.

Valence is sourced with two of Smith’s vehicles: the Edison and the Newton. The Edison is a 3.5 ton 100 miles+ range van and the Newton is 7.5-12 ton truck with 100 mile range used by local delivery services and courier services. They are usually delivery vehicles working within a neighborhood, and are on the road for 6-8 hour a day and are recharged overnight.

The Smith web site does not explicitly specify battery capacity but within their vehicle data sheets they do have a note stating the Edison’s default weight is based on a 40 kWh system and the Newton’s default weight is based on either an 85 or 135 kWh system. Both the Edison and the Newton come in refrigerated versions. Smith’s warranty for the battery system is five years or 1,000 charge cycles—whichever comes first. In order to price a vehicle you need to contact a sales agent.

When asked about battery product pricing, Donaghy replied “Everyone wants to know price, we would agree that we need to get the cost of the energy down. Volume and technology improvements with allow us to do that.” At today’s prices, with a 40 kWh system, a vehicle manufacturer would likely be paying $35-$45,000 for a battery solution which would include the modules, the control electronics, energy management systems, diagnostic kits and firmware. “We would aim to halve that,” Donaghy said.

Although the battery systems is not inexpensive, Donaghy says “For a commercial fleet operator they can see the benefit because they will be operating their vehicles for 14 years or more. After four years they’ll be cost neutral; these guys understand the cost of their fleets down to the pence per mile.

In Great Britain vehicles are heavily taxed via fuel taxes, the value added tax, registration fees and location specific congestion charges and the cumulative effect of these taxes can have a significant impact on a vehicle’s operating cost. In May 2008, the Telegraph newspaper in the UK reported that British drivers paid 57 pence/liter or $2.99/ gallon of diesel in excise tax which doesn’t include the value added tax.

According to the US DOE/EIA, the US average total tax for a gallon of diesel was $0.43/gallon in January 2009. In the UK, electric vehicles are exempt from London’s £8/day congestion charge. The Smith website mentions that Sainsbury, a UK grocery store with on-line food ordering, aims to have 20% of their home delivery fleet electrified by 2009.

Smith Electric Vehicles is a division of the Tanfield Group. According to Tanfield’s most recent annual report, 2007 filed in April of 2008, Smith is the world’s largest supplier of electric vans and trucks. In 2007 they sold 260 vehicles worth approximately £26 million and were expanding their capacity in the UK to be able to convert 3,000 vehicles in 2008. Intermediate filings over the past year indicate, like most vehicle manufactures, Smith is suffering from excess capacity due to the global recession.

UK Business Secretary Lord Mandelson behind the wheel of the Smith Ampere electric van, based on the Ford Transit Connect. Click to enlarge.

In February of 2009 Smith Electric announced an agreement with Ford Motor Company to provide an electric version of the Ford Transit Connect Van for the North American Market. The vehicle is slated to arrive at select Ford dealers in 2010. Smith is setting up a subsidiary operation, 49% owned by Smith, to produce the vehicles in North America (earlier post) and the subsidiary is evaluating several different battery suppliers with Valence actively pursuing the contract.

Valence has also entered into a long term agreement with PVI, which integrates electric vehicles for Renault Trucks. Valence signed a supply agreement in December 2008 and started shipping battery packs shortly afterwards. The Maxity, a 7.5 ton truck, will account for most of the volume and Valence projects revenues of as much as $3 million in 2010 from the PVI contract.

Valence is pursuing business with leading EU automotive OEMs and Donaghy claims one of them has told him that “Phosphate represents the lowest cost, most readily available and scalable high performance Li-ion chemistry that we know of ...

Battery chemistry. Battery chemistry is frequently a trade-off in power, the ability to accelerate, and energy storage or range. While iron phosphate systems have excellent power capability, the energy is low because of the low cathode voltage (3.2V for Valence cells). By comparison, nickel-based Li-ion systems have a cathode voltage of 3.8V. The low energy characteristics could impede the use of iron phosphate systems in longer range plug-ins or electric vehicles.

Valence is trying to persuade OEMs to consider vehicles with a maximum range of 30-40 miles which would still cover the majority of commutes while minimizing battery investment. Valence sees future families having two cars: a plug-in hybrid electric vehicle for longer trips and an all electric commuter car.

In terms of future cathode chemistries, Valence is exploring lithium vanadium phosphates and lithium vanadium fluoro phosphates. “We are finding incredibly good results, a huge advantage in terms of energy, coupled with the inherent safety that lithium iron magnesium phosphate enjoys,” according to Donaghy.

Hydro-Quebec lawsuit. Valence is currently the defendant in an intellectual property dispute with Hydro-Quebec which purchased selected patents from the University of Texas, where Professor Goodenough originally developed the iron phosphate system. Valence was hoping to have the suit dismissed but their motion has been denied. One of the reasons for the judge’s decision to deny Valence’s dismissal request was the judge’s unfamiliarity with key technical terms in the suit.

As a result, a Markman hearing has been scheduled for 4-5 May 2009. The purpose of a Markman hearing, which derives its name from Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995), is to hear argument and, if necessary, receive evidence on the scope of the claims in the patent allegedly infringed.

Although acknowledging the Hydro-Quebec dispute, Donaghy says “We are very comfortable with [our] patent portfolio... we have over 400 international and domestic patents both on our materials and our processes...We were cleared in the EU last year. [from another patent dispute].

Finances. Valence posted sales of $20.8 million in 2008, and as of 4 March 2009 their stock market capitalization was $196 million. Valence may have liquidity concerns. The following statement comes from their latest 10Q report:

At December 31, 2008, the Company’s principal sources of liquidity were cash and cash equivalents of $8.5 million...The Company expects that its sources of liquidity will not be sufficient for the next twelve months...the Company will need to arrange for additional financing within the next three to six months to fund operating and capital needs.

In the past, the company has gotten cash infusions from Mr. Carl Berg, Chairman of the company’s board and principal stockholder.

Donaghy is limited in how he can respond to questions of financial health but he did say: “We have a healthy portfolio of investors. Obviously, we would like to see our share price improve, but wouldn’t everybody. We are comfortable with our pipeline right now in terms of the number of opportunities we are looking at. I joined Valence in the EU 13 months ago and I was the fifth member of staff, we now have 15 employees in our European headquarters. [In total, Valence has more than 470 employees worldwide.] In a global downturn that is not supposed to happen, but we are busier than we have ever been.



"a huge advantage in terms of energy"

So what are they up to with the vanadium doping, 150 Wh/kg or so?

That in itself would bring down the cost per kWh by ~30%.


This appears to be more of a business article. The biggest single move Donaghy can do to increase liquidity in his company is build an assembly facility in the USA. That would make him eligible for certain TARP and DOE funding immediately.

All these China-based manufacturers need to look hard at downsizing those operations in favor of returning to the US. The cost differential will not outweigh the political benefit of bringing jobs home and contributing to American energy independence.

Business people should not underestimate the value to the bottom line of a new "Buy-Domestic" global marketing campaign. In the current economic environment companies that demonstrate a commitment to jobs and products at home - will excel.

Brett A

How does Li PO4 technology compare to that of Li Mn? I have heard those who say Li Mn is superior, for both charge times and capacity. Ener1 is one example of this technology.

Account Deleted

So valence has sold 70000 kWh from 2005 to 2008. They had revenues of 21 million in 2008 and assuming they sold 25000 of the 70000 kWh in 2008 they are selling the packs for $840 per kWh. That fit the statement of the Valence.

I do not think Valence currently is the largest seller of LiFePO4 batteries. Thundersky say in their latest Chinese news announcement dated 19. Nov 2008 that their annual sales was 200 million USD. They don’t say which year but it must be 2007. They also say they produced 200,000,000 ampere hours which at 3.2V is 640,000 kWh or an implied price of 312.5 USD per kWh. They produce both LiFePO4 and other chemistries but I am convinced the LiFePO4 is the most important product now. For reference see and use Yahoo babel fish for translation if your traditional Chinese is a little rusty.

However, I don’t know if the information at Thundersky’s webpage can be fully trusted. They make some unbelievable predictions about expansion plans the next 3 years where they think they can approach 8 billion USD in sales in 2011 including licensed production. This sounds ridiculous. But their cells are going for 640 USD per kWh in retail in the US so the out of factory price of 312.5 USD is probably right.

Stephanie Goldivase

Funny how they claim their batteries are good for 2,800 cycles, but the warranty on the Segway batteries (Segway is by far Valence's largest customer) is only 1 year.

It's also funny how they claim an electric delivery truck will be cost neutral after 4 years, but the battery for that application is only warranted for 3 years. What happens to "cost neutrality" when the operator has to spend $10's of thousands to replace the battery pack? (BTW, the Segway battery packs store 800 kWh and cost @$1,600 to replace, that is $2,000 per kWh).

It's also strange that with all these new customers they tout, their revenue guidance for the current quarter is for a significant decrease in revenue compared to the same quarter a year ago.

Largest supplier of lithium phosphate batteries, they "think?" All one has to do is look at A123 Systems filings to see that at best they are second. And BYD in China probably makes more lithium phosphate batteries than A123 and Valence combined.

They have lost money every quarter for 20 straight years, and have managed to turn over $550 million of investor's money into negative $65 million of shareholder's equity.

The relationship with Smith Electric Vehicles? When it was announced a year ago, Valence touted this agreement as being worth $70 million in the first year. It turned out to be worth $4 million. Smith hasn't bought a battery from Valence since the $4 million order was completed in June 2008.

As far as liquidity concerns, that is a bit of an understatement. They have a "going concern" warning from their auditor, have over $70 million in debt, have had negative cash flow from operations every quarter for 20 years, and have to continually print and sell new shares of stock just to keep the doors open.

They settled a securities fraud lawsuit with their shareholders rather than allow it to go to trial, and also have a history of taking taxpayer's money and then running.

Why is Green Car Congress touting this company?


@Stephanie Goldivase

It's also funny how they claim an electric delivery truck will be cost neutral after 4 years, but the battery for that application is only warranted for 3 years. What happens to "cost neutrality" when the operator has to spend $10's of thousands to replace the battery pack?

Where does it say that the batteries all spontaneously break 1 day after the warranty expires?

Cars break down like they have always done, and these maintenance costs are simply part of the total calculation. Replacing a faulty battery every now and then is too.

They have lost money every quarter for 20 straight years, and have managed to turn over $550 million of investor's money into negative $65 million of shareholder's equity.

Judging by the tone of your post, I think you are one of those shareholders.

Stephanie Goldivase

Anne, nobody said the batteries will all spontaneously break 1 day after the warranty expires. The warranty for batteries in Smith trucks is actually 3 years OR 500 cycles, which is a far cry from the touted 2,800 cycles.

Assuming the stated 14 year life of the truck, the batteries would need to be replaced at least once, probably twice, and maybe 3 times. The Smith Newton truck uses an 80 kWh battery. If that battery costs $2,000 per kWh (which is the price Valence's Segway batteries go for), that is $160K just to replace the battery. Even if you were to assume the price per kWh for the truck batteries is half the price of Segway batteries, the price is still $80K to replace the battery. As you can see, this is a little different than changing the oil (or even overhauling the engine) of a conventionally-powered truck, and makes the claim of cost neutrality after 4 years to be absurd. As soon as the batteries need to be replaced, "cost neutrality" is way out the window. And with a warranty of 500 cycles, that replacement cost could come in as little as 1 1/2 years of daily use.

Maybe the above has something to do with the fact that Smith is only selling a fraction of the number of trucks they were touting a year ago, has layed off staff twice in the last year, has generated only a small fraction of the orders for batteries Valence was touting a year ago. And maybe the above has something to do with the reason why Tanfield's (Smith's parent company) stock price has collapsed from 120 pence a year ago to 8 pence now.

Petr Kadanik

Hi guys!

Dom you know What author meant by: Both the Edison and the Newton come in refrigerated versions?
What refrigeration? Like cargo mobile refrigeration unit? Is this additional load powered from battery as well?

Scarlett Smith

Thanks for sharing about lithium ion batter.
Also I want to share a few things about lithium mining stocks:

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