➤ The biggest challenge facing the electric vehicle industry is the limited supply of lithium, according to David Snydacker, CEO and director of the California-based lithium technology company Lilac Solutions Inc.

➤ Although funding for lithium extraction is growing, "much of that investment has been speculative," Snydacker said in an interview. "Many of the projects that have received those investments have been stalled due to a lack of technology."

➤ Unless new lithium extraction technology is introduced, environmental issues and technical problems will continue plaguing the industry and slowing the energy transition, Snydacker said.

Lilac Solutions Inc. CEO David Snydacker. Source: Lilac Solutions Inc.

Lithium demand is forecast to spike and outpace available supply within the decade as the world clambers to electrify the transportation sector and slow climate change. Lithium brine producers have flocked to vast salt flats in South America, where water is already in short supply, to produce the white metal. The rush to make enough lithium to support the clean energy transition has stirred up concerns over the industry's environmental impact. Startup Lilac Solutions Inc. is deploying a new lithium ion-exchange technology that the company says is more cost-effective than conventional brine operations and consumes only a fraction of land and water, increasing the amount of lithium that can be extracted from brine.

S&P Global Market Intelligence spoke with CEO David Snydacker on Sept. 24 to learn about the challenges lithium producers face in scaling up production to meet demand and why innovating lithium extraction is critical to the energy transition.

The following conversation was edited for clarity and space.

S&P Global Market Intelligence: Having worked with a wide range of battery metals as a materials engineer, why start a company focused specifically on lithium?

David Snydacker: Lithium is essential for the energy transition. You cannot replace it, not even partially. Cobalt could be partially replaced with nickel. Nickel could be partially replaced with manganese or even fully replaced with iron. But lithium is irreplaceable. For every electron you store in the battery, you need at least one lithium atom, and there's no way around it. And that is why lithium is essential for the energy transition. There are other battery chemistries, but they tend to be substantially larger and heavier and not suitable to electric vehicle application.

If you write down a list of the top five battery chemistries in the world, every single one of those is based on lithium. Now, some have nickel. Some have cobalt. Some have iron, and some have graphite. But every single one of them has lithium.

Vehicles are now the biggest source of carbon emissions in the United States, and there is no credible pathway to decarbonize those on a reasonable timeframe without lithium batteries.

What is one of the biggest hurdles facing a transition to electric vehicles and a low-carbon future?

I've been working on lithium-ion batteries for more than 10 years in different parts of the battery and lithium extraction [processes]. I've followed the industry very closely, speaking with battery manufacturers and carmakers throughout that time. Just within the last six months, as automakers announced their electric vehicle goals and then sat down with their engineering teams and their procurement teams to make that vision a reality, they realized there's a huge gap in the plan. That gap is lithium. The major barrier to the whole electric vehicle industry is the supply of lithium. The interest in lithium has never been higher, and it's a major bottleneck within the energy transition.

Is there enough funding to support lithium extraction and the technological development needed to meet the demand coming from the battery sector?

There's a huge amount of funding flowing into battery and electric vehicle manufacturing. And that's really good news for the industry and for the planet. There is money flowing into lithium, but much of that investment has been speculative. It's been in projects that lack the credible technology pathway to develop into commercial production. And so, although there are large investments being made, many of the projects receiving those investments have been stalled due to a lack of technology.

In a Sept. 22 announcement, you said the lithium industry is "plagued by technical and environmental problems that have put the energy transition in jeopardy." Can you expand on this?

The technology currently being used to produce lithium from brine is based on evaporation ponds that are often 10 kilometers across. They use a massive amount of land, and they are evaporating water out of the entire basin, which impacts freshwater resources and causes environmental problems. That has generated intense opposition at times from local communities who rely on the environment for water and tourism. So, there have been major environmental problems that have made it difficult and sometimes impossible for lithium producers to expand those brine operations.

Then, even if you could get one of these new projects permitted, many of the new brine resources are at lower concentrations of lithium and have higher concentrations of impurities. The evaporation ponds essentially don't work. You can recover only a very small amount of lithium at a very high cost. It becomes very, very inefficient to use these evaporation ponds for any new brine resources.

There are many examples of this. Bolivia has the world's largest lithium resource. However, the lithium concentration is low and the impurity concentrations are high. And so, they have not been able to use conventional technology. They are in need of new technology.

Lilac Solutions' technology focuses on innovating the recovery of lithium from brine. Why focus on brine and not hard-rock mining when hard-rock mining makes up the majority of new lithium production?

Eighty percent of new lithium production comes from hard-rock mining, even though hard-rock resources make up only 20% of the global lithium resource. But to produce lithium from hard-rock [resources], we need to dig large, open-pit mines, dig up the rock, crush the rock, [process] the rock at very high temperatures, or use large amounts of chemical reagents to leech out the lithium. It's very energy-intensive and very chemical-intensive. That's why producing lithium from hard-rock [resources] has been much more expensive.

But problems with environmental impacts and extraction technology have meant that lithium brine resources are only contributing about 20% of new lithium supply into the market. Eighty percent of the world's lithium resource is in brine. There's a huge amount of brine. So, you have a very large resource that is underrepresented in new production.

Several analysts forecast a shortage in lithium within this decade. Do you think Lilac Solutions' technology could potentially solve that problem and help balance the market?

Even if Lilac is wildly successful beyond our most aggressive projections, we still will not satisfy that demand to bring prices back down. That's because so much of new production now is coming from hard-rock resources at a much higher price. You would have to push all of those new producers out of the market before you could possibly bring prices back down. Given that 80% of your production is coming from there, it's very, very unlikely that prices would come down and wipe out hard-rock production for the next 10 to 20 years.

How is the increased focus on environmental, social and governance issues affecting lithium producers in Latin America where most lithium brine production takes place?

We are hearing concerns from local communities and governments across South America and across the U.S. about the footprint of lithium projects — about the land footprint and about the water footprint. The impact of evaporation ponds historically has been devastating to local communities in terms of water supply. But the message we want to send is that lithium can be produced cleanly and in a way that respects and involves local communities. And that's the model that we want to bring to every project we work on. The partners that we have, the developers that we partnered with are fully aligned with that vision of producing economic value in a clean way that protects communities.

What role should the U.S. government have when supporting the energy transition?

We believe the proper role of government here is to support the electric vehicle industry broadly rather than picking winners in the lithium space. The U.S. government can be very helpful at early-stage [research and development]. They can be very helpful for creating markets. However, picking specific technology companies that they want to back at a commercial scale is historically not a great role for the government. So, we usually advocate for broad policy support for electric vehicles.