Lithium startups bet on high demand in a battery-powered future

As the world moves towards electrification, it will need more lithiumDemand for this key ingredient in batteries that power everything from electric vehicles to cellphones is projected to accelerate over the next decade.
To achieve this, a new generation of startups is working on novel ways to produce the valuable metal and promises to open up untapped sources of lithium. They are also battling strong economic headwinds, pushing their technology forward amid a current market crisis.

Direct lithium extraction (DLE) is an innovative approach to recovering the material from brine that sits on the Earth’s surface or is pumped from underground. There are a variety of techniques, ranging from using beads that attract lithium to using membranes that selectively filter out the metal. Although startups have pursued DLE for years, only recently has the technology matured to become potentially competitive with existing lithium extraction methods. “Right now, the technology is on the cusp of commercialization,” he said. Sung Choimetals and mining specialist at BloombergNEF.

Still, most startups are operating at the lab or pilot level, reflecting the long road ahead to playing a significant role in the industry. Lithium has traditionally been extracted from brine in open-air evaporation ponds or mined directly from rocks. Countries such as Argentina and Chile have been lithium-producing powerhouses, responsible for most of the lithium imported into the U.S., because they have more concentrated sources of the metal. (Australia is the world’s largest lithium producer.)

While today the demand for lithium is around 1 million tons per year, BNEF Choi expects total production to reach 3 million by 2030 and more than 6 million by 2050 under his economic transition scenario, which assumes no new policies are put in place to accelerate the transition to clean energy. Lithium is currently in excess supply due to, among other things, a slowdown in electric vehicle sales, meaning there is enough produced through traditional methods to meet short- and medium-term demand. But innovation is needed to meet the long-term demand driven by the energy transition, Choi said.

Until recently, most DLE techniques relied heavily on solid materials that could attract lithium chloride, which is refined for use in batteries. Those methods have only been able to recover modest amounts of the metal, and some materials also attracted unwanted substances that have a very similar chemical structure, such as magnesium.

A handful of startups claim to have overcome those technological challenges with novel DLE approaches that capture lithium and only lithium. While still expensive, the companies believe they can compete in the lithium market because they use less water and fewer resources than traditional production methods and can work with lower-quality brines with less concentrated amounts of lithium. DLE startups believe their techniques can open up new markets, diversifying the lithium supply chain.

SpecificX SpecifX is one such startup. Co-founded by University of California, Los Angeles professor David Jassby, the company has developed a membrane material that uses an electric field to move ions around, while only allowing lithium to pass through the “gate.” Although North American brines are generally “more challenging” when it comes to extracting lithium, SpecifX’s approach can work using them, Jassby said.

In addition to being able to extract lithium from brines with low concentrations, DLE has another potential advantage over traditional production methods such as hard-rock mining and mass evaporation ponds: environmental impact. Membrane separation technology is “the holy grail of lithium extraction,” because it eliminates the need for water and chemicals, said Charles McGill, chief executive of Rio Tinto-backed ElectraLith. The Melbourne-based company is also developing a membrane-based approach to DLE.

In comparison, traditional mining techniques are incredibly water intensive, with up to half a million gallons of water used per ton of lithium produced. Drought-prone countries such as Chile are beginning to restrict water use in lithium mining, encouraging miners to adopt direct lithium extraction. Some mining companies have already committed to reducing water use, as well as decreasing their reliance on traditional brine extraction methods. For example, the world’s leading lithium producer, Albemarle Corp., has pledged to reduce freshwater intensity by 25% by 2030, while SQM, the world’s second-largest producer, is in the process of choosing which direct lithium extraction technologies it will deploy.

It’s not just membrane-based DLE methods that are attempting to address the environmental impacts of lithium production. Another startup, Princeton-based PureLi, relies on evaporation, but its approach prevents water in brines from being lost to the atmosphere. The startup passes the liquid over a chain with a special coating that allows it to differentiate lithium from other parts of the brine, while also collecting water. Lithium chloride moves faster and farther toward one end of the chain, while other substances remain or crystallize. Princeton Zhiyong researcher Jason Ren, who is leading the effort, calls it a “rock candy approach.”

In addition to the technological challenges, DLE technology has proven difficult to implement economically. Today, lithium is cheap and widely available, with prices falling in 2023. At its peak, battery-grade lithium hydroxide reached $80,000 per metric ton before falling to $14,000 in April 2024 in the United States and Europe.

The collapse in lithium prices has unnerved investors, creating a challenging financing environment for startups in the sector. Further compounding the problem, using DLE to produce lithium still costs more than traditional evaporative pond techniques, though in some cases, DLE is comparable to hard rock mining. But industry advocates say focusing on the current supply glut is short-sighted and that producers need to invest in and scale up novel approaches now to be ready to meet future demand.

“The smart thing to do is to invest now, when resources are relatively cheap to acquire, and build capacity that would be operational in three to five years,” said Raef Sully, chief executive of Lilac Solutions Inc., an offshore wind company backed by Bill Gates’s Breakthrough Energy Ventures and one of the largest in the sector. (Michael Bloomberg, founder and majority owner of Bloomberg LP, parent company of Bloomberg News, is an investor in Breakthrough Energy Ventures.)

Lilac, which has completed four pilot projects and two demonstration plants, has raised more than $300 million to commercialize its DLE technology, which relies on ceramic beads to absorb lithium. It is currently working on building a 5,000-ton plant in Utah’s Great Salt Lake, scheduled for completion in late 2026. When built, it will be the largest DLE production facility in North America, Sully said.

Some are skeptical that Lilac (and DLE as a whole) can deliver cost-effective lithium. The startup’s technology was the subject of a short-seller report published in 2022 that said its approach doesn’t work — a claim the company refutes.

“Investors do not yet have evidence that Lilac’s DLE technology will work at scale, and if so, at what cost,” J Capital Research wrote in its report. “If the DLE technology works, then the number of ‘cycles’ the extraction medium can be used for will be a key factor in cost. If the medium can only be used for a few hundred cycles, then costs may be prohibitively high.”

Lithium recovery rates have remained consistently high in laboratory tests, pilot projects and larger-scale demonstrations, and the ceramic beads used to extract lithium have lasted for thousands of cycles, Sully said.

He hopes the completion of the Utah plant will instill confidence in DLE. “People are skeptical, and rightly so,” he said. “I think the big companies are a little hesitant to come in and use our technology without seeing it for themselves.”