The Science Behind Kensington Capital Could Electrify Your Portfolio

Among the curious developments amid the novel coronavirus pandemic has been soaring interest in electric vehicles (EVs). Always a forward-looking sector, EVs took on greater urgency during this crisis when Covid-19 disrupted the global auto supply chain. That’s because, structurally, EVs have fewer moving parts, insulating their manufacturing from outside events. However, current technologies underlining the electric platform are hitting peak capacity, driving relevance toward Kensington Capital Acquisition (NYSE:KCAC) and KCAC stock.

a charging station for an electric vehicle (EV)
Source: Shutterstock

Poised to become QuantumScape via a reverse merger, Kensington Capital has been one of the most compelling names out of the special purpose acquisition company (SPAC) craze. As you’ve probably heard, KCAC is levered to the research and development of the solid-state battery. Presently, EVs are powered by lithium-ion batteries, but they have limitations. Solid-state batteries (SSBs) could potentially address these challenges while also making the platform cheaper over time.

But to really appreciate the speculative narrative here, you first have to understand why combustion-engine cars remain viable despite the encroachment of EVs. According to the Brookings Institution, fossil fuels are difficult for societies to give up because they offer unrivaled “energy density.” Basically, a gallon of gasoline can power a car much farther than the equivalent weight of a lithium-ion battery.

So, for companies like Tesla (NASDAQ:TSLA) to make EVs commercially viable, they’ve had to apply a brute-force approach: more batteries for more power and range. Unfortunately, though, this method results in higher costs for the consumer.

For EVs to become mainstream, then, auto manufacturers need a total rethink. Batteries need to go the distance, charge quicker and be reasonably attainable at the average income level. That’s the promise behind KCAC stock — and really all solid-state battery investments.

Basics Behind KCAC Stock and Solid-State Batteries

Before you make a decision on QuantumScape, though, you need to know more than the fact it’s working on a solid-state battery. While the innovation has been labeled the holy grail of EV technology, this description is deceptive. Essentially, it implies that SSBs represent an exclusive pathway.

That’s not true. Some companies are not just fighting in the SSB arena — they’re approaching the challenge from completely different angles. In fact — when you drill into the science — there are multiple paths to SSB development, each with their own set of pros and cons.

So, the narrative for KCAC stock isn’t about the mere development of SSBs, but its distinct approach. However, before we tackle what makes this name stand out, let’s break down the basics of lithium-ion batteries versus SSBs.

The Limitations of Lithium-ion Batteries

At their core, lithium-ion batteries consist of the following:

  • Positive electrodes (cathode)
  • Negative electrodes (anode)
  • A polymer layer separating the electrodes
  • Electrical contact points at each end of the battery cell

In addition, the traditional platforms have a liquid electrolyte that acts as the medium for lithium ions transferring between cathode and anode during charging and discharging. Due to its liquid form, the traditional electrolyte is “flexible” to accommodate the multiple charging cycles that EVs incur. However, this necessary volume makes these batteries incredibly bulky.

Lithium-ion battery vs. Solid-state battery
Click to Enlarge
Source: Chart by Josh Enomoto

Another disadvantage to the lithium-ion battery is that the electrolyte is flammable. Therefore, certain conditions can make these batteries dangerously hot, potentially sparking catastrophe. As such, making the electrolyte into a solid material offers obvious benefits. In addition to addressing safety concerns, SSBs can be made smaller yet pack incredible energy density compared to liquid electrolytes.

Of course, if the process of transferring from regular batteries to SSBs was so easy, the auto industry would have already done it by now. One of the main problems, as Toyota (NYSE:TM) has discovered, is the resilience of the solid electrolyte itself. As reported by IntelligentLiving.com, a Toyota executive noted the following:

The solid electrolyte needs to be compacted under high pressure to reduce the gaps between particles so ions and electrons can easily pass through. But it also needs to be flexible, because the anode expands and contracts during discharge, and the electrolyte must give a little leeway.

The hitch is, the more expansion and contraction there is, the more the electrolyte particles become deformed. And this deformation […] degrades battery performance over time. The key is developing a material that won’t deform easily.

Other organizations have experimented with other technologies and materials to get around the practicality challenges of SSBs. For QuantumScape, it’s experimenting with an anode-less design.

The Distinguishing Factor for KCAC

So, despite the promising nature of SSBs, no company has been able to bring all of the key attributes together: performance, weight savings, safety, longevity and low cost. As the Faraday Institution notes, the frustration that tech firms are encountering is the material choice compromises involved in developing the solid electrolyte. Some materials offer great performance at the cost of safety hazards. Others are incredibly safe but not very practical.

Here, though, QuantumScape may offer the most promising approach so far, hence the interest in KCAC stock. Rather than finding an appropriate physical medium between cathode and anode, the company is getting rid of the anode altogether.

Instead, its SSBs primarily feature a cathode and a solid-state ceramic separator. However — when called upon — lithium ions are able to pass through the ceramic layer. This action forms “an anode of pure metallic lithium,” according to QuantumScape’s website.

QuantumScape's solid-state battery
Click to Enlarge
Source: Chart by Josh Enomoto

Further, the advanced science behind this design just might work. According to IEEE Spectrum, another company called Ion Storage Systems is experimenting on a similar framework:

But Eric Wachsman says his company, Ion Storage Systems, stands out for a few reasons. The company’s strong, dense ceramic electrolyte […] conducts lithium ions as well as current liquid electrolytes. And according to Wachsman, it overcomes two key issues with solid-state batteries: high electrolyte resistance and a low current capability.

This brings me to my last point about KCAC stock: SSBs represent an awfully competitive arena.

Not the Only Game in Town

If the basis for profitability in the SSB game was merely participation, KCAC would be a no-brainer. Not only does the underlying company offer an intriguing platform, it could potentially be superior to its competition.

On top of that, you got powerbrokers like Bill Gates backing QuantumScape. And now that we’ve done our homework about the science underlining KCAC, you can see why. This isn’t just a rich man’s publicity stunt or virtue signaling.

However, buying into QuantumScape is, in a way, assuming that others — particularly massive blue chips — haven’t thought of every single avenue to make SSBs commercially viable. Further, there’s no guarantee that the company’s ceramic-material electrolyte will be the ticket to victory. As I mentioned before, competitors have run into several problems making SSBs holistically practical.

So, ultimately, this says to me that KCAC stock is a speculative play. But, if you’ve got some dumb money laying around, this is certainly not a bad place to spend it. The science behind QuantumScape’s SSB has real potential — and that’s a great spark.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/kcac-stock-the-science-behind-this-name-could-electrify-your-portfolio/.

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