Al Root 

Lithium ion battery maker SK Innovation is partnering with technology start-up Solid Power on the next generation of EV batteries that promise better cost, safety and performance.

The pair said they would jointly develop an all- solid-state battery cell using Solid Power's proprietary sulfide-based electrolyte.

Solid state, for EV batteries, refers to having solid, instead of liquid, electrolytes facilitating the flow of electricity. The car industry is very interested in solid-state batteries because they are cheaper to make, lighter, less likely to catch fire and offer improved battery performance. Solid-state batteries are a panacea for the industry, but the technology isn't yet ready for automotive applications.

SK Innovation (ticker: 096770.Korea) will make a $30 million investment in Solid Power as part of the agreement.

"The partnership with SK Innovation is designed to validate that Solid Power's all-solid-state production processes are scalable and compatible with existing lithium-ion production technology," said Solid Power co-founder and CEO Doug Campbell in the company's news release. "The ability to collaborate with a global leader in lithium-ion cell production is key to our go-to-market strategy and meeting anticipated demand."

SK Innovation makes traditional lithium ion batteries. The company recently made headlines when Ford Motor (F) announced an $11.4 billion investment in Kentucky and Tennessee for vehicle electrification. SK is committing half of the money for batteries -- about $4.5 billion -- and will build and operate the capacity with Ford.

The rest of the money, beyond the battery plants, is for vehicle assembly.

Before this SK-Solid Power deal, the publicly traded, or soon-to-be publicly traded, solid state or hybrid-anode battery companies -- QuantumScape (QS), Solid Power and SES -- were mainly aligned with car makers. Now the traditional lithium ion battery makers, which have internal solid-state battery programs, are looking to the solid-state battery start-ups for additional technology.

QuantumScape is part owned by Volkswagen (VOW3.Germany) and QuantumScape has agreed to sell prototype products to another, unnamed auto maker. SES works with General Motors (GM) and Hyundai Motor (005280.Korea). Solid Power works with BMW (BMW.Germany) and Ford.

SES and Solid Power aren't publicly traded yet, but they are merging with special purpose acquisition companies, or SPACs. Investors that own the SPAC stocks now will own the battery players if the mergers are approved.

SES is merging with Ivanhoe Capital Acquisition (IVAN). Solid Power is merging with Decarbonization Plus Acquisition Corp III (DCRC)

Decarbonization stock rose 3.6% on Thursday, closing at $10.98 a share. The deal helped. D.A. Davidson also launched coverage of the stock with a Buy rating and 13 price target.

Write to Al Root at allen.root@dowjones.com