The flight crew must be notified if a large amount of lithium batteries are being carried in cargo compartments, as these batteries...
explode when the cabin altitude is too high because of the differential pressure.
freeze at low temperatures, causing cracks in their metal casing.
have potential to produce heat, requiring fire fighters to be present during loading and unloading.
have the potential to start an uncontrolled chain reaction when an individual cell is damaged.
A large threat to Lithium Batteries is the risk of thermal runaway. The basic idea of thermal runaway is that if the battery becomes too hot (usually during charging), its internal resistance will change, causing it to produce more heat, hence heating it up further, causing a positive feedback loop that ends in extreme overheating. Lithium Ion batteries are even more prone to it than the old Ni-Cd batteries, and it can happen much more quickly. It often happens due to overcharging/overheating and a combination of the two.
Damage is also a massive factor in the thermal runaway of lithium ion batteries, as these have very high energy densities, so can suffer from very high currents if two different parts of the battery meet unexpectedly. This is called an internal short circuit. It can cause a chain reaction (increased heat - increased resistance - increased heat, etc) and is incredibly dangerous. Furthermore, a lower amount of damage can reduce a battery's charging capacity and circuitry that limits current flow, which can subsequently lead to overcharging/overheating, causing a thermal runaway during charging.
The worst case scenario with a damaged battery is that a fire begins. Fire is pretty much the worst case scenario onboard any aircraft, other than complete structural failure perhaps, and lithium ion battery fires burn extremely hot, in the thousands of degrees Celsius.
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