Batteries all the way down
Chart of the week
Notes:
China really overdid it on battery manufacturing…
These cell prices probably translate to LFP pack prices in the ballpark of $75/kWh, which comes out to about $4,875 for a ‘big enough’ passenger vehicle battery.1 This means the cost of a battery pack is roughly in line with the price of a high quality engine! That’s a really big milestone.
It’s worth reflecting for a moment on how incredible these prices are. When I was just starting out as an analyst covering renewables & energy storage back in the early 2010s, absolutely nobody was predicting lithium-ion prices this low, even by 2030.
Competing energy storage technologies should be quaking in their boots. This is one of the reasons that Energy Impact Partners has been extremely cautious about investing in anything besides lithium-ion. That is, other than technologies like Form Energy and Rondo Energy which are completely out of lithium-ion’s league.2
According to this BNEF chart, the majority of the recent price drop is due to a fundamental decline in COGS. However, it’s worth pointing out that the dynamics of China’s industrial policy are pretty opaque to even the best analysts, like BNEF. Hence, I suspect this trend in battery prices may be more dependent on the idiosyncrasies and largess of the Chinese government than meets the eye…
On that note: These prices make it practically impossible for battery manufacturing outside of China to compete in a global market, absent some combination of heavy subsidies and tariffs. LFP cells outside of China are still selling for roughly double these prices. Given the ratcheting of geopolitical tension, it’s getting harder to bank on ‘progress’ in China translating into lower prices for EVs and grid storage worldwide. Back in April 2023 I posed the Big Question: Will the EV supply chain hold? Since then, this question has become even more entangled with bigger picture, strategic issues (e.g. Taiwan, Russia). This is unfortunately still the best answer I can muster…
On the other hand, I don’t want to be all doom and gloom, and “trade war” and “Cold War II”, etc… Batteries this cheap are worth celebrating. This is one more sign that lithium-ion batteries (and maybe their cousins, like sodium-ion batteries) are shaping up to be one of the most definitive technologies of the century. This is, I think, the only element of the energy transition that is ahead of schedule.
Assuming a 65 kWh battery
In terms of both cost and capabilities.
Now we need to enable the deployment of all this awesome product behind the meter and generate and store energy right where it is needed. Great share!
How much are these prices a function of China dominating metal refining for a large number of metals? I don’t think the west will ever catch up unless it starts developing new efficient refining facilities of its own. I predict Hydrometallurgy will be the new hot area.