This changes everything: Battery prices in free fall

Rating: High school and post-secondary

Summary: Markham interviews James Frith, head of energy storage for BloombergNEF, on the annual battery price survey. Cheap battery storage is already revolutionizing electric vehicles, electric utilities, and many other industries.

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This interview has been lightly edited.

Markham Hislop: BloombergNEF released its annual battery survey in mid-December and there are some really startling numbers. The big one that stands out is the average price for battery packs for electric vehicles, which are now $137 per kilowatt-hour, but they’re going to be $101  by 2023, just two years down the road. And that means sticker price parity with internal combustion engine cars, and then the game changes dramatically. We’re going to talk to James Frith, who’s the battery scientist in charge of the survey.

Could give us a little overview of how prices have dropped over the last few years.

James Frith: BloombergNEF has been tracking battery prices as part of the survey since 2012. We were looking at battery prices before then as well, but we’ve been collecting this data annually since then. And we have collected data back to 2010.

Over the period from 2010 to 2020, the volume-weighted average price of a lithium-ion [electric vehicle] battery pack has fallen 89% from over a $1,000 per kilowatt-hour back in 2010 to $137 per kilowatt-hour in 2020. And I’ll just point out as I mentioned that the volume-weighted average means is when we talk to people within the industry about their battery, what they’re paying for batteries or what they’re being paid for batteries and battery packs, we not only ask them what the price of those battery packs are, but we ask them what the volume in terms of gigawatt-hours are being purchased or sold at that price. So that’s quite important to the way that we approach this.

As I said back in 2010, prices were over $1,000 per kilowatt-hour. It’s clearly come down significantly since then. And a lot of those changes are to do with changes to the chemistry, going into these battery packs improvements in cell design and pack design and the increasing scale within the industry and the economies of scale that come within that as well.

Markham Hislop: I have a little hypothesis that I want to run past you, and that is the recent steep declines and the continuing steep declines in battery prices are the result of the industry moving from a focus on chemistry to one on engineering. At this point in the game, the automakers and the battery manufacturers have poured billions and billions of dollars into better engineering. And that’s, what’s driven [the development of] battery batteries and lower prices. Would you agree with that?

James Frith: Yeah, I think that’s certainly something that is becoming increasingly important now. And I would say that in the first past part of the last decade, it’s really kind of changes to the cell chemistry and design that got us that in the last kind of five years and will become increasingly important. Certainly, engineering has become key to this and it really needs to kind of continue improving to realize the places that we talk about in the future that I’m sure we’ll touch on in a moment.

But I would say that the engineering can be split in two different ways.

What we’ve really seen in the engineering to date has been improvements in the current processes. Increases in the rate at which the manufacturing lines run, for example. What’s going to become increasingly important is actually the introduction of new processes, fundamentally changing the way that batteries are manufactured today. Dry electric coating is one of those technologies that is discussed quite often.

There are other technologies or other processes, things like pre-litigation, which I’m very excited about that I think will be introduced in the next couple of years and could again, really help to drive down prices and increase energy density.

Markham Hislop: Now let’s talk about the future of prices. So your forecasting that prices will hit $101 per kilowatt-hour for battery packs by 2023. And by 2030, it’ll be $58 a kilowatt-hour, which is an astonishing number. And so in 2023, we get price parity on the dealer’s lot, but the Levelized cost of driving the price per kilometre will be significantly lower in 2023 and way lower per kilometre in 2030.

Have I got that right?

James Frith: Yeah, certainly. So I think as well, the things to point out with the price parity here is that it does vary by region, by vehicle segments that you’re looking at and by an automaker’s commercial strategy. For example, if they are operating in a region, where there are EV subsidies, they may sell that electric vehicle kind of at a discount on that kind of the point of price parity because they think they can get some of the money back from the subsidies.

Similarly, the may be markets where for whatever reason people consider not to be at quite at par price parity at that point perhaps because it’s input GCs, et cetera. So there are some nuances that,

But, certainly. when we reach $100 per kilowatt-hour we expect those vehicle manufacturers could produce vehicles at parity to internal combustion engine cars. I think that’s really important to point out and, and certainly, the direction that we think things going here.

I want to just jump back to something you said, you know, by 2030, $58 per kilowatt-hour seems extraordinary. And I couldn’t agree more with you. It’s hard to kind of see how you get to that point. We do some possible modelling to show how that is achievable.

Just as a quick anecdote is that when Bloomberg NEF first wrote about lithium-ion battery prices back in 2011 we forecast that by 2020, the average battery pack price would be $350 per kilowatt-hour. And by 2030, the average battery pack price would be $140 per kilowatt-hour. So what we can see is that actually, we got to that $350 per kilowatt-hour five years early; we actually passed that around 2015 and we got to that $140 per kilowatt-hour 10 years early.

Although that kind of new expectation of $58 per kilowatt-hour by 2030 may seem incredible, if we look at what we’ve seen historically, it’s something that’s probably quite achievable. And we could even find that we end up overshooting that.

Markham Hislop: Final question, James. I think we should point out for viewers how important batteries are to the energy transition because we’ve got wind and solar now that have driven down the cost of electricity down to 2 or 3 cents per kilowatt-hour. Clean energy is going to be cheap and abundant and batteries are important to store that cheap electricity.

Batteries don’t just enable electric transportation, they enable so many other industries to take advantage of that cheap electricity. And we’re going to see these lithium-ion batteries in utility storage and home storage and commercial applications. So this really is quite revolutionary, even in addition to electric vehicles.

James Frith: Yeah, I think that’s certainly true. What we’ve seen over the last four or five years or so is that every year its battery prices come down, we find more and more industries are beginning to electrify or to turn from to batteries.

We saw that a few years ago we saw the widespread adoption of electric buses in China because the total cost of ownership of an electric bus was much lower than a diesel bus. Similarly in the last couple of years, we’ve seen electric two and three-wheelers, which have in the past used lead-acid batteries. We’ve seen them starting to switch to using lithium-ion, and there’s a host of other industries that we can point to that are beginning to go electric.

You pointed out stationary storage. There’s also electrification of marine transport, for example, which is again a really interesting application. And in Norway, we already see Fjord ferries that are running on electricity with a huge battery pack.

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