Cheaper, better batteries drive EV sales during 2020s

Rating: High school and post-secondary

Summary: Markham interviews James Frith, head of energy storage for BloombergNEF, about the effect of falling battery prices on EV adoption. If cheap batteries hit the market sooner than expected, will EV sales exceed forecasts?

Related links:

1. This changes everything: Battery prices in free fall – anchor story with James Frith, head of energy storage for BloombergNEF, about BNEF’s 2020 battery price survey
2. GM accelerates EV battery tech: 2x range, cost 50% less by 2025 – video interview with Sam Abuelsamid, EV analyst for Guidehouse Research
3. Tesla “battery day” science explained – Energi Talks podcast with Dr. Kai-Philipp Kairies – CEO of ACCURE, a German battery intelligence data analytics firm
4. Tesla battery day: $25,000 EVs around the corner – video interview with Sam Abuelsamid, EV analyst for Guidehouse Research
5. New study details rapid technology advances of EV batteries, with much more to come during 2020s – video interview with Maria Chavez, Navigant Research analyst
6. Using EV batteries to power the Netherlands grid – video interview with Baerte de Brey of ElaadNL, the Netherlands’ Smart Charging research centre

7. Future of EVs: GM’s “Ultium” platform and radical new battery arrive just as electric is cost-competitive with gasoline – Markham On Energy column

8. Cost of driving EVs quickly becoming competitive with conventional vehicles – 2019 Energi Media article re. Levelized cost of driving in Canada

This interview has been lightly edited.

Markham Hislop: General Motors recently announced that by 2035 it will not make internal combustion cars anymore. They will all be electric. And so that set off a big discussion about when EVs will be competitive with internal combustion engine cars. At what point how fast will they be adopted and so on. So we’re going to talk to Dr. James Frith, who is the head of Bloomberg and ETFs energy storage division, and about the role that batteries and battery prices play in the adoption of electric vehicles.

So just to set the frame of the scene here BloombergNEF EV outlook, 2020 had these numbers for forecast sales. So by 2030, they would be 26 million, which, and these are global numbers, 26 million, 28% of global auto sales by 2040, they would sell 54 million a year and be 58% of EV sales. Now we’re at that point on the S-curve and it’s just a matter of time until that percentage becomes 80, 90, or 100, whatever that number is going to be.

The question is, how do battery prices affect the sticker price of an EV, what’s the relationship there?

James Firth: If we go back a couple of years battery costs were more than half the vehicle cost. And that was certainly true in the middle of the last decade batteries could account for 50% of the total vehicle costs or more sometimes. But you know, as we discussed last time, battery prices have come down drastically over the last couple of years. And we’re now at the point where the price of the battery is closer to around 30% of the total vehicle.

And obviously, there’s some nuance in there, right. It depends on the vehicle segment that you’re looking at, you know, the size of the vehicle. Is it an SUV or is it a kind of small Nissan micro type of vehicle?

And there’s some nuances around the region that you’re in and the cost of manufacturing, the rest of the vehicle. But generally, the cost of the battery is low and it’s falling and it’s getting close to that point where we’ve reached that kind of upfront sticker price parity or the price where you can manufacture an electric vehicle for the same as an internal combustion engine vehicle.

Markham Hislop: Are we at the point very quickly where manufacturers will be able to make a profit on cars?

It wasn’t that many years ago that automakers lost 9,000 to $12,000 per car EV that they manufactured. And that obviously can’t go on forever. And the fact that GM is going all-in on electric as our other automakers suggest that they think they can actually make a buck. And what role do battery prices play in that?

James Firth: Yeah. A really interesting question. That $100 per kilowatt-hour mark where it’s considered the battery pack will be cheap enough for vehicle producers to produce electric vehicles for the same price as they can produce internal combustion engine vehicles. At that point, if they’re making a profit on the internal combustion engine vehicle, they could make a profit on their electric vehicle.

That $100 per kilowatt-hour mark is expected to be reached around 2023, 2024. Beyond that the trajectory of battery prices is a still decreasing price curve. So we expect that batteries will get cheaper.

That means that, in theory, you could either reduce the price of that EVs and kind of keep that same profit margin or they could keep the price of the EVs at the same level as the internal combustion engine vehicle and increase their margin. It will depend on the OEM that you’re looking at, probably the market segment that you’re looking at as well.

Markham Hislop: And we did an Energi Talks podcast not long ago on the annual battery prices survey that you and your team did. And you estimated that by 2030 a battery pack would be about $58 per kilowatt-hour (it’s at $137 now). That’s a tremendous decline.

If you were going to take a guess, what would you think that battery pack is going to cost per kilowatt-hour in 2040?

James Firth: That is a great question and it’s a really difficult one to answer, right? If I would go back 10 years, it seems impossible that battery packs could have cost $137 per kilowatt-hour when they were over $1,000 per kilowatt-hour. At the moment we’re saying that in the next 10 years, that’ll be about half of where they are today.

I would expect that by 2040 prices could be half of that again. So you could be looking at $30 to $40 per kilowatt-hour. It’s hard for me as a scientist and an analyst to say that’s achievable when I can’t see the exact route to getting there. But if we look at the historic numbers, that’s what it kind of tells us.

Markham Hislop: Now, let’s talk about another important factor, which is rising energy density. This is important because you cannot get more energy density out of a litre of gasoline and you can’t increase the efficiency of internal combustion engine (20% to 30%), but you can get more energy density out of a battery and that’s been rising significantly.

What do you foresee for energy density – more energy, more electricity in a given volume of battery – where do you see that going over the next 10 or 20 years?

James Firth: Another great question. So we expect the energy density will increase. Today, the pack in a Tesla Model 3 is somewhere around 160 or 170 watt-hours per kilogram. The expectation is around 250 watt-hours per kilogram by 2030 on average across the industry.

You have two choices.

One, if you have a higher energy density, that means that you can get the same number of kilowatt-hours into your vehicle, but the battery pack itself is lighter. And that means that if you have a lighter pack, your vehicle is more efficient, and you can travel further on that given charge.

So you could go down the route where you say, okay, well, I’m going to sit at the same number of kilowatt-hours in that, and your EV will go farther. Or in fact, actually, you know, maybe you find that because the energy density is high, you can squeeze more kilowatt-hours into that same space. And so you can travel even further. Maybe you can do a thousand kilometres on a single charge.

Two, you can say that I only need an EV That’s going to travel 300 to 400 kilometres for a given charge and because my efficiency is increasing, I can reduce the kilowatt-hours and make a cheaper battery and lower the sticker price of the vehicle.

The route that OEMs take is going to depend on the market segment that you’re selling that vehicle into. In the US there’s going to be demand for longer-range electric vehicles than in European countries where the distance between cities is much shorter. So I think there’s going to be different paths taken in different markets, but it’s going to be very interesting, exciting.

Markham Hislop: Here’s another wrinkle on this and that is charging speed because we’re seeing recent announcements about fast-charging batteries, where you can get 80% of a charge into the battery in 10 or 15 minutes. And we’re also hearing about the introduction of solid-state batteries, which would reduce the risk of a fire or explosion in the battery. There are new battery chemistries that are coming forward, so it seems like by around 2030 or 2040 we’ll see some of these new technology battery technologies on the market. And that sounds almost like a game changer.

We don’t talk about it much.

James Firth: To your second point there’s so much interest in development. Just yesterday, BloombergNEF had a summit where one of the panelists said, you know, there’s never been more interest in battery research. There’s going to be a breakthrough. So, there’s a lot to come.

In terms of the charging speed, charging infrastructure is pegged as one of the factors that could limit electric vehicle uptake. If you don’t have a driveway where you can park your car and charge it, you rely on public charging infrastructure. If it’s not there, maybe that’s a barrier to EV adoption. If you can charge your vehicle as quickly as you can refill it with gas, then actually, you know, that gets rid of that barrier.

But the other kind of nuanced areas is back to what we were just talking about. If you can travel a thousand kilometers on a single charge, you don’t need to charge as often, therefore you don’t need as much infrastructure and therefore that barrier is also removed.

So I think we’ll probably see different pull and push factors that influence whether vehicles have fast charging versus vehicles that don’t need it because perhaps that comes at a premium.

Markham Hislop: Here’s a question for you that I ran into a couple of years ago in the discussion around autonomous vehicles: self-driving EV systems have to be redundant and they’re very battery dependent, so they suck a lot of energy out of the battery. The more energy-dense batteries you have, then the better that is for the development and eventually the adoption of autonomous EVs.

What are you hearing in your discussion with manufacturers and scientists about that issue?

James Firth: Again, that’s a really kind of interesting question. And it’s one that I think is, is, is still being played out. You also have the split there between onboard data processing and cloud processing. If you have the onboard processing where you’re really power-hungry, that’s where the increased energy-density and more power and more energy of the battery is a benefit. But perhaps the kind of alternatives to that is to have cloud-based processing where you can do a lot of that power-intensive stuff outside of the vehicle and increase the range or increase the uptime of that autonomous vehicle.