Good news for storage as lithium-ion prices fall

There is industry-wide anticipation of a surge in energy storage expansion thanks to the falling cost of lithium-ion batteries. Lower lithium prices will mean better deals and more opportunities for certain sectors of the storage market.

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This is welcome news as growth in demand for lithium-ion battery packs, which are key to the electrification of vehicles and many electrical grid storage projects, looked as if it was going to fail to reach the more optimistic industry predictions of the early s.

According to a report from research provider BloombergNEF, the cost of battery packs fell by 14%, towards the end of last year after experiencing unprecedented price hikes in . This significant decrease has enabled the industry to dial back the &#;pause&#; policies put in place because of rising costs. 

Manufacturers had previously reported lower utilization rates in their plants, with demand and revenue falling short of the expectations of many companies. Additionally, several electric vehicle and battery manufacturers were forced to revisit their production targets. 

But now, concerns about sustained high lithium prices have largely disappeared. The recent reduction in price is down to several factors. First gnarly COVID-related supply chain issues are now in the rearview mirror. 

Added to this is a fall in the cost of components and raw materials due to expanded production capabilities throughout the battery supply chain. Changes to cathode and anode materials, new pack designs and improved cell manufacturing processes will also be key to future price reductions.

With prices at a historic low of $139 per kilowatt-hour, the BloombergNEF data strongly suggests that the demand for lithium-ion battery packs is set to grow significantly, with a projected year-on-year increase of 53%. Last year saw global lithium-ion battery demand hitting topping 950 gigawatt-hours.

Lower costs mean projects that were put on the backburner may now find a new lease of life. BloombergNEF energy storage analyst Evelina Stoikou suggested initial hopes for lithium-ion technology were too high, but last year saw a significant shift.

She said: &#;It is another year where battery prices closely followed raw material prices. In the many years that we&#;ve been doing this survey, falling prices have been driven by scale learnings and technological innovation, but that dynamic has changed. 

&#;The drop in prices this year was attributed to significant growth in production capacity across the value chain in combination with weaker-than-expected demand.&#;

The $139 per kilowatt-hour figure quoted in the BloombergNEF research is a composite of various battery types across different sectors, including electric vehicles, stationary grid storage and buses. Battery electric vehicle packs, which benefit from a greater production scale, are now at $128 per kilowatt-hour. 

At the cell level, average prices for electric vehicle batteries were just $89 per kilowatt-hour. Regionally, the research shows that average battery pack prices were lowest in China, at $126/ per kilowatt-hour. Packs in the US were 11% higher, and in Europe they were 20%. 

Historically, the West has favored nickel-manganese-cobalt batteries, although that is changing, while China is dominant in lithium-iron-phosphate (LFP) batteries. BloombergNEF&#;s analysis found that was the first year average LFP cell prices had fallen below $100 per kilowatt-hour.

Yayoi Sekine, head of energy storage at BloombergNEF, said: &#;Battery prices have been on a rollercoaster over the past two years. 

&#;Large markets like the US and Europe are building up their local cell manufacturing and we&#;re keenly watching how production incentives and tightening regulations on critical minerals will impact battery prices.&#;

But just how inexpensive can lithium-ion battery storage become? When it comes to electric vehicles, industry analysts have long viewed the $100-per-kilowatt-hour threshold as a crucial milestone, after which cost-competitiveness would be guaranteed. 

The US Department of Energy set a more ambitious goal in its  Energy Storage Grand Challenge, aiming for an $80-per-kilowatt-hour manufacturing cost by (for a 300-mile range electric vehicle). 

If prices continue to decline at a similar rate to last year, the industry will easily surpass the $100-per-kilowatt-hour mark within a few years, making the Department of Energy's target seem highly attainable. A further tailwind is that US policy is being mirrored by regulatory shifts favoring sustainability around the world. 

These include new net zero targets and guidelines, including Europe&#;s &#;Fit for 55&#; program, a ban on new internal combustion engine vehicle sales in the European Union and India&#;s Faster Adoption and Manufacture of Hybrid and Electric Vehicles scheme. 

Throw into the mix increased consumer demand for green technologies plus rising electric vehicle adoption rates and the picture is rosy. According to the International Energy Agency, electric vehicles made up 10% of global vehicle sales in and are on track to reach 30% by the end of this decade.

Furthermore, commodity data reporting agency Fastmarkets says more than 20 lithium mines opened last year.  Expansion of lithium production, which is now expanding to Africa, is good news as mines take between 10 to 15 years to come online.

The price drop in lithium also followed the discovery of a massive reservoir of the metal last year, within an extinct super-volcano on the border of Nevada and Oregon in the US. According to estimates from geologists, the McDermitt Caldera could contain up to 120 million tonnes of lithium.

Canada-based Lithium Americas Corporation intends to start mining operations as early as , with plans to continue extraction for the next 40 years before backfilling the pit. 

Even as new lithium reserves are uncovered, the battery industry is working to boost the materials efficiency of its products and improve recycling rates, further safeguarding future lithium-ion battery cost reductions. And for stationary storage, there is the option of even cheaper technologies than lithium-ion. 

New technologies are being developed that can store energy in materials as cheap as rust, concrete and air. These concepts are often aimed at delivering large amounts of energy for hours or even days at a time&#;periods that cannot be covered cost-effectively with lithium-ion today because of the price of the batteries. 

If they go mainstream, these technologies could render lithium cost concerns a thing of the past.

Publish date: 26 March,

The main cost of an electric vehicle (EV) is its battery. The high cost of energy-dense batteries has meant EVs have long been more expensive than their fossil fuel equivalents.

But this could change faster than we thought. The world&#;s largest maker of batteries for electric cars, China&#;s CATL, claims it will slash the cost of its batteries by up to 50% this year, as a price war kicks off with the second largest maker in China, BYD subsidiary FinDreams.

Are you interested in learning more about 6.4 v lithium ion battery pack? Contact us today to secure an expert consultation!

What&#;s behind this? After the electric vehicle industry experienced a huge surge in , it has hit headwinds. It ramped up faster than demand, triggering efforts to cut costs.

But the promised price cuts are also a sign of progress. Researchers have made great strides in finding new battery chemistries. CATL and BYD now make EV batteries without any cobalt, an expensive, scarce metal linked to child labor and dangerous mining practices in the Democratic Republic of the Congo.

Economies of scale and new supplies of lithium make it possible to sell batteries more cheaply. And the world&#;s largest carmaker, Toyota, is pinning its hopes on solid-state batteries in the hope these energy-dense, all but fireproof batteries will make possible EVs with a range of more than 1,200km per charge .

How are battery makers cutting costs?

The largest market for electric and plug-in hybrid vehicles is China. But demand for EVs here has eased off, dropping from a 96% surge in demand in to a 36% rise in .

As a result, battery giant CATL has seen its profits fall for the first time in almost two years.

One of the best ways to create more demand is to make your products cheaper. That&#;s what&#;s behind the cost-cutting promises from CATL and BYD.

You might wonder how that&#;s possible. One of the key challenges in shifting to battery-electric cars is where to get the raw materials. The electric future rests on viable supply chains for critical minerals such as lithium, nickel, copper, cobalt and rare earth elements.

Until recently, the main EV battery chemistry has been built on four of these, lithium, nickel, manganese and cobalt. These are also known as NMC batteries.

If you can avoid or minimise the use of expensive or controversial minerals, you can cut costs. That&#;s why Chinese companies such as CATL have all but monopolised the market on another chemistry, lithium iron phosphate (LFP) batteries. These batteries are cheaper, as they have no cobalt. They have other benefits too: a longer usable life and less risk of fire than traditional lithium battery chemistries. The downside is they have lower capacity and voltage.

The recent price cuts come from a deliberate decision to use abundant earth materials such as iron and phosphorus wherever possible.

What about lithium? Prices of lithium carbonate, the salt form of the ultra light silvery-white metal, shot up sixfold between and in China before falling last year.

Despite this, battery prices have kept falling &#; just not by as much as they otherwise would have.

The world&#;s huge demand for lithium has led to strong growth in supply, as miners scramble to find new sources. CATL, for instance, is spending A$2.1 billion on lithium extraction plants in Bolivia.

Growth in lithium supply is projected to outpace demand by 34% both this year and next, which should help stabilise battery prices.

Battery options are multiplying

China&#;s battery makers have cornered the market in lithium iron phosphate batteries. But they aren&#;t the only game in town.

Tesla electric cars have long been powered by batteries from Japan&#;s Panasonic and South Korea LG. These batteries are built on the older but well established NMC and lithium nickel cobalt aluminate oxide (NCA) chemistries. Even so, the American carmaker is now using CATL&#;s LFP batteries in its more affordable cars.

The world&#;s largest carmaker, Toyota, has long been sceptical of lithium-ion batteries and has focused on hybrid and hydrogen fuel cell vehicles instead.

But this is changing. Toyota is now focused heavily on making solid-state batteries a reality. These do away with liquid electrolytes to transport electricity in favour of a solid battery. In September last year, the company announced a breakthrough which it claims will enable faster recharging times and a range of 1,200km before recharge. If these claims are true, these batteries would effectively double the range of today&#;s topline EVs.

Read more: Petrol, pricing and parking: why so many outer suburban residents are opting for EVs

In response, China&#;s battery manufacturers and government are working to catch up with Toyota on solid-state batteries.

Which battery chemistry will win out? It&#;s too early to say for electric vehicles. But as the green transition continues, it&#;s likely we&#;ll need not just one but many options.

After all, the energy needs of a prime mover truck will be different to city runabout EVs. And as electric aircraft go from dream to reality, these will need different batteries again. To get battery-electric aircraft off the ground, you need batteries with a huge power density.

The good news? These are engineering challenges which can be overcome. Just last year, CATL announced a pioneering &#;condensed matter&#; battery for electric aircraft, with up to three times the energy density of an average electric car battery.

All the while, researchers are pushing the envelope even further. A good electric car might have a battery with an energy density of 150&#;250 watt-hours per kilogram. But the record in the lab is now over 700 watt-hours/kg.

This is to say nothing of the research going into still other battery chemistries, from sodium-ion to iron-air to liquid metal batteries.

We are, in short, still at the beginning of the battery revolution.

Read more: How sodium-ion batteries could make electric cars cheaper

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