Published on March 26th, 2015 | by Guest Contributor


EV Battery Costs Already ‘Probably’ Cheaper Than 2020 Projections

March 26th, 2015 by  

Originally published on The Carbon Brief.
By Simon Evans

The cost of electric vehicle battery packs is falling so rapidly they are probably already cheaper than expected for 2020, according to a new study in Nature Climate Change.

Electric vehicles remain more expensive than combustion-engine equivalents, largely because of battery costs. In 2013 the International Energy Agency (IEA) estimated cost-parity could be reached in 2020, with battery costs reaching $300 per kilowatt hour of capacity.

But market-leading firms were probably already producing cheaper batteries last year, says today’s new research. It says its figures are “two to four times lower than many recent peer-reviewed papers have suggested.”

High costs, falling

Even though the  EU electric vehicle market grew by 37% year on year in 2014, it still made up less than 1% of total sales. High cost is a major reason why electric vehicles have failed to break through, alongside range and a lack of recharging infrastructure.

The new research is based on a review of 85 cost estimates in peer-reviewed research, agency estimates, consultancy and industry reports, news reports covering the views of industry representatives and experts, and finally estimates from leading manufacturers.

It says industry-wide costs have fallen from above $1,000 per kilowatt hour in 2007 down to around $410 in 2014, a 14% annual reduction (blue marks, below). Costs for market-leading firms have fallen by 8% per year, reaching $300 per kilowatt hour in 2014 (green marks).

screen-shot-2015-03-23-at-142210_600x365Cost estimates and future projections for electric vehicle battery packs, measured in $US per kilowatt hour of capacity. Each mark on the chart represents a documented estimate reviewed by the study. Source: Nykvist et al. (2015).

For the market-leading firms, shown in green on the chart above, costs last year were already at the bottom end of projections for 2020 (yellow triangles).

The paper estimates prices will fall further to around $230 per kilowatt hour in 2017–18, “on a par with the most optimistic future estimate among analysts.” The crossover point where electric cars become cheapest depends on electricity costs, vehicle taxes, and prices at the pump.

In the US, with current low oil prices, battery packs would need to fall below $250 per kilowatt hour for electric cars to become competitive, the study says. Behavioural barriers to electric vehicle uptake present additional hurdles to widespread adoption.

The paper says:

“If costs reach as low as $150 per kilowatt hour this means that electric vehicles will probably move beyond niche applications and begin to penetrate the market more widely, leading to a potential paradigm shift in vehicle technology.”

Learning rate

To reach that level, costs will have to fall further. But a commercial breakthrough for the next generation of lithium batteries “is still distant,” the paper says, and many improvements in cell chemistry have already been realised. This seems to pour cold water on frequent claims of new battery types “transforming” the electric vehicle market.

However, there are still savings to be made in manufacturing improvements, industry learning, and economies of scale, which have already brought down costs in recent years. Cumulative global production and sales of electric vehicles are roughly doubling annually, the paper says.

That means the 30% cost reduction expected at Tesla Motors’ planned “Gigafactory” battery plant by 2017 represents a “trajectory close to the trends projected in this paper.” On the other hand, Renault-Nissan’s plans to build battery manufacturing capacity for 1.5 million cars by 2016 have hit the buffers as electric car sales have trailed expectations.

There are large uncertainties in the paper’s findings. Despite being the most comprehensive review to date, it relies on “sparse data” and acknowledges that a secretive industry might avoid revealing high costs, or conversely might subsidise battery packs to gain market share.

Overall it is “possible” that economies of scale will push costs down towards $200 kilowatt hour “in the near future even without further cell chemistry improvements,” the paper concludes. If the paper is right, then electric vehicle uptake could exceed expectations. That will be a good thing for the climate — just as long as the electricity that fuels them is not from coal.

Nykvist B. et al. (2015) Rapidly falling costs of battery packs for electric vehicles, Nature Climate Change, doi:10.1038/nclimate2564

Reprinted with permission.

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  • sault

    In other news, hydrogen fuel cell vehicles keep underwhelming everybody with their high cost, inefficient fuel production and mind-boggling infrastructure requirements. The steady pace of innovation in EV batteries makes it clear that H2 will never make some breakthrough and jump out ahead.

  • JET Charge

    $200/kWh is certainly possible, assuming that raw materials supply can keep up with what will be astronomical demand in the next couple of years. Manufacturers like Tesla need to make sure they have their supply chain sorted all the way upstream to ensure that the raw material supply is sustained.

  • Bob_Wallace

    Let’s remember that Navigant Research stated very clearly last fall that Tesla was paying Panasonic $180/kWh for cells it uses to assemble its battery packs.

    Since then I’ve heard no denial from either Panasonic or Tesla.

    30% off the $180 price means <$130/kWh. With no 'breakthroughs', just more efficient material sourcing and manufacturing.

    • Adam Devereaux

      It seems that “studies” have consistently underestimated learning curves and scaling cost reductions. This goes far beyond batteries, we’ve seen this time and time again with renewable energy sources as well.

      Is the bias so ingrained that many researchers are unable to produce a truly accurate result? Why is efficiencies of scale so well understood in other industries but not here?

      Look at LCD panel technology, in many ways batteries have a high-level similarity in that it’s a very high-tech manipulation of fairly basic raw materials. Why is there such skepticism that we can see similar cost reductions?

      • Gary Doan

        Free market dynamics 101

      • Bob_Wallace

        There’s a fairly constant anti-renewable energy, anti-EV message that’s fed out. I would imagine that lowers expectations and also makes people hesitant to get too far out in front of what has already happened.

        FUD works.

      • I think parts of the problem are 1) not having good knowledge of the cost/prices, 2) not realizing how much costs/prices have dropped since “the data you have” was collected, 3) not realizing how exponential growth and disruptive technologies work, and 4) the huge efforts by incumbent competitors to keep the public in the dark about these low and dropping costs/prices.

        • tibi stibi

          and a large share of population is just conservative. they think stuff does not change and basically are afraid of change.

        • Adam Devereaux

          That’s exactly my point though- if you are a PAID researcher then you should have knowledge and experience the apply beyond the normal public. You don’t just look at current costs and guess what seems like a good number!

          An effective research effort on battery costs would start from the ground up and evaluate raw material costs, material sources and potential scaling reductions. Then you would move on to the battery production itself and cost inputs and potential scaling reductions based on experience and knowledge of other similar industries and historical economies of scale. Then other business and regulatory costs and subsidies and evaluate effective resulting costs.

          Maybe it’s my bias, but the numbers I have seen from approaches taken that are close to this do show traction batteries in the 100-150kWh range are feasible by 2020. I don’t think we would see the movement towards mainstream electric car models by nearly every car manufacturer if this was not the case. I think they know something most of us do not.

          • TatuSaloranta

            I think that there’s also even more mundane reason: many analysts / researchers are quite junior, and more experienced (and knowledgeable) professionals do something else. Partly it is for compensation reasons (research/academia does not pay well, but it is least noticeable at the beginning of career — older you get, bigger the gap).

            So while I do not necessarily question sincerity or intelligence of people working on analyses, I suspect that actual best estimators do not work on writing these reports that we have access to. They have, as they say, more important things (from perspective of employer’s perspective) to work on.

          • Steven F

            “That’s exactly my point though- if you are a PAID researcher then you should have knowledge and experience the apply beyond the normal public. You don’t just look at current costs and guess what seems like a good number!”

            With any new technology there are always a wide variety of manufacturing methods, different designs, chemistry’s, and many future pathways to improve the product. However as time passes manufactures gradually converge to the best designs, manufacturing methods, chemistries. Any eventuallly they use up all all available future pathways to improve the product.

            So for a paid researcher it is very easy to get all the required knowledge through book and history to come up with a accurate prediction for older products. After alli if the product has not changed significantly is 30 years not much new can be expected in the next 30.

            However for new products there is so much going on that it is impossible for one person to learn all that is needed to make an accurate prediction. A team of the smartest people in the world would still not be able to make an accurate prediction. Sometimes they get it irght, and sometimes they get it badly wrong.

            Take nuclear for example. in the 50 and 60’s bigger reactors were typically more cost affordable than small ones. That lead researchers to predict that reactors of 1 to 2 GW in size would te the most cost effective design. Unfortunately these large reactors have ended up beeing extremely expensive to build, maintain, and operate.Many researchers now are saying small reactors are better but businesses don’t trust the predictions anymore.

            With renewables and batteries researchers don’t want to make a big mistake so they develop conservative predictions. If the industry outperforms the predictions they look good and more will trust the predictions to be at least reasonable.

      • Frank

        People like to talk about media bias and ingrained negativity when it comes to new technologies, but you have to remember there are very few instances where a technology actually presents an existential threat to an entire way of life. Moving from ICE vehicles powered by oil to EVs powered by consumer-produced renewable energy destroys the entire macro economic dynamic of the last 100 years.

        Without the ability to accumulate and sell human beings their primary energy source, control over those humans is lost. That’s a fairly large change for simple human beings to wrap their simple heads around, educated scientist or not.

        • vensonata

          Right on, my man, right on!

        • Adam Devereaux

          This is a good point. But we do have several good examples, digital media and cell networks come to mind. Personal computers are another. We like to point to DVD players, but remember that is a product that took a coalition of the traditional media companies and the electronic companies to produce a product that was satisfactory to all.

          On the other hand we have MP3’s which became a force the music industry had to react to or die. What is interesting are all the rumors regarding electronics companies looking into Electric cars. Apple is not a short-sighted company, if they are putting real money into this it has to be for a reason. And they are just one of several companies looking into transportation who never previously would have touched the industry with IC engines.

      • Hans

        Even researchers who like renewables have underestimated the development of renewables. In this case there is some form of self-censorship: Researchers don’t want to be accused of just making wild speculations. So they tend to make very conservative assumptions.

      • Mint

        I think you’re being a bit selective. Cost reductions for fuel cells have been slower than expected. Cost reductions for inverters and electric motors have been slower than expected. LCD has indeed become incomprehensibly cheap, but OLED cost reductions have been much slower than expected.

        Efficiencies of scale are difficult to predict.

  • tibi stibi

    whit large factories which will produce almost automatically the cost will go down to the cost of the materials.

    are these costs known?

    • Bob_Wallace

      Cost of materials plus cost of factory/equipment, energy input, labor and owner profits.

      The Panasonic battery that Tesla uses has about $70 worth of materials.

      The Ambri liquid metal batter about $60 worth of materials. (Not an EV solution, but a comparison.)

      • tibi stibi

        yes and because the factory is large there are many batteries made and the cost per battery is very low. labor will also be very low because there is a lot of automation. energy is offcourse a per battery unit but with all solar on the roof that will be very low as well.
        so if the material is 70$ i think 100$ in total is very easy to get at.

        • Bob_Wallace

          $100/kWh is probably possible, but not easy. What I’m seeing is that the Tesla/Panasonic GigaFactory will get prices down to about $130/kWh. I haven’t seen anyone thinking they can get EV batteries to $100/kWh in the next few years although, based on materials cost, it should be possible.
          $130/kWh would be a huge win. It would likely make a 200 mile range EV very affordable.

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