Systematic review of EV battery pack costs suggests economies of scale may push cost toward US$200/kWh without further cell chemistry improvements
Industry-wide cost estimates for battery packs for electric vehicles have declined by approximately 14% annually between 2007 and 2014, from above US$1,000 per kWh to around US$410/kWh, according to a systematic review of more than 80 different estimates by a team from the Stockholm Environment Institute. Further, they reported in their paper published in Nature Climate Change, the cost of battery packs used by market-leading BEV manufacturers are even lower at US$300/kWh, and has declined by 8% annually.
The results further suggest that it is possible that economies of scale will continue to push cost towards US$200/kWh in the near future even without further cell chemistry improvements. Their study, said Björn Nykvist and Måns Nilsson, has significant implications for the assumptions used when modeling future energy and transport systems and permits an optimistic outlook for BEVs contributing to low-carbon transport.
The single most important factor in achieving a compelling and affordable mass-market BEV is its relative cost. The key difference in design and cost between BEVs and internal combustion vehicles is the power train—in particular, the battery. It is commonly understood that the cost of battery packs needs to fall to below US$150 per kWh in order for BEVs to become cost-competitive on par with internal combustion vehicles. This paper presents a first-of-its-kind systematic review of the cost of battery packs (in contrast to the cost of constituent cell) to BEV manufacturers of the at present dominating Li-ion technology.—Nykvist and Nilsson (2015)
They reviewed cost estimates only for high-capacity (BEV) battery packs, excluding high power packs for hybrid, as these are typically 30–50% more costly—and not used in BEV applications, they noted.
The cost estimates came from reviewed papers in international scientific journals; the most cited grey literature, including estimates by agencies, consultancy and industry analysts; news items of individual accounts from industry representatives and experts; and estimates for leading BEV manufacturers.
They said that they included cost estimates for all variants of Li-ion technology used for BEV packs because their overall aim was to track the progress of BEV technology in general, and data is too scare on individual chemistry variants.
Broadly, they noted that here are still R&D improvements to be made in anode and cathode materials; separator stability and thickness, and electrolyte composition. Combined with improvements due to economies of scale, the industry can see an ongoing drop in cost.
We believe that the 8% annual cost decline for market-leading actors is more likely to represent the probable future cost improvement for Li-ion battery packs in BEV, whereas the 14% decline for the industry as a whole to some degree represents a correction of earlier, overestimated costs. It is likely that the manufacturers with the highest car sales at present will have the most competitive battery pack costs and that these represent a more realistic long-term learning rate. With a cost level of approximately US$300 per kWh these market-leading actors now set the de facto current costs for state-of-the-art battery packs.—Nykvist and Nilsson (2015)
Assuming that the cost gap between market leaders and the industry as a whole will narrow over the coming years, assuming continued sales growth of the order of 100%, and using the learning rates and cost declines they identified in the paper, Nykvist and Nilsson suggest that there will be a convergence of estimates of battery cost for the whole industry and costs for market-leading car manufacturers in 2017–2018 at around US$230 per kWh.
From US$230 per kWh, costs need to fall a further third to reach US$150 per kWh.
How likely is it that annual cost reductions of roughly 8% among leading manufacturers can continue? A commercial breakthrough of the next generation of, for example, lithium air-based batteries is still distant and not considered in this paper. Production of BEVs is still in its infancy, but the Li-ion technology was developed in the 1990s and, although further improvements can be expected, many advancements at cell chemistry level have already been realized. Near-term costs are instead driven by cell manufacturing improvements, learning rates for pack integration and capturing increasing economies of scale.—Nykvist and Nilsson (2015)
Björn Nykvist & Måns Nilsson (2015) “Rapidly falling costs of battery packs for electric vehicles” Nature Climate Change 5, 329–332 doi: 10.1038/nclimate2564