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Lux Research: Li-ion battery costs to drop to as low as $172/kWh by 2025; big boost for EVs in mid- to late 2020s

The electric vehicle opportunity is set to expand, as leading battery developers such as Panasonic drive down prices of Li-ion battery packs by 35% to $172/kWh in 2025, according to a new report, “Crossing the Line: Li-ion Battery Cost Reduction and Its Effect on Vehicles and Stationary Storage,” by Lux Research. However, only the best-in-class players will achieve that cost threshold, while others lag at $229/kWh.

The estimate is based on a new bottom-up cost model built by Lux Research in an industry known for being highly secretive about its costs. The model accounts for differences in battery chemistry, form factor, production scale, location and other nuances.

PR Graphic_ES_5_19_15

High battery prices have led to some huge missed opportunities in the electric vehicle market. Now if developers can drive down prices to $200/kWh or less at the pack level, they have a chance of selling millions of EVs by the mid- to late-2020s, and reap great revenues.

—Cosmin Laslau, Lux Research Senior Analyst and lead author

Lux Research analysts used primary interviews and research to build out its cost model for Li-ion batteries and evaluate the new opportunities emerging for developers and OEMs. Among their findings:

  • Competitive gap is widening. Technological innovation and scale are helping leaders like Panasonic, in partnership with Tesla, widen their competitive advantage. While Panasonic-Tesla and China’s BYD will achieve $172/kWh and $211/kWh at the pack levels, respectively, the Nissan-AESC partnership risks falling behind at $261/kWh unless it changes technologies and production strategies.

  • Disruptive Li-rich NMC will deliver more gains. In 2025, a disruptive Li-rich NMC would bring in cost gains of $17/kWh over conventional NMC/graphite cells. While scale-up efficiencies like Tesla's “Gigafactory” remain a key strategy, geographical location and technology like high-voltage cathodes are also key factors.

  • Benefits for the stationary storage market. Li-ion cost reduction will positively impact the stationary storage market as well. However, it will not address added costs like the power conditioning system, land, construction and integration. Therefore, installed stationary systems spanning from residential to grid-scale will range from $655/kWh to $498/kWh in 2025, respectively.

The report is part of the Lux Research Energy Storage Intelligence service.

Comments

Brotherkenny4

I think this is somewhat of a conservative estimate. Of course it is difficult to estimate the timing of breakthroughs in the technology. However, besides the basic cell chemistry breakthroughs that are possible there is also the possibility of manufacturing process breakthroughs, which are I think are even more probable than chemistry breakthroughs. The manufacturing process breakthroughs however are much less publicized as they can mean a significant advantage to whoever comes up with them. I believe the steady trend down in the Lux representation is some standard cost reductions for improved vendor volumes and lessons learned and such which results in steady slow decline in price, but it does not include a major change in manufacturing processes, which I think are very probable.

On the other hand, any cost under $200 kWhr will significantly expand the potential markets for plug ins and EVs. I also think people will lose the fear of exploding batteries as it become very apparent that is just not happening and I think many will realize that range anxiety is quite insignificant in a commuter car.

I presume LUX's view on the grid application and home storage is that these will be Li ion but I am somewhat doubtful of that in the long run. Cost is a big driver in home storage since mass and size and energy density don't matter as much thus some low energy battery that can be made really cheaply can be potentially more competitive in that market. $ per quantity of electrons stored is the main performance metric. Lead acid is cheap, but has cycle limitations which means that the total energy stored over it's life time is not that impressive relative to cost. Li ion has many cycles but is costly at this point. Something as cheap as lead acid that could get perhaps 3 times the cycles might compete very well in that market.

Davemart

As usual for this sort of report we don't get enough details to make much sense of it.

Everyone else except for BYD shows a step change down to lower costs, but not them.

Why?

The target for BYD is also 35Gwh of capacity by 2020, not 30Gwh by 2025:
http://www.autoevolution.com/news/byd-wants-to-equal-teslas-gigafactory-capacity-by-2020-93384.html

Since they are in the largest auto market in the world with the heaviest incentives for electrification, and also produce electric buses by the thousand with a target of 40,000 of them a year by 2020, with the Chinese bus market alone at 70,000 a year for buses by then, Lux is unaccountably negative about their prospects.

HarveyD

Trying to forecast technology advancements and breakthroughs and mass produced prices over a 10 year span is difficult and rarely succeeds.

Lux track record is not so good.

DaveD

Already out of date. We've been able to confirm that Telsa's cost is already at ~$240/kWh and they expect a 30% drop in 2017 when the Gigafactory comes online. And that does NOT include the ~8% drop they've already been seeing.

And yes, that's just Tesla, but that puts them under $170/kWh by 2017-2018. I doubt the rest of the industry will lag them by 8 years LOL

DaveD

I meant to say "...that does NOT include the ~8% drop they've already been seeing annually and expect to keep seeing."

Davemart

Hi DaveD:

Have you got a link for the confirmed $240kwh?
I haven't seen anything solid, just guesses.

Anthony F

Isn't Tesla selling the 100kWh PowerPack at $250/kWh? Granted the balance-of-system costs will differ slightly for stationary battery (still needs cooling but maybe not as much ruggedized) versus EVs (need a pack that can withstand 150,000 miles of being driven over rough roads). I would presume they're not losing money on each PowerPack they sell, and probably have a somewhat comfortable margin (shareholders might get pissed if they can put those cells into cars that make 28% gross margin vs less than 10% margin on stationary storage).

I'd venture to say that Tesla is at $250/kWh (pack) today, and will be at $175/kWh by 2020 (30% reduction) after the GF1 is up and running at near full capacity. By 2025, they will be under $150/kWh (another 15% reduction).

Davemart

@Anthony:

AFAIK Tesla are not selling any of them as yet, it is unclear whether they are talking about $250 at the cell level or pack level, and unclear whether the balance of plant is included.

Tesla have also never been shy about selling at a loss if they reckon that they can come to dominate a market, and there are also large subsidies floating around which may or may not be accounted for in the %250kwh.

sd

Yup, hard to make predictions especially about the future.

Very difficult when the future is 10 years out and you do not know what the breakthroughs will be. Maybe Tesla will have taken over the automotive world or maybe they will have gone bankrupt and be all but forgotten.

DaveD

Davemart,
Yes, I saw someone that supposedly had sources inside posting that they were at $240...I'll try to find the link.
I had figured it was $250 at the pack level based on their selling price and typical markups to cover warranty, shipping, etc. Of course I'm not assuming they're selling at a loss as you may.

And we all have to state the assumptions we're making to claim anything about profit or loss. If you assume they sell 1,000 units, then it HAS to be a loss. If you assume 1,000,000 units, then it's probably a profit. But I don't have their equipment costs or amortization schedule so it's an educated guess.
Lastly, when you throw in other factors like whether they can spread costs across cars and home units, whether they WANT to write off a loss now for some bullsh@t tax purpose this year, etc, etc, etc...it's all funny pretend profit/loss anyway.

Seer

By 2025 we will have zinc air car batteries for sure and maybe sodium air batteries which will bring a paradigm change, so this analysis is nonsensical.

Account Deleted

It is easy to verify Tesla's battery prices

350 USD per kwh for the 10kwh residential powerwall.

250 USD per kwh for the 100kwh industry/utility intended powerpacks.

See http://www.wsj.com/articles/tesla-ceo-elon-musk-unveils-line-of-home-and-industrial-battery-packs-1430461622
or
http://www.greentechmedia.com/articles/read/Reporting-Live-From-the-Tesla-Mystery-Product-Unveiling

These prices are the current 2015 price at the battery pack level including gross margins of at least 20% as Tesla does not sell anything at a loss. The prices does not include installation cost and items for connecting more packs into larger systems. Such costs could add up to 250 USD per kwh for residential installations and 50 to 100 USD per kwh for industrial instalations. In all likelihood Tesla buys the cells for the powerpacks from Panasonic and currently assemble the packs at Fremont, California. Tesla has sold hundreds of packs and powerwalls to initial pilot customers but Tesla will not be able to make severel hundreds of packs per months until 4Q, 2015 and true scaling for thousands of units per month will not beging until sometime in 2016 at the gigafactory. Tesla's 50GWh has the capacity to make 500,000 100kwh powerpacks per year in 2020 if that was the only thing it made or 5 million 10kwh powerwalls per year.

In 2020 I expect Tesla's 250 USD pack level kwh price to drop to 165 USD per kwh in acordance with the estimated 33% price drop enabled by the unpresidented level of scaling and vertical integration at that factory. Hopefully, Tesla will get enough orders for their vehicles and powerpacks to start construction of another 50Gwh factory before 2020. We will see.

One last thing. Forget about other battery manufactores being able to make batteries at less cost than Tesla. It will not happen unless they also start making 50Gwh factories and noboby apart from Tesla has plans for that. And forget about cutting cost from making battery factories in low income countries. The labor cost at teslas 50Ghw factory is less than 5% of total cost. It is far more important to produce in scale and at proximity to your end customers. Therefore I expect the next 50Gwh factory to be build in Europe and the third in China. The advantage of building in China is to avoid taxes and to be in proximity to customers (labor costs are insignificant).

Davemart

Thinking about the article a bit more, it is even more nonsensical than I had thought at first.

BYD had 4Gwh of capacity in the spring, and are building another 6Gwh this year.

So the assumption is to arrive at their figures that this will mysteriously drop to 2-3Gwh construction per year out to 2025.

How is that remotely credible?

60-100GWh capacity pa would be the range of capacity by 2025 assuming no change from current trends.

Any change in trend should be clearly explained in anything which approaches being a coherent article.

If the assumption is that LiFePo is not too good, that should be made explicit, and in any case ten years would be plenty of time to swap to something else if that had too many limitations.

This sort of fake research prostitutes proper academic work.

Sponsored 'research' with the assumptions hidden behind a steep $1000 or so paywall, to avoid proper critique, which is then endlessly cited.

This is advertising, not research.

Pure bunkum.

Davemart

'"This is just a guess right now, but maybe somewhere around 20%," said Musk. Of course, that would by the profit margin for stationary storage products once the company hits mass production at the Gigafactory in 2017.'

http://www.cnbc.com/id/102654541

So that is not right now assumed profits, and the notion that they are going to hit 20% profit even after the GF opens would be remarkable indeed, as stationary storage is a commodity market where 4% is good going.

Of course, Musk has predicted profitability for Tesla in the past, but it is now pushed out to beyond 2020.

laszlo

LUX's view on the grid application and home storage is that these will be Li ion doeas not make much sense to me. Grid application by Eos using other battery technology is already @ $160/kWh, http://www.businesswire.com/news/home/20150519006387/en/Eos-Energy-Storage-Raises-23-Million-Support#.VVxLTrlVikr

Davemart

@laszlo:

There are plenty of other technologies than Lithium on the horizon, but at the moment that is what is making the running in stationary storage.

Progress for Eos does not seem to be very fast since two years ago:
http://www.greencarcongress.com/2013/05/eos-20130521.html

High energy density capacitors with their ~million cycle lives would be ideal, but again they are on the horizon, at an even greater distance.

Lux is talking nonsense though, even in terms of the lithium storage market.

toitoimontoi

I agree with the last comment, I have seen many Eos presentations and they only show results from a small prototype. 160¤/kWh is only based on assumptions.

Generally, estimations of battery costs are very very difficult to analyse. In the case of li-ion batteries, research have totally under-estimated the capabilities of market-leading manufacturers (Nissan, Tesla...) to reduce costs, as shown in this recent paper (sorry if you don't have access) : http://www.nature.com/nclimate/journal/v5/n4/full/nclimate2564.html
As it has been said above, major breakthroughs at the pack level are today coming from process. It cannot be easily taken into consideration since manufacturers do not communicate about it.

George Murphy

Achieving lower battery costs is an important step to more widespread acceptance of electric cars but far from the only necessary step. A generally accepted electric car must have performance features roughly equivalent to a similar gas powered car. A Honda Accord or Toyota Camry can be purchased for about $25,000. It is unclear whether gas costs savings will offset added electricity costs and consumers tend to significantly discount the value of savings over time when comparing up front costs so an initial ~$25,000 to $30,000 price tag must be one target. Both gas powered cars have a 500 to 550+ mile range per tank. There are gas stations everywhere and a tank can be refilled in less than 5 minutes. Despite one earlier comment, range and convenient recharging infrastructure are two additional, probably very significant, hurdles. The average lifetime for one of these somewhat better made gas powered cars is probably at least 15 years, perhaps approaching 20 years. And despite some recent publicity, many car models have a relatively high reputation for reliability. Lifetime and reliability are additional hurdles. So while progress is being made, and perhaps a niche market may be possible, general acceptance of electric cars appears to be considerable further off than the enthusiasts would have us believe.

HarveyD

GM...e-Camry and e-Accord (and equivalent) extended ranch (500 to 800 Km) eqipped with 100 to 120 kWh quick charge battery pack may become a reality when:

1. battery energy density have reached closed to 800 to 1000 Wh/Km or about 4X todays best.

2. battery price have dropped to below $100/kWh

3. battery duration are extended to 1000 full cycles.

No. 3 above has been reached but 1) and 2) may not happen much before 2020 to 2025.

It is just a matter of time and resources used for EV and light weight lower cost body development.

Bob Wallace

"Of course, Musk has predicted profitability for Tesla in the past, but it is now pushed out to beyond 2020."

There are multiple types of profitability.

Tesla sells their ModS EVs for about 27% more than it costs to manufacture them. That is profitable.

Tesla takes all their profits from the ModS and uses other capital to invest in business expansion. That extra investment in growing the company shows up on the annual profit/loss statement as a loss.

It's not that money is being lost. Money is being invested which records as an expenditure. If the "27%" were being spent on hookers and blow, that would be a loss.

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