Drivers of market growth and cost reduction potential for Li-ion technologies

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Li-ion technologies have benefitted from significant investment in recent years due to their versatility that enables them to be deployed in a wide variety of applications, many of which show important synergies in terms of technology development. Numerous promising research activities and a manufacturing landscape that is not just growing, but also increasing in scale mean that there will be continuing improvements in the energy, power and safety characteristics of Li-ion BES. These improvements will mean the cost competitiveness of Li-ion BES systems will continue to improve.


 

 

The recent history of cost declines for Li-ion BES systems have been impressive. The battery pack costs for EVs have fallen by 73% between 2010 and 2016 as EV deployment has accelerated. Consistent time series data for Li-ion BES systems is typically not readily available, with some exceptions. Germany has been supporting the deployment of small-scale ESS since 2013 and data on the cost of residential storage systems in Germany is available from a number of sources. Figure shows the quarterly BES system prices offered by installers in Germany for Li-ion batteries since Q4 2016. Between Q4 2016 to Q1 2017 the median system price offered to German customers has fallen by around 60%, although declines have slowed in recent quarters from the very rapid declines seen in 2015.

 

 

Li-ion is a relatively new technology and its cost reduction potential is large and based on a number of drivers. The main technical factors that are likely to significantly influence Li-ion technology costs are an increase in the scale of production capacity, improvements in materials, more competitive supply chains, performance improvements and the benfits of broader operating experience feeding back into product design and development. These drivers are not exclusive to Li-ion, as other storage technologies are likely to experience a similar dynamic as their deployment grows. However, with the dominance of Li-ion batteries in the EV market and the synergies in the development of Li-ion batteries for EVs and stationary applications (as seen with Tesla’s EV and stationary battery offerings), the scale of deployment that Li-ion batteries are likely to experience will be orders of magnitude higher than for other battery technologies. This doesn’t translate into order of magnitude cost savings, but this scale-up of Li-ion batteries will result in significant cost reduction opportunities.

 

Global manufacturing for Li-ion cells has ramped up considerably, and plans to further expand capacities continue. The annual manufacturing capacity for Li-ion batteries today, for all chemistry types, may be 100 GWh or more and may possibly exceed 250 GWh by 2020. Li-ion production capacity expansion is underway from current established players and a number of new entrants, primarily driven by Chinese stakeholders. Apart from so-called megafactories, an increase from approximately 29 GWh in 2016 to 234 GWh by 2020 is envisaged (Benchmark Mineral Intelligence, 2017).

 

Apart from the much-discussed “Gigafactory 1” (Tesla Motors/ Panasonic), all the major suppliers of Li-ion cells, including Samsung SDI, China Aviation Lithium Battery Co. Ltd., LG Chem and SK innovation, are now investing in new worldwide production capabilities. Although the bulk of the capacity has been announced in Asian facilities, a consortium of several German companies recently announced the creation of a 35 GWh per annum Li-ion cell production plant in Germany. At the pack level, new facilities and innovations continue to advance worldwide. Companies, such as Volkswagen and Daimler, are investing billions of Euros into facilities for pack assembly for stationary and mobile applications. With such an increased manufacturing landscape, continuous price declines for Liion battery cells and packs will most likely continue. Learning rates based on cumulative production experience curves for Li-ion stationary systems have been recently estimated at 12-16%. These estimates may not be directly comparable to learning rate estimates for electric vehicle battery technologies, which may differ from this range, depending on the research scope.

 

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