Battery costs dropping faster than expected

Wind, solar and storage.
Source: Forbes

From Forbes:

The global energy transition is happening faster than the models predicted, according to a report released today by the Rocky Mountain Institute, thanks to massive investments in the advanced-battery technology ecosystem.

Previous and planned investments total $150 billion through 2023, RMI calculates—the equivalent of every person in the world chipping in $20. In the first half of 2019 alone, venture-capital firms contributed $1.4 billion to energy storage technology companies.

“These investments will push both Li-ion and new battery technologies across competitive thresholds for new applications more quickly than anticipated,” according to RMI. “This, in turn, will reduce the costs of decarbonization in key sectors and speed the global energy transition beyond the expectations of mainstream global energy models.”

RMI’s “Breakthrough Batteries” report anticipates “self-reinforcing feedback loops” between public policy, manufacturing, research and development, and economies of scale. Those loops will drive battery performance higher while pushing costs as low as $87/kWh by 2025. (Bloomberg put the current cost at $187/kwh earlier this year.)

“These changes are already contributing to cancellations of planned natural-gas power generation,” states the report. “The need for these new natural-gas plants can be offset through clean-energy portfolios (CEPs) of energy storage, efficiency, renewable energy, and demand response.”

New natural-gas plants risk becoming stranded assets (unable to compete with renewables+storage before they’ve paid off their capital cost), while existing natural-gas plants cease to be competitive as soon as 2021, RMI predicts.

RMI analysts expect lithium-ion to remain the dominant battery technology through 2023, steadily improving in performance, but then they anticipate a suite of advanced battery technologies coming online to cater to specific uses:

Heavier transport will use solid-state batteries such as rechargeable zinc alkaline, Li-metal, and Li-sulfur. The electric grid will adopt low-cost and long-duration batteries such as zinc-based, flow, and high-temperature batteries. And when EVs become ubiquitous—raising the demand for fast charging—high-power batteries will proliferate.

Many of these alternative battery technologies will leap from the lab to the marketplace by 2030, the report predicts.

Some of these changes will be driven outside the U.S., specifically in countries like India, Indonesia and the Philippines that prefer smaller vehicles.

RMI analyzed the four major energy-storage markets—China, the U.S., the European Union and India—and found two major trends that apply to each: 1) “Mobility markets are driving the demand and the cost declines,” and 2) “the nascent grid storage market is about to take off.”

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Technological change is often driven by demand.  When there is profit to be made from a shift in production techniques or new ways of doing things, then new ways are found.  The first industrial revolution was powered initially by the need to expand one side or other of spinning and weaving.  John Kay's Flying Shuttle in the 1730s increased the need for spinners.  The invention of Richard Arkwright' Water Frame and James Hargreaves' Spinning Jenny flipped the imbalance the other way.   This meant further improvements in weaving machinery were necessary.  This led to a need for more powerful motors, and the invention of the steam engine, which in turn required better processes for making iron and steel, which in turn led to the development of the railways, themselves heavy users of iron and steel and coal. 

Now, the need is for batteries which can store lots of energy and release it quickly enough to drive EV motors while also being lightweight and easy to charge quickly.  This is driving very rapid technological advance, which mean batteries are getting much cheaper and better every year.  Cheap and efficient storage, combined with similarly rapid advances in wind turbine and solar PV technologies, will drive the internal combustion engine, and gas/coal-fired power stations, out of the market.  The only question is, how quickly—no longer whether, just when.  From an investment perspective it is always very painful to be on the wrong side of a rapid technological revolution.

Incidentally, battery costs have been falling by 20% plus per annum for a decade now, and forecasters who assumed this process would slow have been repeatedly wrong.  Of course, one day it will slow, but usually when technological advance slows, it doesn't hit a brick wall, it decelerates gently and we approach the limits asymptotically.  There is no sign of that happening yet with lithium-ion, and even if it did, there are numerous new technologies being developed right now which will enter commercial production within the decade.  If we assume that the 20% per annum decline continues, by 2030, battery storage will cost 1/12th what it costs now.  Which means that by 2030, no petrol/diesel cars will be sold, and no coal or gas power stations will be any longer in use.  They will all be stranded assets.  You have been warned.