Plunging battery costs

Storage is key to our transition to a carbon-free economy.  Even if we have a grid with a good mixture of wind and solar, there will still be periods when the two together don't provide enough electricity and other periods when they provide too much.  And though we can provide electricity to trains or trams via an overhead cable or an additional rail, we can't do that for cars or lorries.  For them, we will need stored energy.  Now, that's provided by petrol or diesel, but in future it will have to come from electricity stored in batteries.  So it's really important that batteries get cheap.

The chart below comes from BNEF via Climate Denial Crock of the Week.

Source

The cost of storing 1 kWh has fallen from  $1000 in 2010 to just over $200 in 2017, an 80% decline, which works out to a cumulative/compound annual rate of decline of 20%.  The rate of decline of the last 3 years, though, has been much faster.  From 2014 to 2017, the rate of decline has been 29% per annum.  This faster rate of decline has coincided with the development of Tesla's first battery gigafactory in Nevada.  Right now, Tesla needs all the batteries it can produce for the ramp up in Model 3 production. So it's unlikely Tesla will be cutting the price of its batteries for public sale yet.  But in 6 months' time, as the gigafactory itself moves towards completion, and Model 3 production beds down, I have no doubt Tesla will be cutting the prices of its Powerwall and Powerpack products. 

Let's be conservative and project a continued rate of decline in battery prices of 20% per annum, though it's far more likely that with 12 battery gigafactories opening round the world, prices will decline faster than that.  At 20% per annum continued rate of decline, by end 2020, the cost per kWh will be down to $100/kWh of storage, half what it is now.

Currently the cost of the Powerpack, Tesla's utility-scale storage solution, is $387/kWh, but that includes the inverter/transformer.  Inverter costs are also falling, so it seems entirely plausible that by the end of 2020, Powerpack costs will have been at least halved.  Currently, the cost of power from the Powerpack is 10.5 cents/kWh delivered ($387/365 days/10 years).  A 50% price cut will take it down to 5 cents/kWh delivered, or $50/MWh.  Currently, gas peaking costs more than $150/MWh.  So it's probable that by 2020, no new gas baseload plants will be built.  Instead, utilities will start using battery storage to firm and balance electricity output.  Also, the cost of wind/solar with 10 hours of storage will be $70 or below, comparable to gas baseload in the US (where gas is cheap), and cheaper than gas baseload in the rest of the world.  Just as coal demand has peaked, so will gas demand peak not long after 2020.

The fall in battery costs will also drive down the sticker prices of EVs to the same as ICEVs.  $100/kWh for storage is where this will happen, but battery costs won't stop falling when they've reached $100/kWh.  They will halve again, making EVs and grid/household battery storage irresistibly cheap.

This is only 3 years away, the end of 2020.  In 3 years' time, EVs will be as cheap as ICEVs, and sales will be exploding.  In 3 years' time, renewables with storage will be even cheaper than they are now relative to coal, and starting to compete head-to-head with gas.  Frankly, those corporations and countries (legacy car manufacturers, oil companies, Saudi Arabia/Kuwait, utilities, etc.) which do not start to plan now for the deluge of profound change that is coming will be wiped out.  The good news for everybody else is that carbon emissions will start to fall really fast in the 2020s, giving us a fighting chance that emissions will be close to zero by 2050, which is what we have to achieve to limit global warming to 2 degrees C.