Lithium-ion battery pack costs have fallen 89% in the past decade— but rising commodity and materials prices are putting pressure back on the industry, according to a new report by analysts BloombergNEF.
Despite a decade of price drops, a series of constraints within the global supply chains, rising demand in China and Europe and the recent production curbs in China have caused values for lithium-ion batteries to rise substantially in H2.
The announcement was made in BNEF’s ‘2021 Battery Price Survey’ report.
James Frith (pictured), BNEF’s head of energy storage research and lead author of the report, said: “Although battery prices fell overall across 2021, in the second half of the year prices have been rising.
“We estimate that on average the price of an NMC (811) cell is $10/kWh higher in the fourth quarter than it was in the first three months of the year, with prices now closing in on $110/kWh.
“This creates a tough environment for automakers, particularly those in Europe, which have to increase EV sales in order to meet average fleet emissions standards. These automakers may now have to make a choice between reducing their margins or passing costs on, at the risk of putting consumers off purchasing an EV.”
Fallen EV pack prices
Real term battery pack prices have dropped from above $1,200 per kilowatt-hour in 2010, to $140/kWh last year and $132/kWh this year.
BNEF’s ‘2021 Battery Price Survey’ predicts that by 2024 average pack prices could be below $100/kWh.
However, the caveat is that higher raw material prices could push the average pack price to $135/kWh next year in nominal terms, meaning the mythologised $100/kWh price may not materialise until 2026.
This would impact electric vehicle (EV) affordability or manufacturers’ margins and could hurt the economics of energy storage projects, according to the report.
The prices are an average across multiple battery end-uses, including different types of electric vehicles, buses and stationary storage projects.
EV battery packs prices were $118/kWh on a volume-weighted average basis in 2021, with cell level prices around the $97/kWh mark— meaning they account for 82% of the total pack price.
China has cheapest batteries
No surprise that battery pack prices were cheapest in China at $111/kWh; meanwhile packs in the US cost 40% more, and 60% more in Europe, reflecting the relative immaturity of these markets, stated BNEF.
This year’s fall in prices was thought to have come as the adoption of the lower-cost lithium iron phosphate (LFP) cathodes increased, and as the use of cobalt in nickel-base cathodes continued to slide.
On average, LFP cells were almost 30% cheaper than NMC cells in 2021.
However, BNEF warned the impact of rising commodity prices and increased costs for key materials such as electrolytes has put pressure on the industry in the second half of this year.
Even low-cost chemistries like LFP, which is exposed to lithium carbonate prices, have seen Chinese producers raise prices by between 10-20% since September.
Path to $100/kWh
At the $100/kWh price point, vehicle OEMS should be able to produce and sell mass-market EVs at the same price (and with the same margin) as comparable internal combustion vehicles in some markets— assuming no subsidies are available.
But, say BNEF, actual pricing strategies will vary by automaker and geography and if the $100/kWh price is pushed back two years the impact on EV affordability or manufacturers’ margins could hurt the economics of energy storage projects.
Kwasi Ampofo, head of metals and mining at BNEF said: “Although we expect demand to keep growing in 2022, other factors such as global supply-chain constraints and China’s production curbs should have been resolved by 1Q 2022. This will help to ease lithium prices.”
The path to achieving $100/kWh is clear, although the timing now looks more uncertain with a number of automakers releasing battery technology roadmaps this year that outlined how prices can be reduced below $100/kWh.
Vehicle OEMs like Renault and Ford have publicly announced targets of $80/kWh by 2030.
Continued investment in R&D alongside capacity expansion across the supply chain will help to improve battery technology and reduce costs over the next decade.
BloombergNEF expects next-generation technologies, such as silicon and lithium metal anodes, solid-state electrolytes and new cathode material and cell manufacturing processes, to play an important role in enabling these price reductions.