What the prices of batteries mean for storage applications

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The prices of battery packs fell from close to $1,000 per kWh at the start of the decade to $227 in 2016, a drop of around 80% according to a McKinsey study released at the start of the year.

Current projections put them on course to fall below $200 per kWh by 2020 and below $100 per kWh by 2030.

What impact does the cost of batteries have on the overall business case for producing an electric vehicle?

Some interesting numbers are discussed in this Tesla forum article:

  • There are claims that Tesla’s internal cost of batteries ranges from $150 to $240 per kWh now.
  • GM revealed that their battery cost at cell level was around $145 per kWh.
  • A 60 kWh battery pack would make up $10,440 of the $37,495 Chevrolet Bolt at a pack price of $174.

This means that the cost of batteries for an electric vehicle drops to under a third of the price of a car and could drop to under a fifth by 2030.

Lithium-ion technologies dominate the battery storage market, making up 95% of new energy storage projects according to McKinsey research.

The same research found that battery storage applications are already economic in four important areas – demand charge management, grid scale power, small-scale renewables and storage and frequency response.

They also note that in applications such as demand charge management and small-scale renewables, lead-acid batteries may work better than lithium-ion.

It is likely that in the coming years packages of energy storage solutions for industrial and domestic use will become simpler and easier to buy and install.

Falling prices as the technology improves in any industry benefits consumers more than the producers – buyers will gain most of the benefit from price reductions in battery technology.

Energy storage has the potential to tranform the energy system as we know it, and it looks like it could happen faster than anyone expected.

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