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| Source: DOE |
Both Nissan and GM are expected to launch their xEV models – Leaf (full EV) and Volt (PHEV), respectively, later this year. Among several other things, high battery cost is often seen as a critical hurdle for mass adoption of these types of vehicles.
In the short-term several countries have incentives – subsidies, tax reductions etc, to increase consumer adoption, with up to $8,800 subsidy for EVs in China. Though the cost of the li-ion batteries is projected to drop, the key questions remain – how fast, to what level, and how long will the incentives last?
Let’s look at the cost components of large a format battery (Chevy Volt is reported to have 16 kwh battery) up closer. As discussed in several conferences, like Advance Automotive Battery Conference, it is reported that critical components (anode, cathode, electrolyte, separator, and foil) for these batteries make up ~1/3 of the battery cost currently. Recent BCG study highlighted cost components of a typical 15 kwh battery to the OEMs, with production volume independent costs largely comprising of the cell critical component costs. Since these are costs to the OEMs, end consumers could be expected to pay additional 10 – 20% on top of that.
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| Source: BCG |
Assuming total cost to the consumers at $1000 / kwh, a typical Volt-sized battery will cost $16,000 and battery for Leaf (24 kwh battery) to cost $24,000. Sticking with Leaf, to achieve that DOE’s objective of 90% cost deflation and BCG study estimates, at a battery pack level, this would mean –
2010 2030 Cost delta
2010 2030 Cost delta
Battery cost $24,000 $2,400 $21,600
Cell – critical component costs $5,520 $1,152 $4,368
Other volume dependent costs $18,480 $1,248 $17,232
Yes, the cost needs to be cut across the board, but the challenge / opportunity in the mfg and other volume dependent (primarily at the pack level) is ~4x than that of the critical materials!
So what does this mean for the industry?
- Focus beyond active materials – There’s lot of exciting work and funding going on to develop next gen chemistry for li-ion batteries and other energy storage solutions. For increased adoption of these technologies, it will be important to also look at the system-level cost (assuming other key CTQs - safety, reliability etc are met). It shouldn’t be a surprise to see an increased focus on “implementation $s” in addition to “R&D $s” for these solutions. Rob Day from Black Coral Capital wrote an excellent post on this topic as it relates to cleantech sector broadly. If you haven’t read it, it can be found here.
- Movements across the value chain – As the battery becomes the new heart of the vehicles, it will be expected for OEMs to keep a tight control on this. This will potentially be good for consumers also as it drives the cost with higher volume and more integrated operations. Examples of this is also seen by bringing pack manufacturing in-house by GM or having a close partnership with pack manufactures as in the case of Toyota with Panasonic.
- Increased consolidation – As is being witnessed for the solar industry, li-ion battery appears to be shaping up for over-capacity, up to 200% by 2015 by one estimate. The likely outcome of this will be increased consolidation within the value chain and potential bankruptcies of the weaker players. In the end, this also will likely drive down the cost as remaining players achieve higher scale.
All in all, these changes will be important for achieving cost targets, increasing consumer adoption of xEVs, and potentially translating these solutions to other applications like stationary. These will be exciting times for the energy storage technology innovation and the industry.
