The lithium-ion battery that billions of people carry daily in their mobile phones is a Nobel Prize-winning scientific achievement. We’ve been living in the age of the lithium-ion battery ever since the 1990s via our camcorders, laptops, smart watches, and drones. In the last decade, these little batteries have started to transform the transport and electricity sectors as surely as they did consumer electronics. New data shows how far batteries have come in a short time, and hint at how much further they’ll go.
Consistently Down
Lithium-ion battery price, volume-weighted average, all sectors (real 2020 dollars)
Source: BloombergNEF 2020 Lithium-ion Battery Price Survey
Differing by Application
Volume-weighted battery pack price by sector, real 2020 dollars per kilowatt-hour
Source: BloombergNEF 2020 Lithium-ion Battery Price Survey
Storage volumes, needless to say, have increased a bit since BloombergNEF began to track them. In 2010, less than half a gigawatt-hour of batteries had been supplied to the nascent electric vehicle and stationary storage industries. A decade later, that total is now 526 gigawatt-hours, nearly 1,100 times as much. That’s nothing, really, compared to what my colleagues project: by 2030, vehicles and energy storage systems will have used more than 9,000 gigawatt-hours of batteries.
A Volume Game
Cumulative lithium-ion battery demand for electric vehicle and energy storage applications
Source: BloombergNEF 2020 Lithium-ion Battery Price Survey
There are many numbers in the charts above, but there’s another one to mention: $100 per kilowatt-hour, the lithium-ion storage battery’s magic number. At that point, the upfront cost for an electric passenger vehicle will be the same as—or less than—a similar internal combustion model. From there, the economics are clear, and other things (hopefully) fall into place: manufacturing happens in mass volumes; charging networks grow as needed.
We aren’t quite at the moment of the market being self-fulfilling, but we’re not far off, either. So in advance of that moment, I’d like to propose a question that may, perhaps, help us frame what’s to come. Are batteries just a product? Or do they create their own markets?
Exxon Mobil Corp began working on lithium-ion batteries in the 1970s, at a time when even oil majors were searching for alternatives to the internal combustion engine. At that point, batteries were a product in search of a use—and yet the consumer electronics that emerged later couldn’t have existed without it. In that case, batteries created the market.
Today, the answer to that question is more complicated. For electric cars, the battery is fundamentally a product. Cars (even electric ones!) have existed for more than a century; they weren’t waiting on economical lithium-ion batteries to bring a market into existence. Electricity is a new way to energize cars, but the car is still the car.
Energy storage for the power grid is different. Fuel is stored energy, after all, and inexpensive lithium-ion batteries have created a new market for stored electrons at significant scale. They’ve also enabled new markets for services that battery operators can offer to the electricity grid.
So, what comes next as batteries become cheaper, with a higher energy density and produced in much greater volume? I imagine that more batteries will create new markets that we haven’t yet thought of. I’m reminded of a tale from the birth of the iPod: Toshiba had invented a 1.8-inch hard drive, but had no idea what to do with it. Apple executives knew —and created a new market with it.