Cheap, compact batteries made smartphones and mobile computing possible, and larger, more powerful batteries represent the technology that enables electric mobility, renewable energy, and the smart grid.
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Above: Tesla lithium-ion battery cells (source: charged)
As is the case with any new technology, battery storage applications expand as their cost drops. Increased demand leads to increased production, driving continuous cost reductions and performance improvements in a virtuous circle.
Over the past decade, battery costs have dropped dramatically – from over $ 1,000 per kilowatt-hour in 2010 to around $ 156 per kWh in 2019, according to BloombergNEF. That is getting very close to the “magic number” of $ 100 / kWh that many believe will drive electric vehicles to price parity with legacy vehicles, and end the Oil Age. What factors have contributed to this rapid price reduction?
Timothy B. Lee, writing in Ars Technica, notes that Tesla has played an important role, not only in bringing electric cars into the mainstream, but in focusing on the importance of battery technology from the start. “Tesla has been a battery company as much as an automobile company,” writes Lee. “Tesla recognized the potential scale of the battery market before most other companies, and has become a leading player in the network storage market.”
Tesla followed a classic tech industry strategy of starting with a low-volume, high-cost product (the Roadster) and progressing to lower-cost mass market offerings (Models 3 and Y). This iterative process was largely enabled by falling battery costs. “The Model S was designed and introduced about five years after the Roadster, and we saw about 40 percent improvements in battery technology, the fundamental chemistry, the packaging of the battery pack,” said JB Straubel in 2014. ” That translated directly into how we can get closer to 300 miles of range in a Model S, nearly 85 kWh of energy storage in a package that is actually smaller than the Roadster package. “
As more batteries are produced, economies of scale kick in and companies learn how to streamline production processes and cut costs. As Mr. Lee explains, economists measure this cost reduction in terms of learning rate, defined as the percentage decrease in cost for each doubling of manufacturing production. BloombergNEF estimates that, in 2019, the learning rate for batteries was 18 percent. In other words, battery costs drop 18 percent each time global battery output doubles.
Bloomberg believes the industry will hit the staggering $ 100 / kWh price by 2023. Some industry watchers suspect Tesla is close to achieving the Grail, and will make a landmark announcement on Battery Day on September 15.
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Above: A look at the declining cost of lithium-ion batteries (Source: Ars Technica via BloombergNEF)
It’s not just cars that are driving demand for batteries. Stationary storage for utility applications is a huge growth area: Elon Musk has said that Tesla’s battery business could one day exceed its automotive angle.
Justin Rowlatt, writing for the BBC, agrees. “The gigantic batteries connected to our electrical networks will be fundamental for the great renewable energy revolution,” he writes.
Professor Paul Shearing, a battery expert at University College London, told the BBC that the world is entering “an almost exponential growth phase.” He notes that Tesla’s boasted “million-mile battery”, which is expected to be revealed in September, will not only be good news for electric vehicle sales. Longer lasting batteries are also essential in stationary storage applications.
Use of storage systems at utility scale much of batteries. In 2017, Tesla installed the world’s largest lithium-ion battery system at the Hornsdale wind farm in Australia, with a storage capacity of 129 MWh, equivalent to 2,000 models 3 or 10 million smartphones. This year, the site’s capacity was increased to 185 MWh. Still, it will be overshadowed by the planned Manatee Energy Storage Center in Florida, which is supposed to have a capacity of 900 MWh and will be operational by the end of 2021. Clearly, more economies of scale and corresponding price reductions are looming. .
Another way to reduce the cost would be to reduce the costs of raw materials like lithium. Despite the scary stories you have seen, there is no risk of a shortage: lithium is abundant worldwide. However, it could emerge as a bottleneck as mushroom demand, because current methods of extracting lithium from salt deposits are slow and inefficient. Rowlatt writes that, in the Atacama Salt Flat in Chile, the evaporation process used to produce lithium salts takes months and recovers only 30% of the available lithium.
Several companies are working to develop better refining methods. The BBC reports that EnergyX is developing a new type of nanoparticle filter, which it hopes can recover lithium from a saline solution at an efficiency rate of 90%, while reducing the time required from months to days. Another innovator is Lilac Solutions, which is testing an ion exchange process in the rich lithium deposits in the California Salton Sea. Meanwhile, Tesla hopes to mine a huge and easily mineable lithium treasure in the so-called Lithium Valley, just hundreds of miles north of Gigafactory 1 in Nevada.
So we see that Tesla is working on several fronts to keep battery costs down. As a recent Loup Ventures article points out, other automakers are falling further and further behind. As Gene Munster writes: “We believe Tesla has a competitive advantage in batteries that investors don’t appreciate too much. In the future, we hope that this advantage will expand. ”
By all reports, Tesla batteries are the best in the industry, but that’s not the only advantage the California company enjoys. Its battery supply chain is more mature and robust than that of other automakers. Munster notes that Tesla has strong relationships with battery providers. Most of the company’s battery cells are manufactured by Panasonic, a long-standing battery partner, at Tesla’s Nevada Gigafactory. Loup Ventures believes that over 60% of Panasonic’s battery cell production currently goes to Tesla.
Above: A comprehensive description of battery-powered electric vehicles using the Tesla Model S as an example; NotesSince this video aired, the Model S’s range has grown to more than 400 miles in range (YouTube: Bloomberg Technology)
Tesla also recently started working with CATL of China and LG Chem of South Korea. As if that wasn’t enough, it is also widely believed that the company is working on its own battery cell design, which probably uses a new proprietary chemistry. With its recent acquisitions of Maxwell Technologies and Hibar Systems, Tesla has secured access to cutting-edge battery technology that is sure to lead to further cost reduction. Maxwell’s “dry electrode” manufacturing process could allow Tesla to redo its battery production line, saving a lot of money, time and factory space.
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Written by: Charles Morris; Source: Ars Technica, BBC Loup Ventures
