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EV battery prices falling rapidly April 5, 2015

Posted by Maury Markowitz in electric cars.
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Price declines in large battery packs are faster than expected.

A recent paper in Nature Climate Change attempts to track the real costs of electric car batteries, and find they are already well below the most wild-eyed predictions for 2020 made only a few years ago. If the trends continue, batteries will fall below a critical threshold around 2020, meaning that electric car lifetime costs will be lower than gasoline cars, in spite of higher up-front costs.

Perception is everything?

The Gigafactory is big. Really big.

The Gigafactory is big. Really big.

A few years back I built a very large, 4,800 Wh li-fe battery pack. The prismatic batteries cost about 65 cent per Wh of storage, which was well below the industry average of $1/Wh. Wiring, packaging and the BMS ran this to just over $1, but certainly well below the $1.50 to $2 that was widely quoted.

After studying a wide array or sources, the authors of the Nature paper, Björn Nykvist and Måns Nilsson, found that my experience was typical – the reported rates for large li-ion battery packs were well below the averages used in the industry when discussing the economics of electric cars.

Most notably, they found that the average price declined abut 14% a year from 2007 to 2014, from $1 to 41 cents/Wh. But packs being built by car manufacturers, Nissan and Tesla for instance, were about 30 cents/Wh today, and those prices have been declining about 8% a year.

With these numbers, they then calculate the “learning rate” for the battery industry and put it at 6 to 9%. That means every doubling in production lowers the cost of the battery packs around 8%, as the companies get better at building them and invest in new production systems, like Tesla’s Gigafactory.

So when you look at current building activities and apply the learning rate, you conclude that battery prices should be on the order of 23 cents/Wh by about 2018.

Ok, and?

There are thousands of papers that explore the lifetime economics of electric cars. They basically conclude that if the price of the batteries is much above 20 cents then most people will be better off with a gas powered car. They invariably continue on and state something along the lines of “…since battery prices are around $1 and are not expected to fall under 30 cents before 2020…” then the $1 is way off in the future and electric cars simply won’t happen any time soon.

Ok, so apply Nykvist and Nilsson’s numbers and any time soon appears to be around 2020. At that point, with battery prices down around 20 cents, you’re almost always better off with an EV. As they put it, this could trigger “a potential paradigm shift in vehicle technology.”

And just to put this plainly for everyone reading this; EV’s are way, way better than gas powered cars. They have considerably fewer moving parts, higher torque for any given level of power, and have, in theory, lower centers of gravity which makes for superb handling like the Tesla. The only thing that’s missing is the sound of your engine, which might be faked anyway.

Before you get too excited

An MIT review of the paper does add a dash of cold water though. Interviewing people from the IEA that work in this fields suggested that direct comparisons between sources, as in Nykvist and Nilsson’s paper, should be examined carefully. But they still conclude that “we have seen events moving quicker than expected in lithium-ion battery technology”.

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