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Sunday, April 9, 2023

I Like Big Batteries - Battery Prices Will Drop (3/3)

Battery Prices Will Drop

In part 2, we looked at the spike in battery material prices in 2022. The good news is that was a temporary spike.

One of the biggest barriers to widespread EV adoption has been the high cost of batteries. The good news is these prices are dropping and over the next decade, we can expect this trend to continue, making EVs more affordable than ever.

The cost of lithium-ion batteries has already dropped by over 80% in the last decade. This is due to a combination of factors, including improvements in technology, increased production volumes, and economies of scale. As battery manufacturing becomes more efficient and the demand for EVs continues to grow, prices will continue to decline.

BloombergNEF tracks and forecasts lithium-ion battery prices. Battery prices were above $1,200 per kilowatt-hour in 2010. By 2021, they had fallen 89% in real terms to $132/kWh. The price could be as low as just $62 per kilowatt-hour by 2030. McKinsey estimates that battery prices could be as low as $50/kWh by 2030.

Wright's Law

Another concept that will play a role in the declining cost of EV batteries is Wright's Law. Wright's Law, also known as the learning curve effect, states that as production volume increases, the cost per unit decreases at a consistent rate.

This principle has was first observed in military aircraft production. It has since has been observed in many industries, including the auto industry, where the cost of unit production decreases as the number of cars produced increases. As more EVs are produced and demand for batteries grows, we'll see a similar effect on the cost of batteries.

The battery market was ~700 GWh in 2022 and it is expected to grow to nearly 5 TWh by 2030. That's a factor of 7 in growth, meaning there's a lot of opportunity for learning curve effects. 

According to a study by the National Renewable Energy Laboratory, the cost of battery packs could decline by up to 30% for every doubling of cumulative production. This means that as the production of EVs increases, we'll see a significant decrease in the cost of batteries.

Battery Recycling 

Another important factor to consider in the declining cost of EV batteries is battery recycling. As more EVs are produced and the demand for batteries increases, it's important to develop strategies for dealing with end-of-life batteries. This is where battery recycling comes into play.

Battery recycling involves recovering valuable materials (such as lithium, cobalt, and nickel) from used batteries and then using these materials to make new batteries. This not only reduces waste but also helps to reduce the overall cost of batteries by reducing the need for new materials.

Redwood Materials’ Battery Materials Campus 1 is still under construction in Northern Nevada, but in late 2022 it had already started producing recycled battery materials. The recycled products are sent to one of the largest battery plants in the world, Tesla's Gigafactory Nevada.

Recycling will help to reduce the cost of batteries (big and small). Furthermore, recycling also has significant environmental benefits. It reduces the amount of waste going into landfills, reduces the demand for new materials, and reduces the carbon emissions associated with mining and manufacturing new batteries.

J.B. Straubel, founder of Redwood Materials and former Tesla CTO, recently said, “Batteries are amazing because they are so recyclable. More than 90% of the critical materials in the battery can be reused many, many times without degradation. Today, the batteries that we buy and put into our products admittedly still have a pretty small recycled material content, but this is changing fast… We’re demonstrating and showing that you can make batteries that have very high percentage (of recycled materials) and still have extremely good performance and exceptional life.” 

Overall, battery recycling is an important part of the EV industry's efforts to make EVs more sustainable and affordable. By recovering valuable materials and reusing them to make new batteries, we can reduce waste, lower costs, and reduce the environmental impact of EVs.

Wrapping It Up

We have many problems that require big batteries to solve: personal transportation, freight transportation, residential energy storage, and industrial energy storage. 

Big batteries are being used to stabilize the grid and to put more renewable energy on the grid. This makes all the other batteries that the grid powers even cleaner. 

Even using today's grid, electrifying semi-trucks will allow goods to be delivered with far fewer emissions. Battery-powered semis will mean that particulate matter emission will be removed from population centers.

So, what does this mean for consumers? For starters, it could make EVs more affordable for a wider range of people. Currently, the cost of a new EV is out of reach of many buyers due primarily to the cost of the battery. However, as battery prices drop, the upfront cost of EVs will shrink.

Lower battery prices will also enable energy storage, long-haul trucking, and more to be battery-powered. 

Battery materials are being extracted today, but (unlike fossil fuels) they are not consumed. At the end of a battery's useful life, the materials will be recycled and used in the next generation of (even more efficient) batteries. This will eventually create a closed-loop system. We'll have moved past an extractive (mine and burn) economy. 

In conclusion, the decline in battery prices over the next decade is an exciting development for the EV industry. As prices drop, we may see more people adopting EVs, leading to a cleaner and more sustainable future.

Three Parts: