Surprise factors: Lithium-ion batteries have plunged in cost by 97 percent since their introduction three decades ago. Now researchers have found out why…Subscribe to Electric Vehicle News Bitesize Podcast for FREE!

Since its introduction 30 years ago, the cost of lithium-ion batteries has dropped by about 97%, and researchers have now analyzed the reasons for this sharp decline and the surprise factors.

So far, the biggest surprise factor is R&D work, especially in chemistry and materials science, rather than the benefits obtained through economies of scale, which is only the second largest reason for the decrease.

Surprise factors like these findings may help policy makers and planners help guide spending priorities to continue to reduce the cost of this technology and other key energy storage technologies.

The project also shows that there is still a lot of room for improvement in electrochemical cell technology.

Analysis requires digging into various sources, because much of the relevant information consists of closely held proprietary business data.

“The data collection effort is very extensive,” said lead author Micah Ziegler. “We looked at academic articles, industry and government reports, press releases and specification sheets. We even looked at some legal documents that came out. We had to work together. Data from many different sources to understand what happened.”

He added that they “collected about 15,000 qualitative and quantitative data points, 1,000 individual records from about 280 references.”

MIT professor Jessika Trancik said that early data on the technology is the most difficult to obtain, and the uncertainty is the greatest. But by comparing different data sources in the same period, they tried to explain these uncertainties.

“We estimate that most of the cost reduction (more than 50%) comes from R&D-related activities,” Trancik said. This includes private sector and government funded R&D, and “most of the cost reduction” in such R&D comes from chemical and materials research.

She added: “People use very different efforts to solve many variables,” including the design of the battery itself, the manufacturing system, and the supply chain. “The increase in cost is the effort of many people, not the effort of a few people.”

The researchers believe their findings point to the importance of R&D investment, as most of them occurred after the commercialization of lithium-ion battery technology. Some analysts believe that research contributions will become less important at this stage.

About 20 years after the battery was introduced five years in the early 1990s, most of the cost reduction still came from research and development.

The study used the analysis method originally developed to analyze the similar sharp drop in the cost of silicon solar panels over the past few decades.

The researchers hope that their method can help guide future public spending, private investment, and other incentives.

To reduce emissions, the world needs to quickly switch to a low-carbon energy system. About three-quarters of global greenhouse gas emissions come from energy and industry.

One of the obstacles to this energy transition is the relative cost of different energy sources. In the past Fossil fuels were cheaper than renewable energy and thus become the main energy source.

Fortunately, this situation is changing rapidly. The cost of renewable technologies has dropped significantly. They are now cost-competitive or cheaper than new fossil fuels. In 2009, its price was more than three times that of coal. Now the script is reversed, and new solar power plants are almost three times cheaper than new coal-fired power plants. Between 2009 and 2019, solar power prices fell by 89%.

But the cost of power technology itself is only an important part of this transformation. One of the challenges facing renewable energy sources is that they produce energy at intervals. The sun does not always shine, and the wind does not always blow , so we can not produce steadily by day. An obvious solution is to store the excess energy and then release it. But to do that, we need a lot of energy storage, which contributes a lot of cost to our energy system.

The encouraging news is that the price cuts of these technologies are similar to those of solar panels.

There are several ways to store excess energy. Most of us think of batteries. Here we will look at lithium-ion batteries: the most common type. Lithium-ion batteries are used in everything from your mobile phones and laptops to electric vehicles and grid storage.

Surprise factor. In the past three decades, the price of lithium-ion batteries has fallen by 97%. The cost of a 1 kWh battery was US$7,500 in 1991, and it was only US$181 in 2018, which is 41 times less. It is encouraging that prices are still falling sharply: between 2014 and 2018, costs have been halved. It halved in just four years.

We see this decline in the average price trend of lithium-ion batteries from 1991 to 2018.

The popular Nissan Leaf electric car—and one of the most affordable models—has a 40-kilowatt-hour battery. Based on our 2018 price, the battery cost is approximately US$7,300. Imagine trying to buy the same model in 1991: the battery alone would cost $300,000.

Or take the Tesla Model S 75D equipped with a 75 kWh battery as an example. The cost of the battery in 2018 was approximately US$13,600; in 1991 it should be US$564,000. A car battery exceeds one million dollars.

This shows how important these price cuts are not only to decarbonize our grid but also to decarbonize our transportation system.

Over time, we often see these price cuts. But, of course, it is not time itself that drives these reductions. It is these innovations in battery production that make it possible to produce them at lower and lower costs. As output increases, there are more opportunities and incentives to achieve such innovations: this is why prices usually fall when technology starts to scale.

Surprise factor. In 1991, the market for lithium-ion batteries was small: only 0.13 megawatts (MWh) were installed. This is only 130 kWh less than the two 75 kWh battery packs in the Tesla car. Since then, the deployed capacity has increased rapidly. By 2016, this number had increased to 78,000 MWh. This is six orders of magnitude higher.

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Surprise factors decrease cost of batteries.
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