Li-Ion Battery Costs Must Keep Falling—And They Are
The cost of battery packs for electric vehicles is falling fast. But not fast enough to pull ahead of the legacy cost advantages and future improvement of internal combustion (ICE) engines, Jackie Forrest, director of research with Calgary-based ARC Financial, argues in JWNEnergy.
Battery prices have tumbled by more than 70% in the last two years. “Even with today’s lowered battery costs,” however, “EVs still do not compete with their [internal combustion engine] peers,” Forrest argues. “For example, the compact Chevy Bolt EV costs almost $43,000, more than two times the price of the similarly-sized, combustion engine-powered Sonic model on offer by Chevy. The price difference is mostly due to the costly battery pack.”
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
“For the sizeable [price] gap between the two options to close,” Forrest asserts, “battery costs must fall even more.”
Many “automakers and their battery-making partners” are working to do that,” she concedes. “GM and Tesla,” Forrest writes, “are both predicting that battery costs [currently about US$227 per kilowatt-hour] will drop by more than half to US$100/kWh by the early 2020s.”
But that may not be enough. Citing researchers at MIT, Forrest says that even with Li-Ion at US$100/kWh, internal combustion (ICE) vehicles will come in cheaper until oil reaches a price of US$100 a barrel—roughly twice its recent level. And, she warns, “the combustion engine is not standing still. U.S. automakers have been mandated to double fleet-average fuel efficiency by 2025. Advances in ICE fuel economy will force future EV’s to price even cheaper to compete.”
Perhaps. U.S. automakers have lobbied the new Trump administration to drop the 2025 fuel standard target. Meanwhile, CleanTechnica observes that forecasts have persistently overestimated the actual cost of lithium-ion batteries. General Motors, it notes, already has a contract with one supplier for battery cells for US$145/kWh, which “probably translates into a battery pack cost around $190/kWh.”
And years ago, a global study by McKinsey reached a different conclusion than the MIT team. “On a total-cost-of-ownership basis,” it found in 2012, battery packs at up to US$150/kWh would compete favourably with comparable ICE vehicles when U.S. gasoline prices were at or above about US$2.20 a gallon—a figure only about 30¢ higher than recent national average prices.