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14 December 2016
By the numbers
$273/kWh – the result of the 2016 battery price survey of the EV and stationary markets
22% – the observed price reduction for lithium-ion batteries between 2015 and 2016
$73/kWh – battery price forecast for 2030 based on a learning rate of 19%
Figure 1: BNEF 2016 battery pack price survey results, 2010-2016 ($ per kWh)
1000
800
642
599
540
350
273
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ADVANCED TRANSPORT – RESEARCH NOTE
14 December 2016
1. RESULTS
The Bloomberg New Energy Finance battery price survey for 2016 resulted in a price of
$273 per kWh. This is comprised of cells plus battery packs. The pack includes a battery
management system (BMS), wiring, housing and thermal management. It does not include other
items like inverter or additional management systems/processing units.
This year‘s survey includes price data from the electric vehicle and stationary storage industries.
Data provided came with a range of formats, chemistries and energy-to-power ratios. This
Research Note explains how these variations can affect pricing. As with last year’s survey, the
average price was calculated using volume weighting, giving more importance to battery prices
attached to high volume purchases. Figure 2 shows the 2016 weighted average price and also
the range (maximum and minimum) of prices we received. See the Methodology section on page
6 for more information.
Battery prices for the larger EV manufacturers (high volume orders, high energy-to-power ratio,
and multi-year contracts) cluster around the low end of the range of around $200 to $260 per kWh
in Figure 2. Battery prices at the higher end of the range – over $300 per kWh – are from smaller
energy stationary storage (ESS) buyers and from EV manufacturers who require PHEV batteries
(high power-to energy-ratio). Figure 2 shows a narrower range of results this year than in previous
years. We think part of the reason for this is that battery pricing is becoming slightly more public.
Battery purchasers on the vehicle and stationary sides are able to push their suppliers down to
price levels based on what they have heard their competitors are paying.
Figure 2: BNEF 2016 lithium-ion battery price survey results and monthly volumes of batteries sold in new EVs, 2012-2016
($ per kWh and MWh)
1,600
1,400
689
642
599
H1 2012:
800 $689/kWh H1 2013:
H1 2014: H2 2014:
$599/kWh Volume-weighted average
$568/kWh $540/kWh
600 battery price
H2 2012: H2 2015:
$642/kWh $350/kWh
400 2016:
$273/kWh
200
0
1,500
1,000
2,500 500
2,000 0monthly MWh of
sales
H of batteries
MWh
1,500 H
1,000 in 1…
2…
1…
new EVs
500
0
H1 2012
H2 2012
H1 2013
H2 2013
H1 2014
H2 2014
H1 2015
H2 2015
H1 2016
H2 2016
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This year’s result shows a 22% decrease in average prices since 2015 and a 73% decrease since
the average 2010 price reported by BNEF. Although technology has improved significantly in the
past few years, much of the rapid price decrease has been due to competitive pricing amongst
the few major lithium-ion battery manufacturers, attempting to increase utilisation rates at existing
plants while announcing new capacity to be built before 2020. We will examine this trend in more
detail in the following sections, while also explaining the difference between the purchasing habits
of electric vehicle and stationary storage buyers. This note concludes with an outlook on future
battery prices.
Some survey
1.1. Drivers of 2016 price reductions
participants reported
The main drivers of the 2016 price reductions were: improvements in manufacturing and
decreases of 25% in
technology, higher volume pricing, and longer-term contract structures. Pricing appears to have
battery price quotes in
changed unevenly through the year. Some survey participants reported decreases in battery price
just a few months. quotes by 25% in just the space of a few months in early 2016. And in the second half of 2016
others were saying they saw quotes come down by 10% within the space of a few weeks. Looking
forward to 2017, participants see prices going down an additional 15-25% for ESS. EV
manufacturers expect even larger drops for longer-term contracts through to 2020.
Survey participants reported that one of the main reasons prices are dropping is due to cell
energy density improvements, which are currently shaving 10-15% off the battery price annually.
For more information on battery production costs and energy density, see our November 2016
Research Note: Max Capacity: battery energy density improvements (web|terminal) and our
March 2016 Research Note: Lithium-ion battery cost breakdown and forecast (web|terminal).
Volume pricing
Generally, the more batteries a company agrees to buy per order, the lower the price per kWh.
This is because volume pricing helps the manufacturer increase plant utilisation, plan for the
future, and aids in raising money to expand capacity.
This variety in volume In 2016, the larger EV manufacturers sold enough EVs to demand anything from 0.2GWh to
purchasing is a major 6GWh of batteries each. This means that when signing contracts for two to three years, large
reason for price automakers could be agreeing to buy up to 10GWh, with freedom to increase or decrease
purchasing within certain ranges. The smaller EV manufacturers might only order a few hundred
differences between ESS
MWh on an on-off basis, or perhaps spread over a period of time. Stationary storage customers
and EVs.
can order anything between 40kWh and 100MWh, in one-off contracts for specific projects. This
variety in volume purchasing is a major reason for price differences between ESS and EVs. The
large EV makers receive more favourable pricing than the small ESS buyers because they take
larger volumes (thereby reducing overhead fixed costs for the cell maker per kWh) and are more
reliable return customers.
The 2016 survey indicated that there are specific break points in volume purchasing that get
buyers to a lower price bracket. These break points for ESS appear to be at 2-4 MWh, 10MWh,
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30MWh and over 100MWh. As the market for batteries gets larger – for both EV and stationary
storage applications – most buyers increased the volumes of batteries they procured from 2015 to
2016. Some reported a tenfold increase in purchasing volume, with resultant price decreases of
up to 30%. However, participants did say that it can be hard to separate the benefit of increased
volume purchasing from general price decreases due to price competition.
Nomenclature
In this report we refer to the cell plus pack as the ‘battery’. The cell is the part of the battery that stores and releases electrical
energy. The rest of the battery is what BNEF refers to as the pack and contains the thermal management, battery management
system and housing.
For stationary storage batteries (we will term them ESS in this report), the pack is often referred to as the ‘storage rack’. In this note
we will use the term pack and it refers to cells, battery management, trays and racks, and housing. It does not include thermal
management. Additional items – like inverters, balance of plant and installation costs – are added to make up the ‘system’. This
survey does not contain information on any of these additional prices.
In this note we use the word price when explaining how much a battery is bought or sold for. The term cost is used when
describing how much money it took to produce that battery.
Perhaps even more important than volume purchasing is an indication by the buyer to the seller
that there will be larger and ongoing contracts in the future. Battery manufacturers want to build
out their future pipeline of orders to help fund new capacity. Therefore it is of value to them to
Companies signing long- partner with customers whose market share is growing and who are interested in discussing
ongoing contracts. If the battery manufacturer can see the trajectory of orders from a customer –
term contracts are
even if they are only buying a few dozen MWh in 2016 – they are willing to offer low pricing for
rewarded by lower
purchases today with the hope of future promised contracts. This rings true for both the EV and
battery prices.
ESS markets. For instance, survey participants who increased orders this year to over 5MWh
have attracted the large battery vendors for the first time and are now being given the option to
discuss longer-term contracts. Smaller EV battery buyers who previously purchased one-off
contracts of a few hundred MWh reported being in discussions for longer-term agreements
extending through to 2020 and reported getting lower prices in 2016/7 because of this.
The quantitative and qualitative data in this report were collected through a series of over 30 interviews during Q4 2016 with battery
manufacturers, car companies, battery material companies and stationary storage project developers. For each price point collected
there was an associated volume (in MWh). Using the information from the interviews we then assign battery cell and pack prices to
each of the major sales relationships between EV makers and battery manufacturers. We determined these by the volumes of the
battery sales, the types of EV model the battery is used in and the characteristics of the car company and battery manufacturer. We
then calculate a volume-weighted average battery price for the industry.
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This year, cells make up 73% of the total price of a battery. Figure 3 shows how we have split cell
and pack prices. Generally an EV battery’s price will be 75% cell and 25% pack. This depends
mostly on whether the pack is for a plug-in hybrid electric vehicle (PHEV) or a battery electric
vehicle (BEV). PHEV packs can account for as much as 40% of the total battery price on a per
kWh basis because they have less kWh to spread the pack price over. For stationary storage
In the 2016 survey, cells packs, the cells make up more of the price – around 80%. This is because the rest of the pack
contains less than an EV pack – most notably no thermal management and less controls
make up 73% of the total
software.
price of the battery pack.
Figure 3 shows that the average pack price in 2016 was $74 per kWh. This shows the reduction
in pack production cost since 2015 as volumes have increased. It also reflects that as time
passes the average battery size of BEVs, and ESS projects, is increasing. A BEV with an 80kWh
battery may have a pack price of only $40-50 per kWh. Whereas a 6kWh PHEV pack could be
over $100 per kWh. Our survey is volume weighted to better reflect this difference.
Figure 3: BNEF 2016 battery price survey: pack and cell price results, 2013-2016 ($ per
kWh)
599
540
pack
188
173
350
273
116
Pack production costs
cells
74
drop rapidly with 411
367
economies of scale and 234 199
learning.
Cell format
Our survey showed that the majority of battery purchasers do not have a cell format they prefer
but rather that considerations like pricing, lifetime, safety and preferred supplier tend to dictate the
format they buy. Cylindrical cells are by far the lowest in price, and can be $150-160 per kWh
compared to pouch/prismatic cells that are over $200 per kWh. However, cylindrical cells do not
meet the specifications of most of the EV manufacturers, who tend to use pouch/prismatic ones.
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ESS market grows and more uses are found for stationary ‘high energy’ batteries. Some survey
Cylindrical format cells participants reported that high power rated batteries are still priced at $350 per kWh or above.
are still the cheapest. Figure 4 illustrates this. E-buses and heavy duty electric trucks will use ‘high power’ batteries,
while passenger battery electric vehicles will use ‘high energy’ batteries.
1 NMC stands for cathodes containing nickel, manganese and cobalt. NCA stands for cathodes containing
nickel, cobalt and aluminium. LFP stands for cathodes containing iron phosphate. All cathodes also
include lithium.
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Battery companies This desire to build additional capacity to meet future expected demand requires capital
brought online an extra investment. To raise money from investors or parent companies, the battery manufactures have
27GWh of manufacturing to prove there will be demand for the new batteries. Part of proving this is to sign large long-term
future contracts with buyers, offering attractive pricing.
capacity in 2016.
The only battery companies that can afford to consistently offer low pricing and provide future
contracts are a few large, mostly Asian, manufacturers who have wealthy parent companies or
investors who are using their subsidiary as a strategy for future profits (see Table 1). The smaller
battery manufacturers that grew up in the 2000s have either been bought, filed for bankruptcy
(e.g. A123 Systems) or are targeting higher value markets like heavy duty transport applications
(e.g. Xalt, Electrovaya).
Part of the way manufacturers are increasing utilisation is by selling to the stationary storage
Table 2: Estimated 2016
market. Through 2015 and 2016, increasing demands from ESS customers has led battery
lithium-ion battery demand
companies to tweak designs and produce cells and packs especially for stationary storage. Most
in stationary and EV
do this by using lines in their plants that were made for EV batteries but are not currently running,
applications
altering the size or shape of the cell format.
Application Demand
(GWh) Some manufacturers told us that ESS orders were less than 5% of the volumes they delivered in
EVs 20 2016 whereas others reported up to 20% of sales were now stationary. Table 2 shows that the
Stationary 1.6 demand for stationary storage batteries this year was only 8% of lithium-ion demand from
storage (ESS) passenger EVs. Some survey participants said that the ESS market has enough demand to
Source: Bloomberg New Energy warrant battery companies building specific manufacturing lines just for them. This can reduce the
Finance. Q4 2016 values are
cost of making stationary cells for the manufacturer, as ESS cells and packs can be less complex
estimated. EVs excludes
than EVs. But it means they have to rely on a steady stream of stationary storage orders to justify
demand in buses and low speed
investing the capital in a new line. We forecast 3.5GWh of stationary storage build in 2017 – 90%
EVs. ESS includes behind-the-
meter and front-of-meter of which will be lithium-ion. Although this is a big increase from 2016, most manufacturers do not
capacity. We assume 90% of think the industry is large enough to warrant converting whole manufacturing lines to produce just
storage deployment is lithium- stationary storage. See our August 2016 Research Note: Global Energy Storage Forecast, 2016-
ion. 24, Part 1 (web|terminal).
Chinese manufacturing
The Chinese market is worth mentioning separately because it is comprised of hundreds of
battery manufacturers, some running at almost full utilisation rate and some hardly selling any
batteries. Due to a government approved list as to which lithium-ion batteries EV companies can
use, manufacturers that make ‘approved’ batteries are struggling to meet orders and have been
able to charge high prices – over $300 per kWh for packs. Whereas the companies that are not
on the list (including Samsung SDI and LG Chem plants in China) are hardly producing batteries.
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For this reason, we did not include prices from companies selling batteries solely inside China in
the survey, as the price is skewed by the government’s policy decisions.
Car companies are also increasingly active in the battery manufacturing industry. Tesla and BYD
both want to control the supply chain, guarantee enough battery supply, and have a say in battery
chemistry and design, and as a result they are establishing significant battery manufacturing
capacity. Most of the major OEMs already have battery IP and engineering knowhow. As other
car companies increase their electric ambition they may follow a similar route. For instance, VW
has announced it may need as much as 150GWh of batteries in 2025 for its new EV models. This
Smaller EV battery is more capacity than most battery manufacturers can afford to build, or would be comfortable
buyers are benefiting building without guaranteed demand in place. This may well lead automakers like VW, that
from battery require large volumes of batteries, to either build capacity themselves with their own IP or
manufacturers’ desire to alternatively, opt to invest in battery manufacturers as a way of helping fund new capacity and
increase sales. underwrite some of the associated risk. For more, see our June 2016 Research Note: Cautious or
ambitious? German automakers’ EV plans (web|terminal).
Car companies have large R&D teams comprised of battery engineers who design the EV battery
specifications. They will then take that to a battery cell manufacturer and engineers from both
companies will work together to produce the required product. Because of this joint work, car
companies typically want one battery manufacturer to make all the batteries for a specific EV
model, and sometimes for their whole range of electric vehicle models. This makes the bidding for
the initial contract quite fierce as each battery maker knows this might be the chance to sign years
of battery sales. Car companies tend to dictate the performance requirements and the price and
Becoming tied to one EV let battery manufacturers submit bids.
maker can be dangerous
As the industry has developed, relationships have shifted. LG Chem and GM partnered to make
for battery
the Volt batteries and now are so involved in making the battery for the Bolt that they are co-
manufacturers. developing and co-manufacturing the cells and packs next to GM’s headquarters. Other car
companies like Ford and VW have kept battery manufacturers at arm’s length, still procuring
batteries from the best bidder and changing their supplier for different models, while making their
own packs. Daimler has decided to develop all its IP and engineering design in-house and then
contract manufacture the battery cells in Asia, with their supplier not allowed to sell this cell
design to anyone else.
Becoming exclusively involved with just one car company can be very beneficial and at the same
time dangerous for a battery maker. Panasonic has become so reliant on demand from Tesla that
it has been driven down further and further on price, and also committed to investing in the
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14 December 2016
Nevada Gigafactory. This has been good for Panasonic’s sales and market share, but risky
because Tesla sales might drop off or future products fail. However, not offering large off-takes
Figure 5: Relationships of international EV and ESS companies with battery
manufacturers, 2016
Seller Panasonic LG Chem Samsung AESC BYD Johnson LEJ Sony
Buyer SDI Controls
GM
VW
Audi
Porsche
Electric vehicles
Ford
Hyundai
Volvo
Renault
BMW
Nissan
Citroen
Mitsubishi
BYD
ESS
EV &
Tesla
Mercedes
AES
ESS
AMS
Sonnen
Exclusive relationship
Major supplier
and low pricing to important car companies can be dangerous too. If there are not the battery
companies available to provide what EV makers need, there is a chance they will begin
manufacturing battery capacity themselves and cutting out the existing cell suppliers.
Chinese EV companies The overcapacity in the market – largely caused by big car companies overestimating their sales
only buy batteries from from 2011-2014 – has resulted in battery manufacturers increasing their interest in smaller car
suppliers on the companies. Often these are companies that integrate cells into packs for specialised applications
government eligibility like buses, pick-up trucks, e-bikes or early-stage applications like hybrid ferries.
list. These smaller car manufacturers in the past may have only bought a few MWh annually and paid
over $500 per kWh for packs. However, now that the orders for products like e-bus battery packs
are increasing, and have hit many GWhs globally, smaller bus pack assembly companies are
beginning to forecast demand in the hundreds of MWh annually each before 2020. This gives
them the opportunity to sign contracts for more attractive short-term pricing with the expectation of
larger orders in the future.
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Exclusive relationship
Major supplier
In 2015 most stationary storage battery companies were ordering less than 1MWh per contract. In
By signing multi-year 2016, many of our survey participants reported increasing their volume purchasing over the year
contracts, clients can by at least twofold, and with that came a reduction in price detailed above in section 1.2.
reduce battery prices. Price is very important because the economics of stationary storage projects can be difficult. So
the price drop observed in 2016 has been beneficial to the ESS market, and spurred further
growth in demand. Price competition has resulted in big price drops for large storage bids such as
the Aliso Canyon gas-leak procurement (web|terminal). It also means that very few ESS buyers
have loyalty to one specific battery maker.
However, this means that ESS buyers are often only able to procure standardised
size/format/shape racks from their suppliers. These may not fit their needs, but to get packs
designed just for them requires a longer wait and larger volume purchasing. The battery makers
are constantly tweaking chemistry and energy density of the cells, partially due to demands from
car companies. This can mean that an ESS buyer may order a specific cell in a given year and
not be able to buy it again next year due to changes by the cell maker.
Contracts between car companies and battery manufacturers are usually negotiated as the new
EV model is being designed. The design and price is agreed upon around 18 months before the
model first goes into production and that basic design will remain for the life of the model – which
can be four to six years. Although the initial annual order volumes and price are set, there is
usually room for renegotiation. Our 2016 survey found that some companies will order more
batteries than they think they need just to get preferential pricing, while others have to procure
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14 December 2016
more batteries than expected at the last minute due to high customer demand. When this
happens they will either be charged a penalty for not fulfilling the contracted order, or in the latter
case, they can renegotiate a lower price for the additional volumes. When battery manufacturers
alter cell technology – often resulting in improved energy density – the car companies usually
demand lower prices for the same kWh size pack, because it requires fewer battery cells.
In the EV battery market, car companies have significant buyer power and are able to set prices.
ESS companies have less leverage and will usually open up bidding for a specific pack or system
While battery demand for design and then take the lowest price option. Some ESS companies are beginning to negotiate
stationary storage is set longer-term contracts – or reveal their pipeline for the next year to battery manufacturers – in the
to increase dramatically, hope of getting lower prices. Of the companies we spoke to, few were willing to sign long-term
agreements at set prices because they have seen battery prices come down so dramatically over
EV demand will continue
the past two years.
to eclipse it.
The more long-term battery contracts there are, the less available capacity there will be for one-
off purchases by EV or ESS companies. EV manufacturers will likely continue to have higher
priority. Stationary storage companies have begun to report having to wait as long as six months
to receive batteries for a one-off order, compared with two to three months in 2015. This could
well be the outcome of tightening supply at certain plants or an unwillingness of battery
manufacturers to sell ‘spot’ when they have larger contracts that have to be delivered. Having to
wait six months for delivery means battery procurers may start thinking about preparing their
suppliers with preliminary orders up to a year in advance, just to avoid shortage. If this happens, it
will help battery manufacturers plan new capacity and price cells more clearly.
Figure 7: Forecast demand for lithium-ion batteries from passenger electric vehicles,
consumer electronics and stationary storage, 2016-24e (GWh per year)
180
160
Electric vehicles
140
120
100
80
Consumer applications
(e.g. mobile, laptop etc)
60
40
Stationary energy storage
20
-
2016 2017 2018 2019 2020 2021 2022 2023 2024
Source: Bloomberg New Energy Finance, Avicenne. See our 2040 EV sales outlook (web|terminal), and our
Global Energy Storage Forecast, 2016-24, Part 1 (web|terminal).
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3. PRICING OUTLOOK
2017 prices will be lower again. Survey participants said they are already seeing quotes for
battery cell prices for next year as much as 20% lower than they paid in early 2016. Several
respondents noted that they do not expect prices to fall by as much in 2017 as they did between
2015 and 2016. As with the 2016 drop, 2017 prices will continue to be influenced by price
competition between suppliers, technology improvements, longer-term contracts and economies
Price quotes for 2017 are of scale. For instance, cell energy density is increasing by 10-15% every 18 months, which could
where industry bring costs down by 10% in that same timeframe. See our November 2016 Research Note: Max
participants a few years Capacity: battery energy density improvements (web|terminal)
ago thought prices
Figure 8 has public data points from car companies on where they are either buying cells today or
would be in 2020. are forecasting cell prices to be in the near future. The grey oval illustrates the price range that
survey participants – both in EV and ESS markets – said they had received quotes on for future
battery prices.2
Many respondents said that the prices they are now getting for 2017 delivery are where they
expected 2020 prices to be just a few years ago. Prices are at least three years ahead of where
most industry participants thought they would be.
Car companies like GM, Ford and Tesla have publicly announced they can buy cells for below
$150 per kWh in 2017 and have quotes for $100 per kWh in 2020. These are for very large
volume orders of a few GWh or more. However, even those who are ordering less than 100MWh
are getting cell price quotes for $160 per kWh in 2017 for cylindrical cells. ESS companies
wanting pouch/prismatic are getting quotes for cells well under $200 per kWh in 2020. $100 per
kWh in 2020 implies annual reductions of cell prices of 15% between now and then. This would
BNEF forecasts that be a slower annual rate of reduction than we have observed over the last six years.
annual stationary
storage demand will Figure 8: Lithium-ion large-format battery cell-price outlook, 2016-20 ($/kWh)
grow from 10GWh in 250
2020 to 36GWh in 2030.
200
Ford Motor Co
cell price forecast
150 BNEF battery cell
Range of BNEF
price survey 2016
battery survey
respondants for
100 General Motors long-term
cell price contracts
Tesla Motors cell
50 price forecast
0
2015 2016 2017 2018 2019 2020 2021
Source: Bloomberg New Energy Finance, Ford, GM, Tesla, survey participants.
2 We are not able to publish specific data points for these future prices because our survey is conducted on
condition of anonymity.
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Some of our survey participants think prices will begin to stabilise as demand rises to meet
supply. A few survey respondents are keen to sign attractive deals now in case battery prices
flatten out or even begin to rise due to supply constraints or a shortage of key materials.
One question that has yet to be answered is whether the EV and ESS battery industries will
become more closely linked and begin to buy cells at the same price and specification, leveraging
economies of scale and purchasing power. Already Tesla and Daimler are buying the same cells
for their EV and their ESS businesses. We asked survey participants if they thought this would
become the norm. While agreeing that the two industries could merge and result in the same cell
specifications and the same main players, many respondents also thought that the ESS industry
could grow to be large enough on its own to have the leverage to dictate new formats, chemistries
and pack design.
The cost of lithium-ion batteries has fallen 73% since 2010 on $ per kWh basis. We think that
chemistry improvements, lower financing costs, improved manufacturing processes and supply
Our 2016 data indicates
chain management have the potential to bring significant further cost reductions by 2030.
that the learning rate for
lithium-ion batteries is In our 2015 battery price survey, we provided two scenarios for how costs might evolve over the
accelerating. next 15 years. Each relied on a different experience curve or ‘learning rate’ (the cost reduction per
cumulative doubling of manufactured volume). The first scenario used a 15% learning rate, which
was based on our observed costs and volumes from global EV battery sales over the last five
years. A second, more aggressive scenario used a rate of 22%, which was based on the historical
experience curve for lithium-ion batteries used in consumer applications like laptops and cell
phones.
We have refined our view based on our 2016 data for average battery prices and demand. Our
new data yields a historical learning rate of 17.2% from 2010-2016. For reference, solar PV
modules have a learning rate of 26%. However, the lithium-ion battery learning rate appears to be
accelerating. The learning rate from 2012-2016 data is 21%, and the learning rate from the last
three years is even higher. Our new estimate is that the future learning rate is around 19%.
Applying this learning rate to the volumes of demand from our long term EV adoption outlook
implies steep declines in average battery costs over the next 14 years.
Our new estimate implies average battery prices (cells plus packs) of around $73/kWh by 2030.
This is significantly lower than our previous estimate of $120 per kWh. This is an annual rate of
cost reduction of around 10% from now to 2020, falling to around 7% annually by 2030. The
average annual cost reduction from 2010-16 was 19%. This 2030 figure is for average PHEV and
BEV battery prices, but BEV prices will weigh much more heavily on the average as pack sizes
rise and BEV sales increase from 2025 onwards.
There are several potential problems with using an experience curve methodology to forecast
future costs, including:
• Price changes are not always indicative of cost reductions: Battery suppliers reducing
their prices impacts the learning rate. However, this may be attributable to many factors
discussed in previous sections like oversupply or manufacturers lowering their margins due to
competition, rather than fundamental improvements in the cost of production. The impact of
these effects are captured by the learning rate over time, but it can cause short-term
distortions.
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• Limited data points. Our price data is based on around 30 interviews and our battery
volume is based on tracking every EV model sold globally and matching this to its battery
pack size. Still, the experience curve is calculated based on reducing this information to two
data points per year. Cost reductions in all industries go through periods of speeding up and
slowing down and it is not clear yet where lithium-ion batteries are in this cycle. Our
experience curve likely underestimates cost reductions in the next two to three years as the
scale of manufacturing increases dramatically but may overestimate them in the long term.
900 900
ESS lithium-
800 BNEF observed values: annual 800 ion demand
lithium-ion battery price index
700 2010-16. 700
EV lithium-
600 600 ion demand
500 500
BNEF
400 400
Implied 2025 observed
lithium-ion values
300 Implied 2030 300
battery price:
$109/kWh lithium-ion 19%
200 battery price: 200
learning
$73/kWh rate
100 100
0 0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: Bloomberg New Energy Finance. Note: Lithium-ion battery demand is based on EV demand only, taken from our Global EV outlook to 2040
(web|terminal). Prices are an average of BEV and PHEV batteries and include both cell and pack costs. Cell costs alone will be lower. We assumed
the ESS capacity here is 75% of our total forecast of ESS, as our original forecast includes other technologies than li-ion.
Electrode chemistries will change in an iterative manner. When NMC was first introduced, it was
as a blend with the more stable LMO material. Similarly, we have seen small amounts of silicon
added to increase the performance of graphite anodes. New materials can be more expensive, so
the performance benefits will have to outweigh this cost before manufacturers will make the
switch.
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supply comes from the Democratic Republic of Congo. Battery manufacturers can reduce their
supply chain risks and improve cell performance by moving towards higher energy density, high
nickel content chemistries. However, while this may help to reduce active material costs, these
new blends can be less stable than their predecessors, leading to additional safety features and
higher pack costs.
A notable portion of cell material costs (about 35%) comes from supporting components within the
cell: separators, collectors and the electrolyte. These materials receive less research attention
than electrode chemistries, and therefore could lag behind in terms of cost reductions.
Comparison with our bottom up cost model
There has been a clear move in the battery industry towards high volume plants and larger
battery packs. When we incorporate these economies of scale and pack efficiencies into our
bottom-up cost model, we obtain a figure similar to our price survey industry average for 2016.
For more information on our bottom-up battery cost model, please refer to our March 2016
Research note, Lithium-ion battery cost breakdown and forecast (web|terminal).
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Appendices
Appendix A: Further explanation of breakdown in
battery prices
Cell format
Cylindrical cells with the measurement 18650 (18mm diameter and 65mm in length) are made at
large volumes and low prices today, mostly for use in consumer applications like power tools or,
in the past, in electronic goods. When designed for EV batteries or ESS the 18650 cell price goes
up because they need to have a longer lifetime, greater energy density, certain power
requirements and guaranteed safety. However, cylindrical cells are still the cheapest in the market
for EV and ESS batteries, and all main battery manufacturers have a variety of cylindrical cells
they offer.
Tesla is the best-known user of cylindrical cells for EVs. The 18650 cells’ high energy density and
low price suited the design of the pack for the Tesla Model S. However, other EV manufacturers
have chosen pouch or prismatic formats because they can provide better safety, thermal
management, a higher number of Whs per cell and better packaging efficiency.
Importantly, many in the industry believe that pouch/prismatic format cells have room for
improvement in production cost and energy density whereas cylindrical cell formats like 18650 are
already at or approaching their limit. Tesla and Panasonic have announced a move to the 21700
format (21mm diameter and 70mm in length). This will be at a higher cost per kWh but will
increase energy density of the cells. Other cell manufacturers already produce 21700 format cells.
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Chemistry
The chemistry of the cell cathode, matched with the cell format, plays a significant role in battery
price and performance. The major cathode chemistries are NCA, NMC, LMO and LFP. Many
battery manufacturers will be blending a variety of metals to make their own versions of cathode
that may change every few months. LFP, predominantly used in China, has a lower energy
density per kg of material than the other chemistries, which results in around a 20% price
increase for LFP compared to NMC (if the two cells have the same energy density). NCA has a
similar price to NMC. NCA, due to its need for compression, is almost entirely used in a tightly
wound cylindrical format, so participants expect to see it phased out as pouch and prismatic
formats begin to eclipse cylindrical cell performance. See our April 2015 Research Note: Lithium-
ion battery chemistries and technologies (web|terminal) for more information on cathode
chemistries.
‘Energy oriented’ batteries (C rate above 1) are used in BEVs, which prioritise high energy for
longer driving range. PHEV batteries, or batteries for e-buses and other heavy duty vehicles, may
prioritise high power ratings (C rates below 1) as they need good torque and acceleration but do
not require the battery to provide the same range as a BEV. PHEV batteries, when at peak power,
can have almost 1:10 energy-to-power ratio, however, this is a function of the way the cells are
arrayed and connected in the pack, rather than the specifications of the cells.
Through 2016, we saw an increase in the demand for energy oriented batteries from the
stationary storage industry as more long duration applications became economic. High energy
batteries are a lower price per kWh than high power batteries and the increase in their
deployment is a major reason why ESS prices have come down so rapidly. Some survey
participants reported that high power oriented batteries still priced at $350 per kWh or above. And
generally batteries with a 1:2 energy-to-power ratio price over 30% more than ‘energy type’
batteries.
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