As energy push accelerates, battery costs set to plunge 60%

Lithium-ion batteries will drop from $550 per kilowatt hour (kWh) in 2014 to $200 per kWh by 2020

An energy storage study claims that prices for certain battery technologies will plunge by as much as 60% over the next five years. The report was prepared by Australian consultancy AECOM and published by the Australian Renewable Energy Agency (ARENA).

The 130-page study, originally published last month, expects all battery technologies  to drop in price. However, the largest reductions are forecast for Li-ion and flow-battery technologies, which are expected to plummet by 60% and 40%, respectively by 2020.

Lithium-ion (Li-on) batteries will drop from $550 per kilowatt hour (kWh) in 2014 to $200 per kWh by 2020; and flow battery prices will drop from $680 per kWh to $350 per kWh during the same time.

"The rapid uptake of solar [photovoltaic technology] provides a useful analogy to what could occur in the energy storage market, as technology prices have potential to reduce as technology development simultaneously improves," the study said. "The behind-the-meter market segment of energy storage is widely expected to undergo a similar boom to the solar PV industry, with a tipping point expected within the next ten years as further cost reductions are achieved."

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Lowest current and projected battery cell price by type for utility-scale applications

The study also said that battery technologies offer "unique advantages" in that they can easily be scaled to suit many uses and have high cycle efficiency. A big reduction in battery prices provides real opportunity for multiple applications, including commercial and residential distributed energy.

Hydro, solar and wind investment continues

Current renewable energy storage markets around the world are dominated by hydroelectric power, which is a mature technology with known cost structures. The ARENA study noted that further deployment of hydroelectric "is severely limited by geographical and environmental site requirements" as well as size requirements to achieve economies of scale.

"Conversely, many emerging energy storage technologies are immature and the cost structures are not well defined," the study said.

While not all government agencies agree hydroelectric power has a limited growth future, other renewables are growing more quickly because of advances in efficiency, per-kilowatt price reductions and their ability to be installed in geographically distributed locations (i.e., on rooftops or in utility and community solar/wind farms).

Solar power, for example, is predicted to supply as much as 14% of the nation's power in just 15 years and 27% by 2050, according to the U.S. Energy Information Administration (EIA).

Today, about 65% of U.S. power is derived from fossil fuels, such as coal and natural gas, according to the EIA. Natural gas, far cleaner in terms of the hydrocarbons it releases, surpassed coal earlier this year.

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Total operational battery projects by country as listed on the U.S. Department of Energy database.

As of 2014, only about 10% of U.S. electricity was generated from renewable energy sources. Hydroelectric provides 26%, wind provides 18% and solar generates just 4% of power. The rest of renewable power is provided by biofuels (22%), wood (23%), biomass waste (5%) and goethermal (2%).

Over the past two years, however, solar energy has grown faster than wind-generated power, and it has been the second-largest source of new electricity generating capacity in the U.S., exceeded only by natural gas.

With so much activity in the energy field, it's no surprise that similar attention would be focused on how best to store that energy cheaply.

Battery tech that scales

Battery technologies offer unique advantages in that they can easily be scaled to suit many applications and have high cycle efficiency, the ARENA report noted. "The potential for significant cost reduction of some battery technologies provides real opportunity for significant deployment in multiple applications."

Tesla CEO Elon Musk has announced his company will be mass producing Li-ion batteries for both commercial and residential use. Musk has said his goal is to eliminate the world's dependency on fossil fuel-generated power. To do that would require two billion of Tesla's new commercial-grade battery systems, Musk said.

Outside Reno, Nevada, Tesla is now building the first of what is expected to be several "gigafactories" that will go online next year and produce 500,000 lithium-ion batteries every year.

models powerwall sized 100583202 large.idge Tesla

Tesla's new Powerwall battery (top left) comes in two sizes, a 7mWh and 10mWh model. The batteries will cost $3,000 and $3,500, respectively.

Tesla's battery systems include two consumer-grade batteries -- the Powerwall line -- that store 7 kilowatt hours (kWh) and 10kWh worth of power and cost $3,000 and $3,500, respectively. A third battery system for commercial use is called the Powerpack; it can store 100kWh and will sell for $25,000.

Flow batteries vs. Li-ion batteries

Flow batteries and Li-ion batteries work well with intermittent energy sources such as solar panels and wind turbines because of their ability to be idle for long periods without losing a charge. Flow batteries, however, scale more easily because all that's needed to grow capacity is more liquid; the hardware remains the same, according to Dean Frankel, an associate at Lux Research.

That means flow batteries have the potential to be less expensive than Li-ion. They also last longer, according to Frankel. At full discharge, Li-ion batteries last only four hours. To double that length of charge, another complete battery unit must be added, Frankel said.

Flow batteries get their name because they use liquid chemicals (electrolytes) that are separated by a membrane. The reaction between the two chemicals frees up electrons, creating electricity.

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The basic concept behind how a flow battery works.

One problem with flow batteries is that they're enormous. In order to power a house, you'd need a flow battery about half the size of your garage, Frankel said.

Li-ion batteries, like Tesla's, can hang on a garage wall.

In the end, the distributed energy market will probably use a range of different battery technologies, Frankel added.

Lux Research's figures for battery prices between now and 2024 differ from the ARENA report, but still anticipate price drops. For a flow battery system, the cost is currently $755/kWh for a 4-hour battery, according to Lux. That cost is expected to fall to $516/kWh by 2024. For large scale Li-ion systems, costs will fall from $626/kWh in this year to $498/kWh in 2025, according to Lux Research.

So on a per-kilowatt basis, flow batteries will almost always be more expensive. However, on a per-kilowatt-hour basis (i.e., how long they can run, depending on how large the electrolyte fluid tanks are) they can be cheaper. The larger the tanks, the more power you can get.

According to the ARENA report, energy storage adoption is likely to occur as a 'megashift' rather than incremental impact on the electricity industry, "due to the rapidly changing economic proposition as well as the disruptive influence on the market."

"Energy storage technology has developed tremendously in recent years and is expected to continue to grow," the report said. "While the costs are still prohibitively high for mass deployment, the trend of reducing costs for battery technologies such as lithium-ion and flow battery technologies suggests that there will be a dramatic shift towards these technologies in the next one to two decades."


Copyright © 2015 IDG Communications, Inc.

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