Lithium-ion batteries will become at least 50% cheaper in the next decade

Lithium-ion battery costs have the potential to rapidly decrease in the next two decades, mainly due to the mass production required to meet the demand from the expected huge increase in the number of electric vehicles. This is the main conclusion of a new JRC science-for-policy report.

Lithium-ion batteries are a key component of electric vehicles, which in turn could play a major role in reducing greenhouse gas emissions from road transport. Batteries are also used to store electricity, including electricity produced by renewable sources such as solar and wind when there is no immediate demand for it. Until recently, the cost of lithium-ion batteries has delayed their large-scale deployment for stationary energy storage. However, significant cost reductions occurred over the last five years, raising expectations of a large market expansion in the future.

The present report indicates that a price reduction of at least 50% in 2030 and up to 75% in 2040 is feasible if high demand growth is sustained. Due to spill-over effects battery applications for energy storage are also expected to benefit from substantial, albeit somewhat slower, cost reductions.

The global manufacturing capacity required to meet the increased demand is enormous; between one and eight gigafactories (35 GWh) dedicated to battery cell production would have to be built worldwide every year between 2030 and 2040.

Background

Increasing the share of electric vehicles on our roads is widely seen as a promising way to reduce greenhouse gas emissions and fight climate change. Lithium-ion batteries are not only a crucial component in electric vehicles’ design, but are also very important for our society’s transition towards renewable energy sources. Wind turbines and solar panels can only generate electricity when their resource is available and this does not necessarily coincide with demand. This natural mismatch makes stationary energy storage a necessity.

Despite the near-term announcements, global manufacturing capacity is subject to uncertainty in the longer-term. Future costs of lithium-ion batteries are directly influenced by this uncertainty to the extent that their production costs depend on economies of scale and the cumulative manufacturing experience gained globally.

By 2040, the number of electric vehicles on the road could range between 150 to 900 million, which is about two to three orders of magnitude higher than today; a similar growth is expected in the stationary energy storage battery market. Overall, almost 4 000 TWh would be sold annually in the most favourable scenario and 600 GWh in the least favourable, compared with less than 80 GWh today. At these scales, and considering the anticipated improvements in cell chemistries, design standardisation and optimisation of the manufacturing processes, the costs of lithium-ion batteries could fall drastically.

Batteries are recognised as a key enabling technology for the energy transition of the EU under the Energy Union strategy, and as such they are explicitly mentioned in several policy initiatives addressing transport and energy economic sectors, EU industrial policy and Research and Innovation. Targeted EC policies recognise that costs need to decline for mass adoption of batteries in mobility and stationary storage applications. The Declaration of Intent of SET Plan Key Action 7 sets a target of 75 €/kWh for a battery pack for automotive applications and 150 €/kWh for stationary storage applications at a system level by 2030. The strategic importance of batteries for the EU is further demonstrated by the formation of the European Battery Alliance and the adoption of the Strategic Action Plan for batteries as an integral part of the third 'Europe on the Move' package.

Related Content

JRC report: Lithium-ion batteries for mobility and stationary storage applications