Cheaper batteries will charge e-mobility

The holy grail for electric vehicles—affordable batteries—should be a reality by 2020, creating the conditions for mass adoption.
Nissan Leaf electric cars are being charged before the start of an electric car rally in Tallinn/ Credits: Reuters
One of the biggest problems with electric cars is very simple: they cost too much. Owners of electric cars can expect to pay 4000 to 5000 euros more than a comparable fossil-fuelled car over the vehicle’s lifetime, according to a study by the International Transport Forum (ITF).

The main reason for this is that the batteries cost too much. The battery pack for the Chevrolet Volt costs about 8,000 dollars in the United States; the Nissan Leaf’s larger model about 12,000 dollars. In the middle of an economic downturn, this has been bad news for sales of plug-in hybrid and all-electric cars, which in 2012 have so far reached just 44,000 in the United States, according to the Electric Drive Transportation Association.

But there is hope on the horizon. Batteries are going to get a whole lot cheaper. By 2020, that Leaf battery pack could cost as little as 4000 dollars.

So says a report by McKinsey Consulting—“Battery technology charges ahead”—which suggests that prices of automotive lithium-ion battery packs for all-electric vehicles could plummet by two thirds by the end of the decade, falling from 500-600 dollars per kilowatt hour (kWh) to about 200 dollars per kWh and then as low as 160 dollars per kw/h by 2025.

That would bring them well below the 250 dollar per kWh threshold that McKinsey calculates would make battery-powered cars competitive in the United States, even with the most advanced internal-combustion engines. (This assumes a gasoline price of 3.50 dollars a gallon—in 2012, the price ranged from 3.35 to 3.99 dollars a gallon.)

The United States Advanced Battery Consortium collaboration between Chrysler, Ford and GM takes a more conservative position; it reckons that battery costs need to go down to less than 150 dollars per kWh to make the conditions for a mass market.

Meanwhile the U.S Department of Energy is trying to accelerate the process. In November 2012, it established a new Innovation Hub for battery research with the goal of cutting costs by 80 percent by as early as 2017.

Three key factors

The report authors broke down the price of battery packs into over 40 underlying drivers and costs, assessing components, changes in materials technology, manufacturing and overhead costs. Three key factors emerged that are driving down the costs of lithium-ion batteries:

1) Lower component prices enabled by suppliers increasing productivity and moving to cheaper locations (about one quarter of cost savings)

2) Larger-scale manufacturing of higher volumes using standardized equipment and processes (about one third of savings)

3) Better cathodes anodes and electrolytes could increase capacity of batteries by 80-110 percent by 2020-2025 (40-45 percent of savings). In particular, replacing graphite anodes with silicon ones could improve capacity by 30 percent.

None of this is absolutely guaranteed, McKinsey cautions, and a lot will depend on auto manufacturers’ strategies when selecting a portfolio of electric, internal combustion, and other ‘powertrains’ for the future.

In fact, the ITF predicts that electric battery advances will be outpaced by improvements in conventional cars. “Gains in fuel efficiency will have a greater impact on widening the cost of ownership gap in favour of fuel cars than gains in electric efficiency (both of production and propulsion) in reducing this gap,” it says.

Disruptive technology

Several battery companies are making technological leaps forward. Envia Systems, a U.S.-based start-up, has built prototype lithium-ion battery cells that store about twice the energy of the best conventional lithium-ion batteries and can be recharged hundreds of times. Korean battery maker LG Chem is using elements of the technology in the Chevrolet Volt electric car.

Some manufacturers are looking at alternatives to lithium-ion. Toyota amongst others is developing solid state batteries that replace the heat-sensitive liquid electrolyte (which requires bulky cooling systems) in a lithium-ion battery with a solid material and consequently reduce the battery size and cost. The Japanese giant is also developing magnesium-ion as a potentially cheaper alternative to lithium—magnesium is much more abundant than lithium.

But there have also been setbacks. American battery maker A123 Systems, which received over 130 million dollars in government grants, recent went bankrupt. On the other hand, its technology and assets have been snapped up by a Chinese firm, Wanxiang, that beat off competition from Siemens and NEC, suggesting a healthy appetite for advanced battery systems.

Aside from making all-electric vehicles more affordable, competitively-priced batteries will have various knock-on effects, predicts McKinsey.

They will likely spur manufacturers of internal combustion engines onto more advances in search of greater fuel efficiency. In addition, if a mass market develops for e-vehicles, it could impact suppliers and refiners of transportation fuels.

Meanwhile cheaper electric storage in the form of batteries could encourage the “wider use of distributed energy” and so ultimately affect power companies. In remote areas around the world, communities are experimenting with off-grid battery solutions for storing energy generated by locally-sited renewable energy installations.

All of which leads McKinsey to conclude that significantly cheaper batteries could be “one of the biggest disruptions facing the transportation, power, and petroleum sectors over the next decade or more.”

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