Li-ion battery costs to fall 50% in next 5 years, driven by renewables
Capital costs for lithium-ion (Li-ion) batteries are expected to come down by around 50% over the next five years, as a result of increased renewables generation, among other factors, finds Lazard in a new study looking at the levelised cost of storage (LCOS). Currently, energy storage is not cost-competitive with most applications, however. In a separate study, Lazard, analyzed LCOEs in the U.S. Utility-scale PV was found to be competitive against conventional energies, while rooftop solar still requires “significant” subsidization.
According to the first edition of its “Levelized Cost of Storage Analysis,” investment bank Lazard found that energy storage costs are expected to come down “significantly” over the next five years.
Currently, storage is not cost-competitive with most applications, although some areas – primarily related to strengthening the power grid – are said to be attractive. For instance, even unsubsidized, certain storage technologies, like Li-ion batteries for certain grid support applications, are been found to be competitive.
“…select energy storage technologies are cost-competitive with certain conventional alternatives in a number of specialized power grid uses but none are cost-competitive yet for the transformational scenarios envisioned by renewable energy advocates,” states the study. Currently, it adds, battery size is easier and cheaper to increase, than battery life.
Going forward, cost declines are forecast to benefit from the increased use of renewable energy generation, government policies supporting storage, and changing power grid needs. They will be seen more in the manufacture and engineering of batteries, rather than in balance of system costs. “Therefore, use case and technology combinations that are primarily battery-oriented and involve relatively smaller balance of system costs are likely to experience more rapid levelized cost decline,” writes Lazard.
Overall, industry participants in the study, which numbered around 50, expect lithium battery prices to fall by roughly 50% over the next five years, while flow battery costs will decline by approximately 40%, and lead batteries, by around 25%. The table below shows the unsubsidized LCOS, and capital costs, relevant to solar PV integration, per MWh, according to the study. Other scenarios, including for commercial & industrial and residential are also outlined in the study.