NS4960 Spring Term 2018 Energy Storage Markets Oxford Analytica US/Int Cell and Energy Storage Markets to Grow, January 16, 2018

Overview Batteries and energy storage With rise of renewable energies and electric vehicles, major transition underway in global energy markets. Key to facilitating growth in both areas is the falling cost of lithium-ion (Li-ion) batteries. Cheaper batteries have Helped reduce the cost of electric vehicles and Made large scale energy storage on the power grid which is a necessity if renewables are to continue growing – a reality

Impact/Implications Several implications from the development of Li-ion technologies Secure access to lithium, cobalt, and other battery-related materials will be vital to economic development Competition over resources to build batteries could see at deposit locations increased Protests, Skirmishing and Illegal trade The plunging cost of Li-ion batteries is altering the energy landscape Facilitating rapid growth for electric vehicles and Making utility scale energy storage (which is crucial to expanding intermittent renewables on the grid) economically viable

Li-ion Batteries I Li-ion batteries have been used in consumer electronics for decades Only in recent years have the batteries become sufficiently cheap for larger applications Recent study found cost of Li-ion battery packs fell to $209 per kilowatt-hour in 2017 from $1,200 in 2010 Rapid cost decline is likely to continue Tesla’s Gigafactory in Nevada is being built rapidly and will deliver Economies of scale and Price reducing competition Much of the capacity is being built by Asian conglomerates aiming for market share over profits Forecast is for prices to fall to $100 by 2015

Li-ion Batteries II Falling cost of batteries enabled electric vehicles to move towards mainstream market In recent years costlier electric vehicles have dominated the market As battery costs fall new models that Cost less ($30,000 $40,000) and Appeal to a broader audience will hit the market Nearly every major automaker has a mass-market vehicle in the pipeline to hit the market by 2020 Getting battery prices down to around $100 per kilowatt-hour would be a major inflection point. Battery prices at that point could make it cheaper to own a car with an electric motor than an internal combustion engine

Energy Storage I Cheaper Li-ion batteries enabling remarkable growth in large-scale energy storage in the power sector. Part of the early growth in this sector is coming from homes and businesses that are using products to store energy at home as backup Larger opportunity if for energy storage to be used by utilities to make the power grid more Resilient, Flexible and Renewable-energy friendly Already used in Southern California and Australia to ease energy shortages there.

Energy Storage II Storage and renewables In the longer term, energy storage’s larger opportunity is to grow alongside renewables Utilities are planning for a future with far more use of intermittent wind and solar power on the grid Looking to large scale storage to help keep power flowing at the times when wind and solar power are not available Utilities in 15 US states – mainly those with aggressive renewable targets such as California, Florida and New York already building storage into long-term plans Storage sector looks certain to grow rapidly in coming years Should draw tens of billions of dollars of investment

Energy Storage III Hurdles to clear While trends point to cheaper batteries, there is no guarantee Prices for raw materials needed for batters could rise sharply, negating cost reductions Another oil price drop, reducing fuel prices could make electric vehicles less cost competitive Many automakers are trying to make their internal combustion engines more efficient

Energy Storage IV Supply chain stoppages Also risks around supply chain for Lithium Cobalt and Other materials involved in manufacturing batteries Vast new quantities of these minerals will be needed to meet rising demand from battery builders Lithium prices have doubled since mid-2016 and cobalt prices have more than tripled over the same period.

Energy Storage V Also some concern over battery manufacturers’ ability to access sufficient supplies Globally there are plentiful reserves of the materials but getting them to the market and scale discussed will be a challenge Tessla and others are scrambling to secure long-term spplies Chile holds much of the world’s lithium reserves so new mining projects in the country’s Atacama Desert will be crucial to global supply

Energy Storage V Much of world’s supply of cobalt comes from the Democratic Republic of Congo and country has problems Human rights groups have warned of child labor in the cobalt mining industry This can result in targeted sanctions for firms associate with this from the U.S. government Other watchdog groups have pointed to rampant corruption and other governance gaps in the country’s mining sector

Assessment Li-ion battery costs will likely fall further as manufacturers add new capacity resulting in Economies of scale and falling costs and Further research and development An inflection point for electric vehicle costs likely in mid-2020s when cheaper betters make electric motors more affordable than internal combustion engines Cheaper batteries will also support widespread use of energy storage on the power grid. This will Make the electricity system more responsive to demand fluctuations More resilient to disasters and Better able to accommodate growing share of intermittent wind and solar power.