Is Double-Digit Day Nearing for Li-ion Batteries?

In the field of transistor technology, Moore's law has long influenced expectations. It suggests that the number of transistors that can fit on a microchip doubles approximately every two years, leading to rapid improvements in performance and cost efficiency. This principle demonstrates how technological progress can accelerate when demand for a product increases. While Moore's law became well-known in the late 20th century, a similar trend is occurring in clean energy technologies today. One of the most notable examples is the significant cost reduction in solar PV installations over recent years. This trend of cost decline is also evident in another important clean energy technology: lithium-ion batteries.

Figure 1: Evolution of the battery cost ($/kWh) as a function of the global installed capacity. Source: BNEF, IEA, Our World In Data.

Li-ion (lithium-ion) batteries are a type of rechargeable battery commonly used in a variety of applications, including consumer electronics, electric vehicles (EVs), and grid storage systems, as such they are essential for the transition to clean energy. They play a key role in electric vehicles (EVs) and provide grid-balancing services in systems with significant intermittent renewable sources like wind and solar. Evidence suggests that Li-ion battery technology follows a pattern similar to Moore's law. Over the past decades, every time the global stock of Li-ion batteries doubled, their costs fell by an average of 20%. This promising trend enhances the business case for grid balancing and battery electric vehicles (BEVs).

Following this pattern, 2024 is expected to be the year the cost of Li-ion batteries could drop below the $100/kWh threshold, a significant reduction from over $2,000/kWh at the start of this century. According to the International Energy Agency (IEA), crossing this threshold is not just symbolic but also economically important. It brings BEVs closer to cost parity with fossil fuel vehicles, making them a more viable option for consumers.

While it's too early to definitively state the average price for Li-ion batteries in 2024, recent reports from market watchers like Volta and BloombergNEF (BNEF) indicate a high likelihood of it falling below $100/kWh. Historically, advances in cost reduction for this technology have been underestimated, similar to what happened with solar PV and offshore wind. In 2016, the IEA projected that Li-ion battery costs would reach $100/kWh by 2040, which now appears overly conservative. As we approach this milestone, the key question shifts from whether the cost will fall below $100/kWh to how far below this threshold it will go in 2024.

In conclusion, the rapid reduction in Li-ion battery costs highlights the accelerating pace of technological advancement and its significant impact on the energy transition. As we near this milestone for Li-ion batteries, the implications for clean energy adoption and economic viability are substantial and encouraging.