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Grid-scale energy storage systems are unlikely to see any price
declines until 2024, when manufacturing of lithium-ion batteries
scales up to meet the increase in demand from automakers, according
to an IHS Markit analysis of clean technology trends.
Released 3 February, the analysis finds that prices for
lithium-ion batteries rose 10%-20% to $110 per kWh in the latter
half of 2021, predominantly for LFP (lithium iron phosphate) cells,
which is the favored technology for grid-energy storage.
However, IHS Markit analysts say these price hikes, which are
driven by soaring raw material costs and demand from automakers,
will be tempered by the anticipated rise in the global LFP cell
production capacity.
Announced expansion plans currently suggest that LFP cell
capacity across the globe will reach 330 GWh annually in 2025,
compared with less than 200 GWh in 2020.
"In reality, capacity may reach much higher than this, as new
expansions will be announced in reaction to increased demand," Sam
Wilkinson, a director in the clean energy and renewables group at
IHS Markit, wrote in a 6 January note on lithium-ion battery
costs.
LFP batteries have been the choice of technology for the
grid-scale energy storage industry in recent years due to their
lower cost and better safety track record in comparison to the main
alternative, NMC (lithium nickel manganese cobalt oxide) batteries,
which automakers favored for EVs until 2020.
Some EV makers shifting to LFP
As automakers seek to ramp up their EV fleets in response to the
net-zero pledges made by countries where they have a large market
presence, such as China, Europe, and the US, they are seeing the
value of LFPs. Last year, Ford took a cue from Tesla and indicated
it would consider LFP cells for EVs.
Tesla announced in December it would begin offering its
LFP-powered "standard range" models globally, rather than only in
China as it had before. The EV giant already has positioned itself
as the third largest energy storage integrator globally, holding
11% of the energy storage market.
But with automakers getting into the demand mix, the ample
supply of LFP batteries that the energy storage industry enjoyed
until 2020 is no longer the case, Wilkinson wrote.
The availability of LFP batteries depends on the pace at which
automakers manufacture EVs using these cells as opposed other types
of lithium-based batteries. In 2021, the automotive and
transportation sector accounted for 80% of lithium-ion battery
demand, a figure IHS Markit estimates is set to rise to 90% by the
middle of the decade.
Any decline in the price depends on LFP manufacturing capacity
quickly scaling up and energy storage system integrators securing
supply agreements with a wider range of LFP suppliers that are less
focused on the larger EV opportunity, according to IHS Markit.
Growing demand for lithium from the EV sector also is propelling
an increase in prices of the lithium compounds used in LFP cells.
Wilkinson said prices escalated by 400% between the fourth quarter
of 2020 and the fourth quarter of 2021.
S&P Global Platts reported that the seaborne lithium
carbonate price soared 413% from the start of 2021 to $32,600 per
metric ton (mt) on 14 December, while the lithium hydroxide price
climbed 254% over the same period to $31,900/mt. Both compounds go
in to making lithium-ion batteries, such as LFP, NMC, or nickel
manganese aluminum oxide (NMA) options.
Battery cell manufacturers also have had to deal with the
increases in prices of copper and aluminum, Wilkinson said. "In a
bid to preserve—or even raise—margins, which have been
persistently low, battery manufacturers have responded by
increasing prices," he added.
Global LFP capacity could surge past the current forecast of 330
GWh in 2025, up from 200 GWh seen in 2020, Wilkinson added, as an
increase in demand could spur more investment in production.
Posted 04 February 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst