Prices of batteries witness a noteworthy 14% decrease in the year 2023, as per BNEF's report.
In the rapidly evolving world of energy storage, battery prices have been a subject of great interest. According to the head of energy storage at BloombergNEF (BNEF), the dynamic nature of these prices is influenced by a variety of factors, including local production incentives and regulations on critical minerals.
This year, the reduction in battery prices is primarily attributed to increased production capacity and subdued demand, rather than scale learning and technological innovation. The price of battery electric vehicle (BEV) packs currently stands at an average of $128/kWh, with cells accounting for 78% of the total pack price.
The localisation of battery manufacturing, particularly in the US and Europe, may lead to new pricing complexities due to higher production costs compared to Asia. This trend, however, is poised to influence the role of the battery industry in the global transition to cleaner energy sources.
China currently boasts the lowest average battery prices at $126/kWh, while the US and Europe have higher prices, reflecting market immaturity, production costs, and application diversity. The industry's preference for lithium iron phosphate (LFP) chemistry has led to the lowest global weighted-average prices for these packs and cells, at $130/kWh and $95/kWh, respectively, marking the first time LFP average cell prices have dropped below $100/kWh.
Looking ahead, miners and metals traders anticipate further easing of key battery metal prices in 2024. Conversely, BloombergNEF's forecast suggests that the trend of price reduction in the battery market will shape the future of the industry, with the average battery pack price potentially decreasing to $133/kWh in 2024.
The demand for batteries, including those used in electric vehicles (EVs) and stationary energy storage sectors, is projected to increase by 53% in 2023, reaching 950 gigawatt-hours. Technological advances and manufacturing improvements are expected to drive down battery pack prices, potentially reaching $80/kWh by 2030, according to BNEF.
However, the demand for batteries fell short of industry forecasts, resulting in reduced plant utilisation rates among major battery manufacturers. As a result, EV and battery companies are reassessing their production targets due to the lower-than-expected demand.
The local production incentives and regulations on critical minerals, as highlighted by the head of energy storage at BNEF, play a significant role in shaping the battery market. These factors, along with the anticipated price trends and increased demand, will undoubtedly shape the future of the battery industry and its role in the global transition to cleaner energy sources.
