Analysts predict 30% reduction in Asia-Pacific region's grid battery storage prices over 5 years

Jan 19, 2021 01:21 PM ET
  • The Asia-Pacific region will certainly remain to be the globe's leading centre of lithium-ion cell production for the following decade, yet it won't just be cost decreases in batteries that will certainly drive a 30% decrease in front-of-meter battery storage in key markets China, Australia as well as South Korea.
Analysts predict 30% reduction in Asia-Pacific region's grid battery storage prices over 5 years
Image: Andy Colthorpe / Solar Media

According to brand-new evaluation by research firm Wood Mackenzie, although battery cost reductions were the largest driver in system costs dropping "faster than prepared for" during in 2014, there has actually additionally been a growing focus on reducing the expenses of the various other hardware components that make up large-scale power storage space systems that provide power, capability or power services for energies and grid drivers.

While rival research company BloombergNEF located that international lithium-ion battery pack rates averaged around US$ 137/kWh in 2020 and might fall to US$ 100/kWh by 2023, equating to a 89% drop because 2010, Wood Mackenzie's evaluation concentrated on whole system costs consisting of power converters, battery management systems (BMS) as well as other components.

Wood Mackenzie senior analyst Mitalee Gupta claimed that Asia-Pacific, led by China, "will remain to control global cell production ability with 2030," but that as the energy storage space industry in the area "removes, every component throughout the value chain will certainly play a role in lowering system costs".

China's sector, presently the cheapest globally for complete system prices at US$ 554/kW throughout 2020, will certainly enjoy a 33% decrease in expenses for 2-hour duration front-of-the-meter power storage to US$ 369/kW by 2025; Australia is anticipated to see a 34% decline in expenses from US$ 990/kW in 2020 to US$ 658/kW in 2025 and South Korea a 29% reduction from US$ 821/kW to US$ 578/kW in that same duration.

Gupta mentioned that the proportion of "all-in system expenses" that batteries themselves stand for is expected to reduce and that as a result there will certainly be "increased focus on balance-of-system (BOS) price decreases moving on".

" Manufacturers will certainly continue to introduce and also produce BOS components that help reduce work prices, as well as setup teams are applying more efficient labour methods as they get even more experience on job websites," Gupta stated.

" Competitive markets will drive system efficiencies, product standardisation as well as less costly batteries as we proceed towards 2025."

One more study and evaluation company, Guidehouse Insights, anticipated a few months ago that by 2023, the Asia-Pacific region will certainly surpass North America as the world's most significant market for utility-scale power storage space, with expected development in the Chinese market a "significant variable" in this change in international market characteristics.

Secret distinctions include option of battery cell chemistry

While China's lead can be discussed in part by a "favourable plan landscape" as well as the existence of a residential supply chain that has actually developed a "battery giant", the country's market has also concentrated significantly on lithium iron phosphate (LFP) chemistry batteries. Current figures from the China Energy Storage Alliance's (CNESA) internal research group found that deployments of electrochemical power storage ability in the nation throughout the very first 3 quarters of 2020 were 533.3 MW, a boost by 157% on the same period in the previous year while 85% of those new systems were lithium-ion battery-based.

Wood Mackenzie anticipated that in creating the globe's largest production centre of LFP batteries, along with the world's biggest need centre for them, China has put LFP batteries ready to be the world's leading selection of battery chemistry in the years to 2025.

LFP batteries are starting to be favoured for fixed energy storage applications over the nickel manganese cobalt (NMC) batteries located in electrical automobiles (EVs) for reasons including the greater temperature threshold needed to create LFP batteries to go into thermal runaway, which can trigger fires. LFP is less energy thick and also has a tendency to have a lower cycle life than NMC, yet these factors to consider matter much less for fixed applications than it provides for wheelchair, especially the first.

That said, NMC is still very commonly used for grid-scale power storage systems around the globe as well as presently a lot of the remainder of the Asia-Pacific region's various other crucial markets are controlled by it. The fact that NMC batteries are also utilized in EVs helped drive down the expense of the technology drastically in the very early days, although as LFP producing capability grows, cost decreases for that chemistry will certainly become more quick too, Wood Mackenzie mentioned.

Australia as well as South Korea continue to be "key NMC markets" and in both nations there will be a substantial increase in the variety of front-of-the-meter projects in the next few years. Australia is nonetheless undergoing a "innovation shift" with a growth in interest in LFP batteries from designers and also system integrators due to its expanding cost-competitiveness, the schedule of supply from Chinese producers along with what the evaluation company described as "continuous improvements in the modern technology" which "make it a beneficial option" for energy storage applications.

Meanwhile, although South Korea saw a "huge rise" during 2018 in power storage implementations as a result of good government policies, this result in a hugely competitive landscape which left numerous individuals struggling to maintain and also numerous exited the industry. The reason was likewise not helped by a variety of fires at battery storage facilities which nicked confidence in the sector.

As a result, while South Korea's market enjoyed fast price declines over and afterwards boom period, expense decreases going forward, especially for BOS equipment components, may not be as fast as those expected to be seen in Australia and also China, according to Wood Mackenzie.

As a basic fad, cost variance in between countries for non-battery equipment is not as obvious as it once was, as well as the boosting energy density of batteries has resulted in lower affiliated BOS expenses. Wood Mackenzie's Mitalee Gupta additionally said that in the coming years, "fire dangers and also security requirements, tariffs as well as profession policies and also safeguarding the supply chain in the middle of COVID-19 uncertainty are elements that could make or break the industry".

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