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Batteries may have been around for the last 100 years but the technology and cost reduction advances we have seen in the last years has been nothing short of remarkable.
In 2009, lithium-ion battery packs were priced at $1,300 per KWh; today they are below $350/KWh with a clear cost roadmap towards $100/KWh over the next five years. At these price levels and with further technology improvements coming our way, batteries will play an increasing role in our lives. Not only will we find them in our mobile phones and computers but batteries will also be used for powering robots, drones, the Internet of Things as well as automobiles, and they will be used as critical parts of our power system. In fact, the coming of cheap and effective batteries will cause the greatest revolution seen in the transport and energy worlds in over a century.
The speed of technology improvement in the battery space is truly breath-taking. When Motorola introduced the first commercial mobile phone to the world in 1983, it featured 30 minutes of talk time. Thanks mainly to its bulky battery, the phone weighed a highly cumbersome one kilogram. Today, the latest Samsung S5 weighs 145g and boasts over 21 hours of talk time. One of the major reasons for this improvement is the adoption of lithium-ion batteries, which is now being pushed as the standard technology for electric motor vehicles by the major global automobile manufacturers. And their input is already having an impact.
Take the BMWi3 series. It is only two years on the market and already has a battery upgrade. The latest BMW i3 is available with a 33kWH battery system which has the same dimensions as the 22kWh unit which was in the original one. The result is that the driving range of the new BMW i3 is 33% greater than the original BMWi3. It is also faster to charge and all of this has been done at lower costs.
And yes EVs may still be more expensive than conventional internal combustion engine cars but we must not forget that we are at the early stages of mass production of not only batteries but most other core components in an electric car. And with far fewer parts in an electric car, it is only a matter of time before EVs become cheaper than conventional cars. And let’s be clear. EVs are already more fun to drive. The fastest accelerating production car in the world is an electric car in the form of the Tesla Model S P100D which is able to do 0-100 Kmh in 2.5 seconds. And the low centre of gravity caused by the battery packs means that EVs should be able to handle better than conventional cars. Add to that the fact that they are more efficient, better for the environment and cheaper to run and you can see why EVs will with every year continue to make market share gains against gasoline and diesel powered alternatives. The other impact of EVs will be that we will see lots of cheap and technically better batteries available for other uses.
We will also see a flood of so called second life batteries come on the market. Companies like BMW and Daimler have already announced that they will recondition and reuse batteries, when they are taken out of motor vehicles, for other less stressful uses such as stationary storage. And the numbers are ginormous. There are currently over 1m EVs on our roads. Assuming those batteries will be taken out of those cars in 5 years’ time means that some 35GWh of batteries could be available for second life usage by 2020! That is enough power to meet the UK’s power needs for an hour. And let’s be clear 1m electric cars is not a lot as there are some 80m cars sold across the world every year so as we add increasing numbers of EVs every year we are in fact adding GWs of mobile storage facilities.
Through new charging strategies and electric vehicle swarm aggregation, EVs will transform the operative management and structure of the power grid, as we have never seen before. Not only will the demand for electricity and stresses across the power grid increase but we will also likely see the BMWs and Tesla’s control the power flows in and out of those batteries through energy services agreements with the car owner.
The increasing use of batteries in the car will also require new power production capacity to be built most of which will be a mix of renewables and gas. The biggest loser in this changing energy mix will be diesel. Hybrid power solutions using a combination of renewables, fuel cells and batteries will replace diesel gensets for generating power and in our cities bus and truck fleets will also move away from using diesel combustion engines towards electric.
Finally, the increasing penetration of EVs thanks to cheap batteries will also impact demand for gasoline. What this all means is that over the next decade we are likely to see a peeking of global demand for oil. This will have huge geopolitical consequences for oil importers and exporters with the former needing to import less oil and the latter needing to find other alternatives for driving economic growth in their countries.