An affordable electric car may be closer than you think

IEEFA

2015 Nissan LEAFElectric cars may seem like a niche product that only wealthy people can afford, but a new analysis suggests that they may be close to competing with or even beating gas cars on cost.4

The true cost of lithium-ion batteries in electric cars is a secret closely held by manufacturers. And estimates of the cost vary widely, making it tough to determine just how much lower they must go before electric vehicles with long ranges can be affordable for most buyers. But a peer-reviewed study of more than 80 estimates reported between 2007 and 2014 determined that the costs of battery packs are “much lower” than widely assumed by energy-policy analysts.

The authors of the new study concluded that the battery packs used by market-leading EV manufacturers like Tesla and Nissan cost as little as $300 per kilowatt-hour of energy in 2014. That’s lower than the most optimistic published projections for 2015, and even below the average published projection for 2020. The authors found that batteries appear on track to reach $230 per kilowatt-hour by 2018.+

If that’s true, it would push EVs across a meaningful threshold. Depending on the price of gas, the sticker price of an EV is expected to appeal to many more people if its battery costs between $125 and $300 per kilowatt-hour. Because the battery makes up perhaps a quarter to a half of the cost of the car, a substantially cheaper battery would make the vehicle itself significantly cheaper too. Alternatively, carmakers could maintain current EV prices but offer vehicles with much longer ranges.8

The range would likely be crucial for many buyers because it’s so much cheaper to “fill” an EV with electricity—charging a car with a 300-mile range could cost less than $10. Given the disparity in gasoline and electricity prices, the study’s authors, Bjӧrn Nykvist and Måns Nilsson, research fellows at the Stockholm Environment Institute, say that if batteries fall as low as $150 per kilowatt-hour, this could lead to “a potential paradigm shift in vehicle technology.”6

The analysis suggests that the cost of packs used by the leading EV manufacturers is falling about 8 percent a year. Although Nykvist acknowledges that “the uncertainties are large,” he says it’s realistic to think that this rate of decline could continue in the coming years, thanks to the economies of scale that would be created if large manufacturers like Nissan and Tesla follow through with their separate plans to massively increase production. The speed at which the cost appears to be falling is similar to the rate that was seen with the nickel metal hydride battery technology used in hybrids like the Toyota Prius, he says.1

Nykvist and Nilsson relied on estimates from a variety of sources: public statements by EV manufacturers, peer-reviewed literature, news reports (including from MIT Technology Review), and so-called gray literature, or research papers published by governments, businesses, and academics.+

Luis Munuera, an energy analyst for the International Energy Agency, and Pierpaolo Cazzola, a transport policy analyst for the same agency, caution in an e-mail to MIT Technology Review that the cost reductions implied in the new analysis “should be taken with care,” since battery cost figures from disparate sources are often not directly comparable. Further, they point out, the degree to which cost decline trends for energy technologies can be extrapolated into the future is unclear. Still, they admit, “we have seen events moving quicker than expected in lithium-ion battery technology.”

Source: IEEFA. Reproduced with permission.

Comments

5 responses to “An affordable electric car may be closer than you think”

  1. Andy Boothroyd Avatar
    Andy Boothroyd

    As Australia is the worlds 2nd biggest producer of lithium, does a boom in electric cars, and energy storage in general will be a big boost for the economy, and allow a move away from coal production?

    1. Ronald Brakels Avatar
      Ronald Brakels

      Widespread adoption of electric cars, thanks to their beating petrol and diesel ones on running costs, will be a significant boon to the economy. This is because of the obvious reason that if they are cheaper to run people will have more money to spend on other things they want, and probably more importantly there are huge costs from running internal combustion engines that are often ignored. These externalities include direct health effects from vehicle pollution and deaths and economic destruction that result from greenhouse gases released. (Another advantage is people in certain countries may be less likely to have a small piece of a Textron Defence Systems product propelled through them at high speed.)

      Cheaper energy storage is not necessary for eliminating Australian coal use, but could help. However, we don’t require any additional storage capacity beyond what Australia already has to eliminate coal from electricity production.

  2. Diego Matter Avatar
    Diego Matter

    Australian politics should do a deal with Tesla to help produce the Model S and all new models for the Asian markets in the soon to be abandoned car
    factories.

    That is creating jobs for the future!

  3. Peter Thomson Avatar
    Peter Thomson

    I am amazed at the number of EV and PHEV models available in the UK – there are at least thirty different models over a wide range of body styles, from tiny urban commuters to 7-seat people movers and SUV’s. Renault is currently introducing their fourth generation EV, the Zoe. The TCO (total cost of ownership) for many of these is already similar to their petrol equivalents – higher initial capital cost, but lower depreciation (they hold their value better) and much lower fuel costs.

    The UK Government heavily incentivises low emission vehicles. Vehicles producing less than 100 gm/km CO2 are zero cost for rego, and are exempt from London congestion charges. This includes all EV’s, PHEV’s and some diesels. Rego costs then scale up with emissions, so the biggest polluters pay the highest rego. There are enough charging points through the UK to drive from Edinburgh to London, albeit rather slowly due to frequent stops for charging, and using the public charging points is currently free.

    With Ford and Holden dropping the traditional large family Australian production models, perhaps it’s time for our states to start looking at incentivising efficient vehicles with scaled rego charges.

    1. Ronald Brakels Avatar
      Ronald Brakels

      Edinburgh is further from London than I thought. It would take a current Leaf maybe 5 charges on the way to get there, but a Tesla would only need one supercharger stop. Nissan has said they will double the range of the Leaf (or perhaps more than double it) so that will make longer distance driving easier for that vehicle, but in Australia, with multiple car families being the norm, I presume families could use an electric vehicle with current Leaf like range or less in town and use a longer range car for long trips. This could be a long range, fast charging electric car like the Tesla; a plug in hybri like the iBMW or Volt; a plain hybrid; or a legacy internal combustion vehicle.

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