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Battery Cost Cuts Clearing Path for Deeper EV Uptake

Batteries are set for continued, noteworthy cost declines in the coming years as technology keeps improving and demand keeps rising, both in electric vehicles (EVs) and stationary applications, finds a new report from Energy Intelligence Research & Advisory. Some of the technological advances represent further improvements to current technology, but next-generation batteries are also on the horizon. Both are seen accelerating passenger EV adoption, wider electrification of transport, and uptake of intermittent renewables in power generation — while displacing a corresponding share of fossil fuel products. Critically, in the passenger car segment, falling battery costs are slated to bring parity between combustion engine vehicles and EVs by around 2027, the report finds.

“Consumers, often aided by subsidies and incentives, are already buying EVs in growing numbers, particularly in China, and a cheaper upfront cost will help encourage even more sales,” says Sam Burman, a senior analyst with Energy Intelligence. “However, charging limitations will inhibit sales in some markets, such as rural locations in the US, and would need to be overcome — either through greater battery capacities, longer vehicle ranges or more public charging infrastructure — to achieve any meaningful vehicle penetration there.”

Average EV battery pack costs fell from over $400 per kilowatt hour in 2015 to around $140/kWh in 2021, benefitting from economies of scale in expanding production, more efficient material use and evolving chemistries. The trend reversed in 2022 due to supply chain snags and rising lithium costs, but battery prices resumed their downward path last year as materials prices resorted back to historic norms.

Future cost declines are set to be more modest, with average lithium-ion pack costs reaching $100/kWh — the point where EVs reach cost parity with ICE vehicles — in around three years. Meanwhile, global battery demand is set to expand fast, reaching over 7 terrawatt hours by 2040 from around 500 gigawatt hours today driven primarily by rapid EV adoption and also by stationary storage use, the report projects.

Technological Evolution

Current battery chemistries have been on a track of notable improvement. The evolution of lithium-ion battery cathodes has driven recent advances in key performance areas, delivering improvements in energy density and cutting reliance on critical minerals like cobalt, the report finds.

Notably, the relatively high critical minerals content of today’s leading batteries — lithium nickel manganese cobalt oxide (NMC) technology — has led the industry to revive an older option, lithium iron phosphate (LFP) technology, for a variety of uses. Further efforts are seeing a range of potential chemistries being developed as variations on NMC, such as cobalt-free cathodes, while raising density and performance and cutting costs. Overall, these trends in lithium-ion batteries have resulted in gains in cell-level density, typically rising from around 150 watt hours per kilogram in 2010 to over 250 watt hours/kg by 2020.

The report also flags the development of next-generation batteries, namely sodium and solid-state batteries. Sodium-ion batteries use sodium instead of lithium as the base cathode material. Sodium is cheaper and more readily available than lithium, so sodium-ion batteries look set to help cut battery costs. A further advantage over current lithium-ion technologies is higher cycle life — but a limitation looks likely to be limited energy density. As a result, the report predicts that sodium-ion batteries will mainly be used in low-cost, lower-range EVs and in static battery storage applications.

Solid-state batteries use solid electrodes, rather than liquid, and as a result can have much greater energy density, as well as improved cycle life. But at the moment they are “considerably more expensive than current lithium-ion technologies,” says Alex Martinos, head of Energy Transition Research at Energy Intelligence and the lead author of the report. “If commercialization efforts advance and solid state battery costs decline — as anticipated by many in the sector — then they could be used in high-performance EV passenger batteries, and in other transport applications where density and range are key considerations — potentially even extending into aviation.”

Oil Eyeing the Space

Most major oil and gas companies have generally avoided getting involved in the diverse and competitive battery value chain (see diagram). However, interest is growing as many firms seek to diversify their product offerings, expand their footprint across the low-carbon space, and utilize and leverage existing competencies to enter potentially profitable areas.

TotalEnergies is by far the most active of the Western majors in battery production via Saft and other partnerships, with other European firms like Equinor also looking to act as grid-scale battery storage developers, notes Martinos. Also of interest are Southeast Asian firms like Thailand’s PTT that have shown interest in battery manufacturing and even in EV assembly. There has also been a notable focus on brine extraction for lithium by the US majors, Pemex and others — although those efforts remain relatively small-scale and early-stage for now.


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