Determinants of lithium-ion battery technology cost decline

Prices of lithium-ion battery technologies have fallen rapidly and substantially, by about 97%, since their commercialization three decades ago. Many efforts have contributed to the cost reduction underlying the observed price decline, but the contributions of these efforts and their relative importance remain unclear. Here we address this gap by developing a set of cost change models to disentangle these efforts and estimate their individual contributions to the cost decline of lithium-ion cells. We collect data on lithium-ion cell components and their prices, develop a cost equation and cost change equations for these cells, and estimate the contributions of different low-level mechanisms of cost reduction, such as the impacts of changes in energy capacity characteristics, reductions in material prices, and changes in non-material costs. We find that between the late 1990s and early 2010s, about 38% of the observed cost decline resulted from efforts to increase cell charge density. Meanwhile, reductions in cathode materials prices contributed 18% of the cost reduction, and changes in non-material costs accounted for 14% of the cost decline. We also consider the contributions of high-level mechanisms, including research and development (R&D), learning-by-doing, and economies of scale. We find that the largest share of cost change was driven by public and private research and development, which we estimate contributed a majority of the observed cost reduction, with a lower contribution from economies of scale. Moreover, we find that the majority of the R&D contribution can be attributed to advancements in chemistry and materials science. Looking to the future, these results suggest that the nature of electrochemical battery technology, which often allows for many different combinations of electrode materials and electrolyte chemistries, presents further opportunities for new approaches and cost decline in batteries. However, public policy may be needed to help avoid premature lock-in, which can result from market forces favoring incumbent technologies.

Automated summary

The study found that the major reasons for the rapid decline in lithium-ion battery prices include efforts to increase cell charge density, reduce cathode materials prices, and lower non-material costs. Research and development, as well as learning-by-doing, were the main contributors to the observed cost reduction, with economies of scale playing a smaller role. Looking ahead, the nature of electrochemical battery technology presents further opportunities for new approaches and cost decline in batteries.