A new study published in Nature Climate Change has revealed that electric vehicle batteries are becoming cheaper faster than anticipated. According to Bjorn Nykvist and Mans Nilsson of the Stockholm Environment Institute, from 2007 to 2011, the average battery cost for battery-powered electric vehicles dropped by 14% annually. This is even more impressive when considering that the two leading electric vehicle makers, Tesla and Nissan, experienced a decrease of 8% per year. This remarkable decline puts battery costs close to the level the International Energy Agency predicted they would reach in 2020. This progress in battery technology is arguably more significant than the recent plunge in oil prices. The curve has passed us by six years. Here is the graph from the paper, which is a little difficult to read:
This places the market for electric vehicles at a very intriguing turning point. A chart created by McKinsey & Co. in 2011 demonstrated which form of car would be the most cost-effective at varying gasoline and battery prices:
Since 2011, the cost of batteries per kilowatt-hour has plummeted from around $550 to around $450, and for Tesla and Nissan, even further to around $300. This has the potential to make battery-powered vehicles economically viable. However, the recent drop in the price of gasoline to around $2.50, combined with a possible thaw in U.S.-Iran relations, has meant that internal combustion engines remain the dominant force in the market. Nevertheless, if battery prices continue to fall, the economics will change and battery-powered vehicles will become increasingly attractive.
The United Nations Environment Programme’s report on global investment in renewable energy shows that, while investment dropped slightly between 2011 and 2013, it rebounded in 2014 to a near all-time high of $270 billion. This has led to a significant increase in the amount of renewable energy capacity added in 2014, with China, the U.S. and Japan leading the way in renewable investment. In 2014, renewables accounted for 9.1 percent of global electricity generation, up from 8.5 percent the year before.
The combination of cheaper batteries and cheaper solar electricity is a powerful one, as it has the potential to reduce our dependence on fossil fuels and their associated geopolitical drawbacks and climate harm. Solar-plus-batteries is set to revolutionize the way humankind interacts with the planet and powers civilization, as it allows solar power to run homes 24 hours a day, 365 days a year. While the transformation has already begun, it is expected to really pick up steam during the next decade. This is a positive development, as it will provide cheap energy to power our economy and help to prevent climate change.
