Analysts: Li-ion output surging, prices plummeting

Global manufacturers of lithium-ion (Li-ion) batteries are preparing for “one of the largest factory buildouts in world history” to meet what is expected to be massive demand, particularly for plug-in electric vehicles and stationary energy storage.

February 3, 2012 – Global manufacturers of lithium-ion (Li-ion) batteries are preparing for “one of the largest factory buildouts in world history” to meet what is expected to be massive demand, particularly for plug-in electric vehicles and stationary energy storage, says an IDC Energy Insights study.

Demand for Li-ion batteries is predicted to grow an astonishing 447%, spiking from 5.4GWh in 2011 to 24.2GWh in 2015. To match that, manufacturing capacity will also leap from around 6.7GWh to over 26GWh over the same period. Meanwhile, global makers of plug-in electric vehicles will need over 7× their current level of production in 2011, i.e. exceeding 17GWh by 2015, with North America taking the lead in demand but quickly eclipsed by Asia. Assuming Li-ion battery costs fall, global demand for stationary storage on the electric grid will then increase exponentially — 17-fold — to 640MWh in 2015, says IDC.

Li-ion battery storage has application in areas ranging from plug-in electric vehicles to computers and consumer electronics, and electricity grid storage — but it’s also expensive. A big Li-ion manufacturing buildout will achieve “a rough equilibrium” between capacity and demand, triggering a big price drop perhaps down to as low as $400/kWh by 2015, says Sam Jaffe, research manager at IDC Energy Insights. The expectation is that lower prices will open up new applications, “creating a self-feeding cycle that will lead to lower prices and more widespread adoption.”

ABI Research agrees with the Li-ion manufacturing buildout scenario, fueled by both promises of rapidly widening end-demand and governments’ generous support for manufacturing. ABI also narrows the Li-ion market specifically to hybrid & electric vehicles, pegging a $47B battery module market by 2020, a 25% compound growth rate (CAGR) from $5B in 2010. Here, as in Li-ion demand overall, end-user acceptance is growing, but price remains the sticking point — and costs for the battery pack, the most expensive component, aren’t expected to drop as much as for other components such as power electronics and electric motors.

Among those prepping a big capacity push are large battery firms worldwide — Panasonic in Japan, Samsung SDI in Korea, and Johnson Controls in the US — as well as startups including A123 (US), Electrovaya (Canada), and BYD (China), says IDC. Specifically in the US, a provision in the American Recovery and Reinvestment Act provided a 50% matching grant to Li-ion manufacturing facilities. In other regions, governments have been even more welcoming of the new technology, offering “significant subsidies” to help build out Li-ion factories.

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