Falling Battery Prices Push EVs Past Key Milestone

EV Plugin

By Jonny Wakefield

April 16, 2015

Falling battery prices could mean the electric vehicle (EV) "revolution" arrives years ahead of schedule.

That was one of the findings of a Swedish report on the cost of vehicle battery packs published in the journal Nature last month. While battery costs aren't the only factor, the study suggests that the day when battery, electric and internal combustion vehicles are cost competitive could come sooner than previously expected. 

According to the study, the cost of producing EV batteries "declined by approximately 14 per cent annually between 2007 and 2014." Industry-wide, the average cost of producing a kilowatt-hour of storage capacity, a key benchmark, fell from $1,000 to $410 over the same time period. Large-scale EV manufacturers have brought costs down to around $300 per kilowatt-hour.

A 2013 study on EV costs found that at $300 per kilowatt-hour, battery powered vehicles could achieve long-term "cost parity" with internal combustion engine (ICE) vehicles. That study projected manufacturers wouldn't reach that point until 2020.

According to Bloomberg analyst Noah Smith, that means industry-leaders Tesla and Nissan are "six years ahead of the curve." While collapsing oil prices might put off the day when average EV achieves cost parity with ICE vehicles, gas in the $3 (US) range "would be enough to make battery-powered vehicles an economic alternative to internal combustion vehicles in most regions."  

Now, it seems likely that economics, not technological breakthroughs, will finally close the gap. As the top manufacturers of battery electric vehicles, Nissan and Tesla are ahead of the pack on kilowatt-hour costs mostly because of their economies of scale. Telsa expects a new factory will knock another 30 per cent off costs.

According to the authors of the Swedish study, falling kilowatt-hour costs have "significant implications for the assumptions used when modeling future energy and transport systems."

In Canada, a variety of provincial programs have resulted in over 10,000 EVs operating on the roads today (including plug-in hybrids). As a result, governments, utilities, and the private sector are scaling up efforts to build infrastructure to support these vehicles.

While there is some debate about how much EVs contribute to abating carbon emissions, dropping battery prices make it all but certain that more and more EVs will be hitting Canada’s roads.