Another 40% drop in the cost of battery storage through 2030 is set to speed the shift from fossil fuels to renewable energy, but global storage deployment will have to increase six-fold this decade to meet the decarbonization targets set at the COP28 climate summit, the International Energy Agency reports.
Annual additions of new battery capacity have soared from zero in 2010 and 100 megawatts in 2012 to 41.5 gigawatts in 2023, the IEA says in an assessment released Thursday, with strong growth in utility-scale, behind-the-meter, mini-grid, and home solar systems. Electric vehicle battery deployment rose 40% last year, “with 14 million new electric cars accounting for the vast majority of batteries used in the energy sector.”
Those numbers made batteries “the fastest growing energy technology in 2023 that was commercially available, with deployment more than doubling year-on-year,” the Paris-based agency writes.
“Batteries are changing the game before our eyes,” said IEA Executive Director Fatih Birol. “The combination of solar PV (photovoltaic) and batteries is today competitive with new coal plants in India,” and “just in the next few years, it will be cheaper than new coal in China and gas-fired power in the United States.”
That assessment comes more than a year after Clean Energy Canada reported that wind and solar farms with battery backup were already cheaper than new gas plants in both Ontario and Alberta.
And battery prices still aren’t close to stabilizing: by 2030, Reuters reports, the IEA projects that capital costs will fall by another 40%. “The slide in battery costs will also help provide electricity to millions of people without access, cutting by nearly half the average electricity costs of mini-grids with solar PV coupled with batteries by 2030,” the news agency writes, citing the IEA report.
With a 90% cost reduction since 2010, higher energy densities, longer operating life, and a wider mix of chemistries that can be adapted to mineral availability and price, the IEA says lithium-ion batteries “have outclassed alternatives over the last decade.” The added energy density in EV batteries is coming from their relatively high nickel content, while stationary storage markets shift toward lithium iron phosphate chemistries that use no nickel or cobalt and offer “even lower flammability and a longer lifetime.”
“With falling costs and improving performance, lithium-ion batteries have become a cornerstone of modern economies, underpinning the proliferation of personal electronic devices, including smart phones, as well the growth in the energy sector,” the IEA writes. “In 2023, there were nearly 45 million EVs on the road—including cars, buses, and trucks—and over 85 GW of battery storage in use in the power sector globally.”
That rapid growth means the energy sector now accounts for more than 90% of annual lithium-ion battery demand, an increase from 50% as recently as 2016, despite “continuing use of lithium-ion batteries in billions of personal devices in the world”.
But the sector will have to deliver much more, even faster to support the tripling of global renewable energy capacity by 2030 that countries adopted as a shared target at the end of COP28 negotiations in Dubai late last year.
“By enabling greater shares of renewables in the power system and shifting electricity supply to when it’s most needed, batteries will help advance progress on the goals set at COP28,” the IEA says. But “battery deployment will need to scale up significantly between now and the end of the decade to enable the world to get on track for its energy and climate goals,” with batteries accounting for 90% of a six-fold increase in storage capacity and pumped hydro covering most of the rest.
While most battery manufacturing is currently located in China, the IEA says 40% of the new capacity announced in the last year was located in the United States and the European Union. “If all those projects are built,” the agency says in a release, “those economies would have nearly enough manufacturing to meet their own needs to 2030 on the path to net zero emissions.”
