The main factors driving cost reductions in battery energy storage systems (BESS) include:
1. Advances in Battery Cell Technology
- The trend toward larger battery cell sizes, particularly cells greater than 300Ah (ampere-hours), contributes significantly to lowering costs. Larger cells offer higher energy density, which reduces the amount of material and complexity per unit of energy stored, resulting in cost savings. Systems with larger cells tend to be about 5% cheaper than those with smaller cells.
- Many manufacturers are shifting to bigger lithium iron phosphate (LFP) cells, which are more cost-effective and support the falling prices of BESS.
2. System Design and Scale Efficiencies
- Utility-scale BESS costs decrease with longer storage durations measured in $/kWh, although system costs measured per $/kW can increase due to power capacity components like inverters. This implies that optimizing the storage duration and scale can drive down direct storage costs.
- The balance of system (BOS) components and inverter costs scale with power capacity but improvements in these subsystem costs through scaling and design innovations also contribute to overall cost reduction.
3. Reduction of Soft Costs
- Soft costs, which encompass business-related expenses such as accounting, administration, R&D, maintenance, and marketing, have grown over time but can be minimized through better strategic planning and lean manufacturing processes. Reducing these non-material costs lowers the overall BESS price.
4. Repurposing Second-Life Batteries
- Utilizing repurposed end-of-life electric vehicle (EV) batteries for stationary energy storage is a growing cost-reduction strategy. Since most production costs (mining, manufacturing, and encasing) were incurred during the first life of the battery, repurposing these batteries significantly cuts costs while maintaining comparable lifespan and performance capabilities.
5. Industry Trends and Market Dynamics
- Rapid price declines have been observed recently, with turnkey energy storage system prices falling 40% year-on-year to around $165/kWh globally. This rapid decline is driven by the factors above and is forecasted to continue, with anticipated costs dropping further to about $122/kWh for systems utilizing larger cells by 2025.
In summary, the key drivers behind cost reductions in battery energy storage systems are:
| Factor | Description |
|---|---|
| Larger Battery Cell Sizes | Higher energy density cells (>300Ah) reduce cost |
| System Scale and Duration | Longer duration systems lower $/kWh; scale efficiencies |
| Soft Cost Minimization | Streamlining admin, R&D, and operations |
| Second-Life Battery Repurposing | Using retired EV batteries cuts material and production cost |
| Market and Manufacturing Trends | Innovative designs and manufacturing improvements |
These combined factors are driving significant and ongoing cost reductions in battery energy storage systems.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-factors-are-driving-the-cost-reductions-in-battery-energy-storage-systems/
