According to Wood Mackenzie, it is envisaged that by the year 2025 a drop in and around 30% is expected in the All-in front-of-the meter (FTM) battery storage system costs in the Asia Pacific Market.
There was a steep price reduction in the storage system than was anticipated in 2020. The main component in this scenario was the price reduction of the battery. It needs to also be mentioned that the improvements in battery energy density was also a contributory factor to lower the overall balance of system (BOS) components and its associated costs.
Further, it is noted that, other hardware apparatuses are also losing their price due to the price variances amongst other countries. Except for a handful of locally relaxed necessities, many of the policies that started regional differences in the pricing of hardware components has been grounded by market forces.
Wood Mackenzie Senior Analyst at Mitalee Gupta said: “As batteries are expected to represent shrinking portion of all-in system costs, there will be heightened focus on BOS cost reductions moving forward.
“Manufacturers will continue to innovate and produce BOS components that help reduce labor costs, and installation crews are implementing more efficient labor practices as they gain more experience on job sites. Competitive markets will drive system efficiencies, product standardization and cheaper batteries as we progress towards 2025.”
China, the world leader presently sets the record for the lowest all-in costs globally. It is predicted that the country’s 2-hour duration of the all-in FTM system cost will decline by 33% to US$369 per kilowatt (kW) in 2025 compared to US$554/kW last year. The country being recognized as battery live wire center has gained from constructive policy landscapes and the domestic supply chain.
The world’s largest producer of lithium iron phosphate (LFP) batteries and demand center is China and as such will appear as the leading battery chemistry (globally) over the next five years. The cost of these batteries is expected to further reduce at a rapid speed as Chinese dealers are concentrating on increasing their manufacture and developing the LFP technology.
Over the past decade an increase in the demand for electric vehicles (EVs) has slowed down the cost of lithium-ion batteries by more than 85% (since 2010). Nickel Manganese Cobalt (NMC) is the next leading battery chemical dominating the Asia Pacific. However, in the recent past, LFP batteries are being taken into consideration for use in energy storage applications. The differences rest in the energy density, fire risk and degradation behavior.
Australia is considered as a vital NMC market in the region and is projected to see costs drop by 43% to US$ 658/kW in 2025 for a 2 hour period all-in FTM system rate in comparison to US$ 990/kW in 2020. The pace at which the FTM deployments are to take place in the country is projected to be over the next 3 years with a continuity of a slide in the system costs.
It is very clear, that even though NMC is dominant in the market, technology transition is taking place and several developers and system integrators are closely observing LFP with new interest. The supply availability from China together with the continuing progress in the technology and the cost competitiveness of LFP is making it a very positive choice for energy storage treatment.
In 2018, South Korea yet another prominent market witnessed a substantial rush in energy storage deployments that indeed led to a sizeable fall in system costs. Nonetheless the speed has slackened since. Some vendors profited out of this program, while of course some vendors grappled to hold on with the escalating competition, from fire incidences, weak low system prices and concerns resulting from fire incidences. These were some of the reasons for many vendors to withdraw which then resulted in there being fewer companies and a domino effect of a decelerating pace of BOS cost declines.
It is predicted that in 2025, the country’s 2-hout period all-in FTM system could drop by 29% to US$ 579/kW in comparison to US$821/kW in 2019. FTM deployments over the next 5 years are foreseeable to grow in South Korea, but when compared to China and Australia, the pace of the price decline will be somewhat slower.
Gupta said: “Asia Pacific is the largest manufacturer for lithium-ion batteries today and will continue to dominate global cell manufacturing capacity through 2030.
“As the region’s storage industry takes off, every component across the value chain will play a role in bringing down system costs. Fire risks and safety standards, tariffs and trade policies, and safe-guarding the supply chain amidst Covid-19 uncertainty are factors that could make or break the industry.”
