Falling Lithium-Ion Battery Costs Great News for Consumer and Energy Grid
By Andrea Persico
Electric Vehicle Transition Consultant and Carbon Zero Initiative Clean Energy Champion
Australia’s energy system is under-going a transformational shift. In the first three months of 2024, wholesale energy prices fell even as demand rose. This was underpinned by an increase in clean energy and the declining costs of grid scale lithium-ion batteries. (AEMO, Quarterly outlook April 2024).
This trend, driven by global advances and supply chain improvements, promises lower energy prices at home and for our everyday commute. The backdrop of this shift is a global decrease in lithium-ion battery costs, which dipped by 14% towards the end of last year, according to BloombergNEF. This decline was due to the resolution of COVID-related supply chain issues and a reduction in the costs of components.
For Australian consumers, the decline in battery costs means lower energy prices, more affordable home batteries and electric vehicles (EVs). For households motivated by financial savings, battery storage as part of home energy systems will be an obvious choice, as will an EV. A 2023 Drive.com study found that an EV owner saves between $1320 and $3070 a year in fuel and maintenance costs. The biggest savings will come when the car battery can support the home energy system and the wider grid.
A reduction in battery costs will see continued growth in the installation of large grid scale batteries in Australia. As the grid shifts to renewables, large batteries smooth energy supply by storing incredibly cheap solar power and releasing it in the evening when the sun fades and energy is needed in our homes. In this way batteries enhance grid stability,energy security and lower prices.
CarGurus’ February Intelligence Report noted an 8.2% drop in new EV prices in the 12 months since February 2023, due to new brands and models hitting the Australian market. This price reduction, favorable government policy and legislation in place (such as the New Vehicle Emissions Standards passed this week) is impacting the growth of new EVs sales as a percentage of all new vehicle sales. Supported by a growing network of charging infrastructure around Australia, switching to an EV is a big win for households.
In addition to this great news for consumers, Australia's role in the global lithium market is creating huge economic opportunities. As the world's largest producer of lithium, Australia is well-positioned to capitalise on the expanding global demand for lithium-ion batteries, and there are new efforts to see more of the battery supply chain served locally. The clean energy think-tank Beyond Zero Emissions estimates that Australia could create over 40,000 new jobs in lithium supply chains by 2035.
Industry experts predict that as battery production scales globally, prices will continue to fall, having already passed the critical $US100-per-kilowatt-hour threshold. This price point is considered essential for achieving cost-competitiveness with fossil fuels.
Transition away from fossil fuels is essential to reach Australia’s energy policy goals and international climate commitments.
Falling lithium-ion battery prices make sustainable technologies more accessible, enhance the reliability of the national grid, and support economic growth through increased investments in clean energy and advanced manufacturing industries. As prices continue to decline, the future looks increasingly bright for Australia's energy landscape.
