IEA Forecasts 40% Drop In Battery Storage Costs By 2030

Highlights :

  • IEA report found the EV market share of electric cars to increase more than sevenfold over the past five years and today, nearly 40% of all new cars sold in China are electric, in EU it is over 20% of all new car sales, and 10% in the United States.

IEA Forecasts 40% Drop In Battery Storage Costs By 2030 IEA Forecasts 40% Drop In Battery Storage Costs By 2030

International Energy Agency’s (IEA) recent report on the use of batteries in electric vehicles (EVs) and battery storage installations has shown that developer costs of batteries will decline by 40% by 2030. The report was prepared after studying the use of solar PV plus batteries and found the total upfront costs of utility-scale battery storage projects market including battery plus installation, and other components. It identified stand-alone battery storage to be more competitive with natural gas plants, and battery storage paired with solar PV one of the most competitive new sources of electricity.

IEA in its report on, “Batteries and Secure Energy Transitions”, based on electric vehicle (EV) sales data, found the EV market share of electric cars to increase more than sevenfold over the past five years. It reached 18% in 2023 and today, nearly 40% of all new cars sold in China are electric. In the European Union, it is over 20% of all new car sales and 10% in the United States.

Reportedly, batteries used in electric cars are spread across three regions which represent 80% of the global battery volumes in use today in the energy sector. It found a huge untapped electrification potential in emerging markets and developing economies other than China. In this, electric cars currently constitute only 2% of sales, despite large year-on-year growth in countries such as India (up 70% in 2023) and Indonesia (up by over 60% in 2023), albeit from a small base.

IEA report stated that India allocated USD 2.5 billion through its Production-Linked Incentive (PLI) scheme in a bid to develop a domestic battery manufacturing industry. Other countries in Southeast Asia like Malaysia introduced income tax breaks for domestic EV charger manufacturers. Similarly, reportedly, Thailand has enacted a new USD 700 million subsidy scheme that aims to lower the production cost of domestic EV batteries.

For example, in the case of India, it announced the introduction of a three-rate tariff in 2023. This process started in April 2024 for small commercial and industrial consumers. It differentiates between normal hours, “solar” hours, and peak hours (with prices in solar hours 10-20% lower than in normal hours), providing an incentive to deploy behind-the-meter storage.

The research identified China as having a high cost of capital for clean energy projects in emerging markets and developing economies. It explained the reason why capital flows to battery storage remain highly concentrated in advanced economies. The survey data from the IEA Cost of Capital Observatory shows the cost of capital for battery storage projects in emerging markets to be at least twice as high as advanced economies.

EVs equipped for battery swapping so far have been largely limited to China where they enjoy significant policy support (Figure 2.13). In 2022, only 2% of new EVs worldwide were swap-capable. In China, they accounted for 4% of the EV market (Forbes, 2022). Progress has been particularly strong for trucks in China, where half of the all-electric heavy-duty trucks sold in 2023 were swap-capable (BNEF, 2024). China also hosts 80% of the world’s battery swapping stations, with a combined energy storage capacity of around 5 GWh – equivalent to the combined battery storage capacity of Japan, Korea, and the United Kingdom (Fastmarkets, 2023). Battery swapping for two/three-wheelers is gaining traction in India and other Asian markets, especially where the vehicles are used for commercial purposes and cover long distances each day.

Australia, Japan, and Korea remain the largest markets for utility-scale storage in the Asia Pacific outside China and India, with combined additions rising to 3 GW by 2030. Australia supports the roll-out of utility-scale battery storage through its Capacity Investment Scheme, which seeks to facilitate the integration of rising shares of variable renewables and fill the gap left by the planned retirement of significant amounts of coal-fired capacity over the coming years. Near-term growth in Japan is underpinned by subsidies, and upcoming capacity auctions for low-carbon capacity will provide a potential additional revenue stream for utility-scale battery storage.

Regional average upfront costs for utility-scale battery storage with a four-hour duration currently vary from USD 200/kWh to over USD 300/kWh, but this range narrows over time as more markets gain experience and take advantage of new technologies. China is the lowest-cost region for new battery storage projects today and is projected to remain so through 2030. Recent costs of utility-scale battery storage projects in the United States and Europe are at the higher end of the range today, but broader markets and more extensive deployment drive down future costs. In India, strong growth in the battery storage market enables deep cost reductions. 

The report found the cost of solar PV plus battery storage to be competitive to coal- and natural gas-fired power in some markets. The study draws a comparison between the value-adjusted LCOE in the STEPS. Sharing the case of China, IEA found the value-adjusted LCOE of solar PV plus battery storage falls below that of coal-fired power around 2025 in the STEPS. 

Sharing the case of India, the study showcased that solar PV plus battery storage is more competitive than coal. it remains so in the years ahead. In the United States, solar PV plus battery storage outcompetes new efficient gas-fired power plants before 2025. and extends its lead by 2030. 

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