Count Lux Research among the pessimists when it comes to the costs of lithium-ion battery packs.

Lithium-ion battery costs will fall to about $400 per kilowatt hour by the end of the decade, more than double the $150 per kilowatt hour the U.S. Advanced Battery Consortium says will be required for battery-electric vehicles to be affordable to most of the car-buying public. So says a new report from Lux Research.

Not enough EV batteries will be made to create the economies of scale required for a substantial cost reduction, while few technologies aside from the current lithium-ion process, such as Li-air and solid-state batteries, will be developed in time to make much of an impact by 2020, according to the report.

The report is the latest to weigh in on how far battery costs will fall as automakers hope to ramp up on EV production to meet progressively more stringent greenhouse-gas emissions requirements both in the U.S. and abroad. Green-technology firm Pike Research said last month that lithium-ion battery costs may fall by about a third to about $523 per kilowatt hour by 2017, while global revenue for transportation-oriented lithium-ion batteries will jump to $14.6 billion in 2017 from about $2 billion in 2011.

Estimates of battery costs have varied as automakers and tech analysts have looked into ways to make them cheaper. The Nissan Leaf EV's battery pack has been reported to be as cheap as $375 per kilowatt hour, while Tesla Motors CEO Elon Musk said last month that battery costs may fall to less than $200 per kilowatt hour "in the not-too-distant future."
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Lithium Battery Cost to Drop to Under $400/kWh

BOSTON -- Early demand for electric vehicles and plug-in hybrid electric vehicles has fallen short of optimistic projections, as vehicles like the Chevy Volt have missed sales targets. The key to growing the market is reducing the cost of Li-ion batteries, according to a Lux Research report. While larger-scale production will help reduce costs, the effect of scale-up and likely technology improvements bring nominal battery pack cost only to $397/kWh in 2020 – far short of the $150/kWh target from the U.S. Advanced Battery Consortium (USABC) and not enough to reach the mass market.

"Searching for Innovations to Cut Li-ion Battery Costs"
"Vehicle applications demand a different scale in both size and performance, and no other incumbent technology combines the power and energy performance of Li-ion batteries," said Kevin See, Lux Research Analyst and the lead author of the report titled, "Searching for Innovations to Cut Li-ion Battery Costs."

"Plug-in vehicles' fates are tied to the cost of Li-ion batteries, so developers need to focus on the innovations that have biggest impact on cost," he added.

To see what technologies can impact Li-ion battery cost, Lux Research studied the cost structure of Li-ion batteries, and considered the innovations that could drive disruptive decreases in cost necessary to spur growth of the electric vehicle market. Among their conclusions:

Materials improvement and scale are insufficient to cut costs. While scale does have a significant impact in driving costs down, it is not likely to lead to a disruptive drop in battery pack costs unless coupled with other innovations.
Cathodes remain the biggest target. Cathode capacity and voltage improvement hold much more value than anode innovation. In the optimal case, with a maximum voltage increase of 1V and capacity increase of 200 mAh/g, the nominal pack cost dropped 20%.
Beyond Li-ion remains a focus. Technologies such as Li-air, Mg-ion, Li-S and solid-state batteries push past the limitations of Li-ion batteries and achieve higher energy densities and specific energies. Each technology has its supporters – PolyPlus and IBM for Li-air, Toyota for Mg-ion, Sion Power and BASF for Li-S and Sakti3 for solid state batteries - but all face significant obstacles. A clear leading contender that can meet strict requirements on cycle life, power performance, and manufacturability has yet to emerge.

For more information, please click here to register for the complimentary Lux Research webinar, "Materials Innovation and Cost Cutting Strategies for Li-ion Batteries in Transportation," on April 3rd at 11:00 EDT.

The report titled, "Searching for Innovations to Cut Li-ion Battery Costs," is part of the Lux Research Electric Vehicles Intelligence service.