Let’s Parse the Crazy Week That Upended the Central Math of Batteries and EVs
For a little over half a year, the battery and electric vehicle communities have been in ferment: Companies that no one thought twice about have gone Spac and are worth hundreds of millions and even billions of dollars. New gigafactories have been announced by the week. Legacy automakers have torn up and remade their five-year plans, only to do so again within weeks or months. In total, they have announced hundreds of new EV models.
But no episode amid the general mayhem has generated more whiplash than the discovery this week of the industry’s sudden, wholly unannounced recalculation of the key metric driving everything: The relative cost of EVs and combustion vehicles. For a decade or more, the orthodoxy has been that if you could profoundly lower the cost of the battery, the most expensive part of an EV, you would bust through the sticker price of combustion vehicles and bring on a new electric transportation age. A figure was attached to this destination — a battery costing $100 per kilowatt-hour. And the milestone has seemed within sight. By the middle of the decade, it has been thought, $100/kWh will be the average battery pack cost.
This week, however, Dave Howell, the long-time head of the U.S. Energy Department’s influential Office of Vehicles Technologies, told me there was a new target — $60/kWh, a full 40% below the long-time benchmark. He said that was a truer representation of cost parity, and since his office has tended to define industry standards, that was that. There was no fanfare, no industry-wide discussion. I asked around: Wasn’t $100/kWh the true maxim? The magic number after which the fireworks go up? How and when was it changed to $60, and by whom?
No one could say with certainty, and though the core math of their world had utterly changed, the battery community chose to go on and not gaze at the corpse of $100. Folks seemed mostly casual, like, “Didn’t you know?” No, I didn’t, and I don’t think many of them did, either. What did this feel like? The Twilight Zone. With the hallowed $100/kWh flag ripped to shreds, all manner of wild things seemed possible.
For starters, Howell, in a followup exchange of emails yesterday, told me that not only had his office adopted a $60/kWh standard, but two years ago — in 2019 — he had even suggested a $50/kWh target, using a metallic lithium anode. “A lot has to happen to make it come to fruition,” he said, outlining a tough challenge the battery would have to overcome, including a highly improbable plunge in the lithium price. Yet, he was not ruling it out. “These are possible,” Howell said.
To be sure, there have been hints of what has come: Over the last several months, both Tesla and Volkswagen have announced their own stretch missions to reach the neighborhood of $60/kWh at the pack level. BloombergNEF, a clean energy research firm, put out forecasts that $58/kWh would be reached in the second half of the decade. But industry hands often regard BNEF’s forecasts as on the bullish end, and Elon Musk’s battery cost savings ideas as fantastical.
Until Howell spoke, I had never heard anyone say or seen anyone write that the cost standard had changed. Yet, here we are. “I think the goalposts moved because $100/kWh turned out to be too easy a target and all the leaders will hit it,” said Cody Hill, vice president for energy storage at LS Power, an investment firm. “It was never a magic number — just a round number.”
Scott Hardman, a researcher at the Plug-in Hybrid and Electric Vehicle Research Center at UC Davis, said that the obsession with $100/kWh — or any other price — is misplaced. He suggested that Wall Street, Silicon Valley, consultants and the auto industry have wrongly assumed that when they get the price right, all the pieces will fall in place. Price, he said, won’t be the thing that drives people to EVs.
“If you ask people why they bought their car, how many would say because it was the cheapest?” Hardman told me. “There are emotional things, social factors, functional preferences that people have. Price isn’t everything or we would all be driving Hyundais.”
It’s true that people won’t switch to electric just because they are for sale and have a good price. For one thing, Hardman cites a new survey by his team suggesting that mainstream buyers will be influenced by the availability of home charging. For another, the automakers have to create super-desirable vehicles — they need to focus on the looks, the styling.
But once fast charging is in place, and cool EVs are for sale, price will be a crucial matter. A big thing that $60/kWh will do is give all EVs, regardless of their size and style, cost parity with their combustion cousin, said James Frith, head of battery storage at BNEF. Then both VW and Tesla should be able to market a competitively priced, compact EV on which they will make the same profit as they do with conventional models, he said. Musk has said that within three years, given much lower battery costs, he could make a profitable $25,000 vehicle.
In that vein, Frith said, achieving $60/kWh could be “the last hurdle in making all passenger EVs competitive with internal combustion engine vehicles.”
I get it — $60 is the new $100. For now.