Li-ion Cost Decline and Forecast
Using Cumulative Production Volume
Data Source: Ark Invest
https://ark-invest.com/analyst-research/wrights-law-2/
Wright’s Law Formula Y=aX^b
Y = cumulative average $/kWh
X = cumulative kWh produced
a = cost required to produce 1st unit
b = slope of the function
For example, the graph shows Li-ion cost decline and forecast using cumulative production volume. Estimating the values from the graph and entering them into a spreadsheet, then estimating the linear equation using natural log values (LN).
LN(Y) = 9.2 - 0.55*LN(X)
As a result, we forecast future battery cost declines based on increases in cumulative kWh produced. 2020 costs average $100/kWh. Estimated 2021 and 2022 are $95/kWh and $90/kWh respectively. However Tesla has stated they have a new 10 gWh factory producing the new 4680 cells in California at full capacity by 2022. This means Tesla will probably be producing batteries at about $40/kWh from the 10gWh factory and the older designed batteries and Nevada factory will still be at $90/kWh.
This aligns with Tesla’s estimate that they will reduce $/kWh battery costs by about 50 percent in 2022 when operating at full capacity. As volume increases, based on scaling up to Terawatt-hour factories (probably in Texas and Berlin), then the battery costs per kWh will continue to decline until they are a commodity both for vehicles and grid scale, residential or commercial energy storage.
Posts
