Raw material cost
This analysis calculates the raw material cost for common energy storage technologies and provides the raw material breakdown and impact of raw material price changes for lithium-ion battery packs.
Figure 1 compiles raw material cost for multiple energy storage technologies based on their material inventories and commodity prices from 2010–2020. These raw material cost may represent potential cost floors below which product prices are unlikely to go with current energy storage technologies and no innovation in raw material extraction.
Nickel-metal hydride batteries exhibit relatively high raw material cost due to large amounts of nickel. These batteries are also subject to commodity price fluctuations of nickel, leading to pack cost of 250 USD/kWh in the worst case. Similarly, vanadium price fluctuations mean that raw material cost for vanadium-flow batteries could be as high as 400 USD/kWh in the worst case.
The material cost of other electrochemical storage technologies are also driven by their active materials like platinum, lithium, and lead. Lithium ion is a family of technologies with different options for materials used in the cathode. Taking average raw material cost, NMC is 66% more expensive than LFP. Mechanical storage technologies have the lowest material cost below 20 USD/kWh due to the low-cost materials employed.
Figure 1 - Raw material cost for common electricity storage technologies. Error bars account for variations in each technology's raw material inventory and commodity prices from 2010-2020. Commodity prices are taken as monthly averages instead of daily spot prices as these better reflect the contract prices battery manufacturers see. NMC refers to NMC111 with equal shares of nickel, manganese, and cobalt.
In order to assess the impact of raw material price changes on product prices, it is important to understand the raw material composition of electricity storage technologies.
Figure 2 illustrates this for lithium-ion battery packs by displaying weight and cost contribution of the key raw materials for the two most common chemistries, LFP and NMC. It shows that aluminium constitutes 22% of the total weight due to its use as current conductor and cell and pack housing. This is followed by 12-13% graphite, which is used as anode and 12-13% copper, which is also used as current collector.
The individual active materials of the cathode and lithium usually constitute less than 10% of the raw material weight in lithium-ion battery packs. However, the cost contribution of lithium in LFP or nickel and cobalt in NMC batteries is larger than 20% each.
Figure 2 - Weight and cost contribution of key raw materials in lithium-ion batteries with a) LFP cathode and graphite anode and b) NMC cathode and graphite anode. NMC111 with equal shares of nickel, manganese and cobalt assumed here. Symbols indicate usage of raw materials in battery cell and pack components. Raw material analysis is based on ANL's BatPac model v3.0 and the Bloomberg terminal.
The analysis shows that each material only contributes a minor share to total raw material cost. In addition, total raw materials cost only constitute a share of total product price. The cost increase of one raw material will therefore only have a limited impact on lithium-ion battery pack prices.
Figure 3 illustrates this through a sensitivity analysis for the key raw material cost contributors for LFP and NMC battery packs. It shows that a doubling of copper prices, i.e. 100% cost increase, will increase the product price of LFP or NMC battery packs only by 5.4% or 5.0% respectively. A quadrupling of copper prices, i.e. 300% cost increase, would increase LFP or NMC pack prices by 16.2% or 15.1% respectively.
LFP battery pack prices are most sensitive to copper, aluminium and lithium hydroxide cost. A quadrupling of all three would increase pack prices by ~35%. In contrast, NMC battery pack prices are most sensitive to the cathode materials, nickel and cobalt. A quadrupling of the cost for both would increase NMC battery pack prices by more than 50%. This suggests that LFP battery pack prices are more robust to raw material cost changes than NMC battery packs, because the cost contribution of individual materials to total raw material cost is lower.
Figure 3 - Impact of relative raw material cost change on lithium-ion battery pack price for a) LFP cathode and graphite anode and b) NMC cathode and graphite anode. NMC111 with equal shares of nickel, manganese and cobalt assumed here. Battery pack price of 130 USD/kWh assumed. Values in brackets show baseline raw material cost assumptions based on monthly average prices from 2010-2020.
Schmidt, O., & Staffell, I. Monetizing Energy Storage - A toolkit to assess future cost and value. Oxford University Press. Forthcoming.