Why declining battery costs alone isn’t enough in the mainstream market

Last week I had an opportunity to participate in the first session of “ACCURE academy” hosted by one of my colleagues. The topic for the first session was “Climate crisis”. Out of the many interesting aspects discussed, one of them just kept ringing in my head. The guest speaker mentioned this about the temperature rise, and I quote – “a 1-2 degree temperature rise could affect millions, a 2-3 degree rise could ?affect billions, and anything above that could affect the entire life form”.

This is terrifying. What felt like a distant problem, is now closer than ever before. Fortunately, this big problem can be solved by breaking it down to small pieces. And one such piece that is possible to solve with the current technologies we have is decarbonization. Being a cheerleader of battery energy storage, I believe it to be one of the many cornerstones for decarbonization at scale.

However, every opportunity comes with it's own set of challenges. For battery energy storage to takeoff in the mainstream market, the cost at the system level must come down significantly. The good news is that the hardware costs are already on the decline, thanks to the advanced manufacturing capabilities that reduce waste. However, as the battery cells are more and more commoditized (today in the case of lead acid; in future it would be the case for Li-ion too), the costs will be driven not by the hardware costs, but by the “latent costs”. In academic terms, as the product enters the mainstream market, the competition now shifts from the core/generic product to the “whole product”. This means, there is a decreased return in investing in the R&D for the generic product. Rather manufacturers must focus on investing in the innovative software technologies that can bring down the “latent costs”.

How to bring down the latent cost?

Once the battery cells are out of the assembly lines of the manufacturing facility, their deployment in field requires meticulous design and system integration efforts. Battery cells are assembled into modules and wired together to be later integrated with a BMS. The final Bill of material (BOM) will consist of more equipment such as the inverter, cooling arrangement and climate control system. A slight change in the BOM, and the entire system is re-evaluated to ensure that it still meets the revenue targets. Adding to this is the land procurement and utility interconnection costs.

The design, verification and validation of the above process constitute atleast 30-40 percent of the total commissioning cost for batteries. To cover up for any errors, the developers themselves tend to overdesign the battery system as a buffer – shooting up costs even further.

Cloud based battery data engines for utility scale batteries are precisely built to bring down the design and validation costs of such an iterative process. It provides:

• a big data approach to design by learning from the correlation of cell behavior across different system design and use cases
• validation on the suitability of the chemistry, supplier, and sizing for the job
• opportunity to fully utilize the battery asset in different markets without compromising on the battery degradation.

The figure below illustrates a possible scenario for utility scale batteries in 2025 with and without Cloud based battery data engine (please note that the numbers in the figure are for representative purposes only).

Figure: Battery storage commissioning costs in $/kWh based on BNEF analysis

Having said this, battery energy storage is just a spoke in the giant wheel of work that needs to be done in this decade towards decarbonization. As I was listening to the guest speaker at “ACCURE academy”, I realized we could contribute towards decarbonization by making some lifestyle changes at a personal level too. As Steve Jobs said – “the most important thing is to shake off the notion that life is just there and you are going to live in it, versus - embrace it, change it, improve it, make your mark upon it….Once you learn that, you’ll never be the same again”.

Thank you for your time :)