Batteries that power electric vehicles are the cheapest they have ever been, with economies of scale kicking in following a ramp-up in demand, according to new research.

In December 2017, lithium-ion battery packs sold at an average price of US$209 a kilowatt-hour, down 24 per cent from the start of 2017, and about one fifth of the cost of 2010, according to research by Bloomberg New Energy Finance.

BNEF analyst, James Frith, said the rate will fall further in 2018, reaching below US$100 a kilowatt-hour by 2025.

Mr Frith said that is a magic number for the electric car business with $100 widely seen as “a tipping point in the adoption of EVs”.

BNEF surveyed more than 50 companies to gather the price estimates and the reduction in the costs reflects a rise in battery manufacturing and “the economies of scale that come with it”.

However, due to lower order volumes, developers of stationary storage systems including backup for rooftop PV pay around 50 per cent more than carmakers.

Smart Energy Council member John Grimes said the findings are both significant and important for the renewable energy sector.

“Analysts were tipping a fall in battery prices of just 15 per cent this year. A 24 per cent drop is huge,” Mr Grimes said.

“The rate of change is phenomenal, batteries have become cheaper far quicker than expected.

“The only thing holding them back now is the [cost of] cells – when they become cheaper batteries will hit a sweet spot in the market.

“Already the cost of $US209 per kWh opens up opportunities. Many companies are now targeting the US$100 per kWh mark.

“Many said it was impossible but if you get a decrease of 24 per cent in one year alone followed by a reduction of that magnitude in the following years you can get close to that figure.”

Mr Grimes said not one of the major vehicle manufacturers is not planning for electric vehicles. With an eye on the near future, they are all gearing up.

“All of the car makers are building EV production lines and once lines are turned on and in action they are never turned off. So from BMW to Audi to Toyota and Ford and all others, all car makers will develop EV lines and once they are fully active that will push up competition for EVs and consequently costs will reduce,” Mr Grimes said.

“Sceptics out there say things are not happening and won’t happen but they will and the shift will be dramatic.

“We may be coming off a low base for EVs but things are changing.”

BNEF estimated global passenger electric vehicle sales would hit about one million in 2017, well up on the 100,000 just a few years ago.

There are now almost three million electric vehicles on the world’s roads, however this is relatively small given the global car fleet of around one billion.

Reductions in emissions from road transport will be a key part of meeting climate targets, but the average vehicle is on the road for 12-15 years which creates significant ‘lock-in’ to the current transport system.

According to the Electric Vehicle Council the cost of running a car on fuel is $1.19 per litre and the cost of running an electric car is just $0.33 per elitre, where the elitre is based on the cost of driving an EV the same distance a petrol powered vehicle could travel on one litre of petrol.

EVC Chief Executive, Behyad Jafari, said the transition to a new era of fuel-free motoring is “well and truly underway” and he applauded the NRMA’s $10 million rollout of an electric vehicle fast-charging network across NSW, saying it will be an important step forward.

Mr Jafari said the network of at least 40 chargers gives drivers more confidence in using electric vehicles for extended trips and “The roll-out of chargers sends a highly-visible message that electric vehicles are quickly becoming a mainstream product for all motorists”.

Several countries including China, France and the UK have announced they will ban the sale of petrol and diesel vehicles altogether in the future. 

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