Month: December 2021

Challenge: Space Heating in an All Electric Grid

Without regard to the means we choose to decarbonize, electrification is a massive challenge.

Joule:

-53% of U.S. space heating energy can be electric without exceeding current peak loads•

-Electrification increases aggregated peak loads by 70%, more than double in 23 states•

-Targeted heat pump advances mitigate load issues, but challenging regions remain•

-Some fossil fuel backup supports 97% heating electrification without new peak loads

Abstract:

Building heating decarbonization is essential, but the prominent “all-electric” proposal—replace all fossil fuel heating with electric heat pumps and expanded renewable electricity supply—could require massive buildouts of underutilized electricity infrastructure according to the analysis presented in this paper. Future heat pump advances could mitigate these issues, but some regions could still require more than double the current delivery capacity. Because it is imperative to start rapidly reducing emissions now, this paper evaluates a viable transitional approach: dual source systems that maintain existing fossil fuel equipment with new heat pumps. Because the highest heating needs are infrequent, using fossil fuels for only 3% of total U.S. heating energy could avoid any increase in local peak electricity demands. Such an approach would further allow the flexibility to adapt to future developments, such as viable alternative fuels or unanticipated major heating technology advances.

Report: Battery Prices Plummeting

Bloomberg:

BloombergNEF has just published the 2021 battery price survey, one of the most important pieces of research we carry out annually.

The key takeaway: On a volume-weighted average basis across the battery industry, prices fell to $132 per kilowatt-hour in 2021. This is down from $140/kWh in 2020 (in real 2021 dollars). The 6% drop isn’t as drastic as the 9% decline we had forecast last year. 

Why are this year’s prices higher than expected? The cost of raw materials used in the cathode — lithium, cobalt and nickel — and other key components including the electrolyte have risen this year, putting more pressure on the industry. The increases have been more prominent in the second half of 2021, and even led to Chinese battery manufacturer BYD announcing a 20% battery price increase in November.

The results aren’t as bad as I had feared when I previewed the early findings in September. There are four reasons behind this. First, prices for raw materials and components were relatively low in the first half of the year. This meant that for the first six months of 2021, battery prices were lower than they were in 2020, helping the yearly average to fall.

Second, low-cost lithium iron phosphate (LFP) batteries have been used more in 2021, in both the passenger EV and stationary storage sector. Despite the increase in the price of LFP cells in China in the second half of the year, the average price of these cells in the country is now the same as the average price of high-performing nickel-based cells in the first half, at around $100/kWh. Again, higher adoption of these low-cost batteries has helped to bring the average price down.

Third, when using nickel-based cells, automakers have more widely adopted cathode chemistries that reduce the amount of expensive cobalt used, such as NMC (811). This resulted in lower average NMC prices in the first half of the year, helping to reduce some of the impacts of higher raw material costs in the second half.

Finally, when automakers place large battery orders, they increasingly use contracts that link raw material costs to a commodity index. These prices are normally reviewed on a quarterly basis, and use a price averaged over three months trailing the quarter by a month. This means that prices in the fourth quarter of this year would use an average price from June, July and August. Many automakers won’t feel the hit from the huge lithium price rise seen in September and October until the first quarter of 2022.

We expect prices next year will be $3/kWh higher than 2021 prices on a nominal basis. This would mark the first price increase that the battery industry has seen since we began tracking these prices in 2012. Inflation also will affect the outcome for 2022. Once adjusted for real 2022 dollars, we could still see prices fall.