Dive Brief:
- The global market for lithium-ion batteries is expected to remain oversupplied through 2028, pushing prices downward, as lower electric vehicle production targets in the U.S. and Europe outweigh rising demand for energy storage systems, Clean Energy Associates said Aug. 29 in its Q2 2024 ESS Price Forecasting report.
- China accounts for the bulk of lithium-ion battery production capacity through the forecast period despite challenges driven by U.S. and European trade barriers and U.S. incentives for domestic battery manufacturing, CEA said.
- The United States’ Section 301 tariffs will increase costs for battery suppliers that do more manufacturing in the U.S. but should not lead to a significant contraction in the U.S. market when duties on non-EV batteries and natural graphite take full effect in 2026, CEA said.
Dive Insight:
Section 301 tariffs and the Inflation Reduction Act’s 45X tax credit could make U.S.-made lithium-ion battery energy storage systems cost-competitive with Chinese-made systems as soon as 2026, CEA said in June.
In addition, Chinese and North American lithium prices have converged, eliminating the North American premium seen in 2023 and early 2024, and global lithium carbonate prices are expected to remain below $20/kg through at least 2027, CEA said. Lithium carbonate is the form used in lithium-iron-phosphate batteries, which are preferred over nickel-manganese-cobalt batteries for energy storage applications, according to the report.
Despite lower raw material costs, the fallout from weaker-than-expected EV demand growth is leading some U.S. battery manufacturers and suppliers to delay or cancel planned capacity investments, CEA said in its supply chain-focused Q2 2024 ESS Supply, Technology, and Policy report, also released Aug. 29.
One supplier delayed operations at a planned South Carolina facility from later this year until late 2025, while another suspended a planned Arizona facility and canceled a planned Michigan plant, CEA said.
The versions of the reports shared with Utility Dive did not cite companies by name or include specific values for battery material prices or volumes.
Battery suppliers continue to invest in North American anode production amid concerns about Chinese dominance of global graphite supplies, according to CEA’s price forecasting report. Suppliers have announced over 250 GWh of graphite projects in the U.S. and Canada with anticipated start dates in 2026 or sooner, though only some are likely to come online as scheduled, CEA said.
Meanwhile, energy storage integrators are shifting en masse to the twenty-foot-equivalent unit, or TEU, form factor, CEA said. Major holdouts Fluence and Powin recently switched over to TEUs, which have higher energy densities and are more cost-effective to shift due to their compatibility with multimodal logistics platforms, CEA noted.
CEA’s supply, technology and policy report examined the market for longer-duration, non-lithium storage technologies and found it “crowded with no clear leader.” Most non-lithium technologies, including thermal storage, liquid air and various next-generation battery chemistries, remain short of full commercialization as market demand for longer-duration storage remains relatively low, CEA said.
The outlook for non-lithium technologies is muddied by a lack of demand drivers for manufacturing scale, with no apparent analogue to the EV-manufacturing boom that drove learning and cost declines in lithium battery technology, CEA added. But next-generation batteries, such as flow, zinc and iron-air chemistries, offer greater potential to scale than mechanical storage technologies — pumps, compressors, storage tanks and so on — that are “well-understood with little iterative potential for cost declines,” it said.
