“As prices for Li-ion cells come down, more applications will become eligible for their use, creating a self-feeding cycle that will lead to lower prices and more widespread adoption”
This increase in manufacturing capacity is driven by an expected dramatic increase in global demand, especially with respect to batteries for plug-in electric vehicles and for stationary storage.
IDC Energy Insights forecasts global manufacturers of plug-in electric vehicles will require more than seven times their current level of production in 2011, rising to 17,331 MWh by 2015. North America will lead the demand in the coming year; however, Asia will quickly eclipse North America in demand.
IDC Energy Insights forecasts that if Li-ion costs fall as expected, global stationary storage Li-ion demand on the electric grid will increase from 2011 by over 17 times to 640 MWh in 2015.
In total, IDC Energy Insights forecasts global growth in demand of Li-ion batteries of 447% from 5,411 MWh in 2011 to 24,191 MWh in 2015.
To meet this expected demand, manufacturers throughout the world are engaging in one of the largest factory build-outs in world history. It is led by a combination of existing battery giants, such as Panasonic in Japan, Samsung SDI in South Korea, and Johnson Controls in the United States, as well as emerging players, such as A123 Systems in the United States, Electrovaya in Canada, and BYD in China. In the United States, there is a thriving Li-ion manufacturing industry reignited by the American Recovery and Reinvestment Act, which provided 50% matching grants to Li-ion manufacturing facilities. However, the vast majority of Li-ion production will occur in Japan, South Korea, and China, whose governments have identified the Li-ion industry as a vital national interest and have initiated significant subsidies to help build new factories.
Li-ion batteries are the preferred battery type in a number of applications ranging from plug-in electric vehicles to computers to power tools, based on their flexibility, durability, energy density, and power capabilities. Historically, the one challenge that has delayed adoption has been price: they are significantly more expensive today than other battery types. However, the enormous increase in production capacity will generate economies of scale, causing Li-ion battery prices to decrease significantly.
"As prices for Li-ion cells come down, more applications will become eligible for their use, creating a self-feeding cycle that will lead to lower prices and more widespread adoption," explained Sam Jaffe, research manager for IDC Energy Insights and one of the authors of the report. "Demand and supply will be in rough equilibrium for at least the next three years, allowing manufacturers to reach high levels of production capacity and leading to even lower price points."
The IDC Energy Insights report quantifies the sources of demand for Li-ion batteries, including a quantification of the build-out by region and by chemistry type, and a demand forecast by region and by usage type. The report is best used by consumers (automotive OEMs, electric utility executives, etc.) and producers of these batteries to help with strategic planning over the next five years.