Chasing Zero – Why battery power should unlock the energy transition

But there has also been an equally potent economic driver: the costs associated with lithium-ion battery production have plunged a remarkable 90% since 2010, transforming the economics of battery-reliant systems and machinery, most notably for electric vehicles (EVs). Alongside their efficiency, the price drop has helped establish lithium-ion units as the premium option for both EVs and industrial grid-scale storage, though research into multiple alternatives is intensifying.

While batteries had already become a lynchpin of modern life, powering millions of computers, phones and portable devices, it is the boom in the transport and energy sector over the last five years that has transformed the landscape. The energy sector now accounts for over 90% of the demand for lithium-ion batteries – a market that itself expanded ten-fold between 2016 and 2023.

This imbalance has been met by a series of major policy responses, most notably the Inflation Reduction Act in the US, which through a series of aggressive measures looks to onshore supply chains crucial to the energy transition. State support must certainly continue if private investors are to be convinced, with many battery projects suffering from unpredictable revenue streams or uncertainty in jurisdictions with underweight industries and regulatory regimes. There is also a wider challenge around how to get investors comfortable with the commodity risk associated with battery storage projects, though increasingly creative approaches are helping attract cash.

Touted alternatives, such as sodium-ion units which offset lower energy density with more readily available minerals, remain second best amid low lithium prices and now lithium-ion batteries are viable for both utility-scale and consumer requirements, two formerly distinct sectors that are now blurring. Huge uncertainties about both the viability of battery supply chains outside China as well as the fortunes of the vying alternatives to lithium batteries remain profound challenges for investors, industry players and policymakers considering where to place their bets. Given the long lead times for automotive production lines, such uncertainty risks choking off much-needed investment at a key moment in the push for post-carbon power.

In the latest chapter in our Chasing Zero series exploring the hard realities of the drive for clean power, we assess a sector that remains crucial in the journey to net zero. Barring a rapid and unlikely thawing in global trade relations, the ultimate question remains how battery production can be diversified and exponentially expanded globally at improbable speed if it is not to undercut the energy transition. From the feasibility of mass roll-out of grid-scale battery storage, to the uncertain prospects of EVs, to challenging geopolitics and the global hunt for critical minerals, our experts assess the key issues.