Transportation’s Battery Bottleneck: Context, Challenges, and Path Forward

By Kevin Hettrich

In 2012 the global passenger car market topped 78 million vehicles. Of that, 120,000 vehicles—0.2% of the market—were plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs).  To put the size of this segment into perspective, ten times as many Toyota Corollas were sold in 2012 than all BEVs and PHEVs models combined.  Such low penetration is arguably surprising for the following reasons.

There is no shortage of electric vehicles in the market. Shown here, the Nissan Leaf.

There is no shortage of electric vehicles in the market. Shown here, the Nissan Leaf.

First, most major automotive manufacturers have developed and released PHEV and BEV models—Toyota Prius PHEV, GM Volt, Nissan Leaf, Ford C-Max Energi, VW e-Up, Volvo V60 PHEV—together with emerging manufacturers like Tesla and BYD who produce the Model S and F3DM respectively.

Second, electric vehicles offer drivers performance advantages.   Electric motors have a wider power range, enabling use of a single fixed gear and resulting in smooth driving with no “gaps” due to gear switching.  The flatter torque curve of electric motors enables better acceleration over a broader range of engine speeds.   The battery electric Tesla Model S, winner of 2013 Motor Trend Car of the Year, is one of the quickest American four-doors ever built.

Third, EVs are around 75% less expensive to drive than gasoline vehicles.  Assuming $3.60 per gallon of gasoline and a 30 mpg car, each mile driven costs twelve cents.  Assuming $0.09 per kWh of electricity and 0.33 kWh/mile, a mile driven costs three cents.  Driving 10,000 miles per year would equate to $900 savings per year.  Fewer moving mechanical parts in a BEV powertrain—perhaps half a dozen—translate into lower annual maintenance costs when compared to the hundreds of moving mechanical parts in a combustion engine.

Fourth, government subsidy of plug-in electric vehicles is widespread and substantive.   Customers in China, the world’s largest vehicle market by volume, benefit from a $10,000 subsidy towards the purchase of a BEV or $7500 towards a PHEV; in addition, drivers of electric vehicles in China are commonly exempt from annual vehicle tax.  The US federal government offers up to a $7,500 subsidy on top of which states add incremental incentives.  California for example provides a further $2,500 in subsidies and access to high occupancy vehicle lanes during rush hour.  Upstream from the customer, the US government funds research to drive down the cost of batteries, grants low cost loans to battery and electric vehicle manufacturers, and subsidizes charging infrastructure. The EU and individual member states have similar programs.

Multiple available models, fun to drive, inexpensive to operate, strong subsidy from the government to jumpstart the industry—all this yet BEVs and PHEVs still have relatively little penetration.  Most signs point to prohibitively high battery system costs as the current bottleneck.  A July 2012 McKinsey study estimated battery system costs to be near $500 per kilowatt hour (kWh) and cited a need to reduce prices by a third to half for more significant penetration of PHEVs and BEVs respectively.   To put $500 per kWh into perspective, the 24kWh battery system alone—note, not the car—in the EPA rated 73 mile[1] Nissan Leaf would cost $12,000.  That is nearly equivalent to the full $15,000 retail price for the 2012 Nissan Versa 1.8S that can drive nearly 400 miles on a single tank.

Tesla is building a vast network of "supercharger" stations so drivers can recharge on the fly.

Tesla is building a vast network of “supercharger” stations so drivers can recharge on the fly.

In the longer term, as system prices come down, focus will likely shift to volumetric energy density—more kWh of battery storage does not help if it does not fit in the car—together with charge power to reduce recharging times on long trips.  As car manufacturers design purpose built BEVs, more will likely follow the lead of the BMW i3 and Tesla Model S and locate a flat battery pack under the passenger floor to benefit from a lower center of mass, efficient cooling, and as volumetric energy improves, the opportunity to withdraw the battery system from the driver pole crash zone.

In the near to medium term the industry is focused on bringing down battery system costs for BEVs and PHEVs to a point where for a mainstream customer the total cost of vehicle ownership is competitive or better than combustion engine equivalents.  Battery systems are composed of cells grouped into modules interconnected with ancillary subsystems for mechanical support, thermal management, and electronic control; the largest component of battery system cost is the cost of the cells and specifically the input materials for the cells—cathode, anode, electrolyte, separator, current collectors, and so forth.  Intuitively, the industry can reduce cell material costs in two ways: reduce per kg cost of material and/or increase the amount of energy each kg of material stores.

Reducing per kg cost of material has potential, especially the separator where more competitive entry is expected to bring down pricing.  However the relative maturity of the cylindrical form factor batteries utilized by Tesla, Mercedes, and Toyota in their BEVs (also commonly utilized in consumer electronics like laptops and consequently the current cost leader) means progress is more likely incremental than revolutionary.

Consequently, disruptive innovation, difficult and historically rare, is more likely to manifest as a substantial improvement in the amount of energy stored per a kg of material.  Such high risk, high impact research is underway today into different classes of lithium ion chemistry (e.g. formation reactions like lithium-air and lithium-sulfur), the use of active materials other than lithium (e.g. magnesium), and new material structures that hold the promise to increase energy density by 200 percent or more.  Testament to the challenges and complexity of commercializing large improvements, over the last twenty years the industry has made only incremental progress, improving energy stored per kg of material at a pace of 5-6% per year, effectively gating EV penetration. Breakthroughs and commercialization of “new” chemistries or innovation in material science sufficient to unlock the massive potential electric vehicle market are no easy feat.

Yet despite these challenges, the massive potential transportation market together with the growing grid and consumer electronics demand is creating tremendous pull and incentive for such innovation to occur from governments, universities, incumbent manufacturers, and new entrants.  Let’s wish the material scientists and chemists luck; much rides on their success.

Kevin Hettrich is a director at a stealth energy storage company in the San Francisco bay area. He holds an MBA from the Stanford Graduate School of Business and a Masters of Science from Stanford’s Emmett Interdisciplinary Program in Environment and Resources. Prior to completion of his graduate work at Stanford, Kevin worked at McKinsey, Bain Capital, and the US Department of Energy’s Advanced Research and Program Agency – Energy (ARPA-e).