Energy Storage Market Forecast Prepared for NYBEST Energy Storage Conference October 11, 2017 Primary Author: Sam Jaffe 1
Table of Contents ABOUT CAIRN ERA LI-ION PRICING MARKET DEMAND FORECAST IMPLICATIONS FOR SUPPLY CHAIN 2
ABOUT CAIRN ERA Who We Are and What We Do 3
Cairn ERA Cairn Energy Research Advisors is a strategic market research and consulting firm with a specialization in energy storage and other emerging energy technologies. Cairn ERA approaches all projects from a first principles philosophy: all models are bottom-up and no data is entered that is not extremely robust. Cairn ERA s strength is in its people and its processes. All Cairn ERA partners have multiple years of experience working in the energy sector and have a strong and diverse network of contacts throughout the industry. And the Cairn ERA approach to research and modelling has been honed over decades of experience in providing first-rate deliverables to some of the world s most successful and demanding companies. All rights reserved Cairn Energy Research Advisors 2017 4
CAIRN ERA INTRODUCTION Methodology: How Cairn ERA s Modelling Process Works Demand Bottom-Up Business modeling Supply Price Forecasting External Stress Testing Top-Down Historical Proxy Comparisons Pricing threshold model: individual applications are modelled to determine an price threshold for that application to become feasible More than 20 individual stationary storage applications and eight different transportation applications are tracked and modelled Pricing data is then forecasted based on knowledge of materials markets, manufacturing process and manufacturing capacity changes Forecasts are then built around expected pricing and expected market demand based on ROI-positive business models for each application Forecasts are then stress-tested against top-down historical proxy growth curves to determine how other historical examples have grown under similar supply/demand circumstances 5 All rights reserved Cairn Energy Research Advisors 2017
SECTION 2: LI-ION PRICING Cell and Component Pricing Forecast 6
MILLIONS USD LITHIUM ION PRICING All Applications Forecast All Battery Applications, Global Forecast in Energy Capacity and Revenue, 2015-2026 800,000 $70,000 700,000 $60,000 600,000 500,000 400,000 300,000 200,000 100,000 $50,000 $40,000 $30,000 $20,000 $10,000 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Energy Capacity 67,176.6 78,448.2 89,717.2 101,507.3 114,472.6 163,180.9 199,098.4 243,783.5 347,680.6 372,224.9 485,747.3 759,383.7 Total Revenue 23,964.7 24,906.8 24,446.2 24,841.5 25,573.6 30,253.2 33,972.9 38,831.0 44,182.0 43,753.2 50,294.5 66,447.5 $0 7
$/KWH $/KWH LI ION PRICING Historical and Forecast Li-Ion Average Cell Pricing for Large Automotive Orders in $/KWH, Historical and Forecast, 2009-2026 Li-Ion Average Cell Pricing for Large Automotive Orders in $/KWH, Historical and Forecast, 2009-2026 $1,400 $350 $1,200 $300 $1,000 $250 $800 $200 $600 Cell Pricing $150 Cell Pricing $400 $100 $200 $50 $0 $0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 8
COGS for Li-ion Changes To 2019 Overall Battery Manufacturing Costs Total Manufacturing Costs of Average Li-Ion Battery, 2016 $14.58 $59.20 $12.95 $7.22 $4.66 $29.58 Anode Cathode Electrolyte Separator Case and Tabs Cost of Manufacturing Total Manufacturing Costs of Average Li-ion Battery Cell at Price of $100/KWH, 2019 $11.47 $48.66 $5.18 $5.22 $4.66 $13.53 Anode Cathode Electrolyte Separator Case and Tabs Cost of Manufacturing Cairn ERA estimates that the average Li-ion battery costs to manufacture will drop from $128.19 per KWH to $88.72 in the next three years. That would leave the battery manufacturer a profit margin of 11.28%. 9
The Road to $100 Approaches to Cost Reductions Four Clear Approaches: Compress Logistics Tail Compress Manufacturing Costs Compress Processed Materials Prices Compress Margins all Along the Supply Chain 10
Logistics: The Journey of a Lithium Molecule A lithium molecule is extracted from a salt lake in Chile and then follows this route before a car customer drives off the lot powered by batteries using that lithium molecule. Shipped from Chile to Alabama to be refined into battery grad Lithium Carbonate. 4,788 Miles. Shipped from Alabama to Los Angeles Port and then to Japan for further refinement. 7,480 Miles. Shipped to Korea for mixture into NCA slurry. 714 Miles. Shipped to Shanghai. 537 Miles. Multiple stops at various distribution warehouses in the Shenzhen/Shanghai area before being incorporated into a battery at a factory in Shenzhen. 200 Miles. Battery is then shipped back to Los Angeles to be incorporated into car battery pack. 6,465 Miles. Total Miles: 20,184 Miles 11 All rights reserved Cairn Energy Research Advisors 2016
Manufacturing Approaches to Cost Reductions: Manufacturing Costs Manufacturing costs will come down significantly from scale alone, which will make energy, equipment and permitting/tax costs cheaper Purchasing of newer equipment will also decrease equipment costs due to higher automation levels in newer equipment. Cairn ERA expects that it is reasonable to expect increased scale alone to allow reductions in manufacturing costs from $29.58 per KWH to $17.75, which translates in a reduction of BOM/COGS of 30% to 18%. 12
SECTION 3: MARKET DEMAND Growth of Market Demand by Segment 13
AXIS TITLE Market Demand: ALL ELECTRODE CHEMISTRIES The overarching trend in electrode chemistries of Li- Ion will be the expansion of NMC market share. All chemistries outside of LCO and LMO will see increased annual market share from 2016, although growth rates will dramatically differ. NCA s growth rate will mirror Tesla s vehicle sales rate. LFP and NMC will dominate the market by 2020 and will only grow faster beyond that. 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Energy Capacity of All Batteries by Electrode Chemistry (MWH), 2015-2026 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 14 Other LTO LFP LMO NMC NCA LCO
MWH MILLIONS USD Forecasts: Consumer Electronics Forecast 60,000 50,000 40,000 Portable Devices Global Battery Energy Capacity (MWH) and Revenue (Millions USD), 2015-2026 $16,600 $16,400 $16,200 $16,000 30,000 20,000 10,000 $15,800 $15,600 $15,400 $15,200 $15,000 Revenue Energy Capacity 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $14,800 The appetite for consumer electronics batteries will grow at a tepid pace between 2015 and 2020, from 41.7 GWH in 2013 to 47.4 GWH in 2020. Some regions, primarily North America, will actually see declining growth in energy capacity. Revenue will decline at a 3.1% CAGR between 2015 and 2020 thanks to declining prices, especially for higher end polymer electrolyte chemistries used in tablets and smartphones All rights reserved Cairn Energy Research Advisors 2017 15
MWH MILLIONS USD PEV Battery Forecast Global Transportation Energy Capacity Global Transportation Energy Capacity (MWH) and Cell Revenue (Millions USD0, 2015-2026 700,000 600,000 500,000 400,000 300,000 200,000 100,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Revenue Energy Capacity 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $0 The global automotive industry consumed 24.3 GWH of batteries in 2015. By 2025, it will consume almost 650 GWH s. North America is by far the highest consumer today (thanks to Tesla). By 2025, it still will be, but Asia and Europe will be close. 16
MWH MILLIONS USD Stationary Storage: Reserve Power Forecast 600 Global Reserve Power Batteries Forecast in Energy Capacity (MWH) and Cell Revenue (Millions USD), 3025-2026 $3,500 500 $3,000 400 $2,500 300 200 $2,000 $1,500 $1,000 Revenue Energy Capacity 100 $500 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $0 Reserve power is a stable, mature market, growing revenue at 1.8% for the next ten years and growing in energy capacity by 2.9% annually. The reserve power segment is moving from lead acid towards Li-ion, but not wholesale. By 2020, half of new UPS systems will have Liion batteries. 17
MWH MILLIONS USD Stationary Storage: Ancillary Services Forecast 800.0 700.0 600.0 500.0 Global Ancillary Services Batteries Forecast in Energy Capacity (MWH) and Cell Revenue (Millions USD), 3025-2026 $200 $180 $160 $140 $120 Source: ECoult 400.0 300.0 $100 $80 Revenue Energy Capacity 200.0 $60 $40 100.0 $20 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $0 The use of batteries for ancillary services on the grid will see low growth between 2015 and 2025 globally, but significant contractions in growth in some regions (North America) and expansions in others (Asia Pacific). Globally this will even out to an annual CAGR of 14.2% in terms of energy capacity of systems sold, and 4.4% in terms of revenue for batteries sold. Globally, system shipments will grow from 170 MWH s in 2015 to 326.6 MWH s in 2020 and revenue for battery cells sold will reach $702 million in 2026. 18
MWH MILLIONS USD Stationary Storage: Load Shifting Forecast Global Load Shifting Batteries Forecast in Energy Capacity (MWH) and Cell Revenue (Millions USD), 3025-2026 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $700 $600 $500 $400 $300 $200 $100 $0 Energy Capacity Revenue Traditional load shifting has been done with pumped hydro/nuclear systems; To meet those costs with batteries, prices have to significantly decline further Load shifting with batteries is the most immature market today, with growth expected late in the coming decade. Energy capacity will grow from 46 MWH s in 2015 to 8,945 MWH s in 2025. Revenue will grow from $18 million to $592 million in 2025. Load shifting will be the one application which will see significant competition for Li-Ion, in the form of flow batteries 19
MWH MILLIONS USD Stationary Storage: Peak Shifting Forecast 50,000 Global Peak Shifting Batteries Forecast in Energy Capacity (MWH) and Cell Revenue (Millions USD), 3025-2026 $4,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Revenue Energy Capacity 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $0 Batteries sold to provide peak shifting services will grow from 475 MWH s in 2015 to 45,556 MegaWatt-Hours in 2025, representing a CAGR of 60% between 2015 and 2020. Peak shifting will become the main application of batteries on the grid. Revenue for battery sales will increase from $159 million in 2015 to $3.7 billion in 2025, representing a ten year CAGR between 2015 and 2025 of 48.4%. 20
MWH MILLIONS USD Stationary Storage: All Applications Global Stationary Storage Batteries Forecast in Energy Capacity (MWH) and Cell Revenue (Millions USD), 3025-2026 60,000 $8,000 50,000 $7,000 $6,000 40,000 $5,000 30,000 20,000 10,000 $4,000 $3,000 $2,000 $1,000 Revenue Energy Capacity 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 $0 Stationary storage battery sales will grow from 1,118 MWH s in 2015 to 55,745 MWH s in 2026. The 2015 to 2020 forecasted CAGR is 84.2%. Cell revenue will grow from $2.4 billion in 2015 to $6.9 billion in 2025. The Forecasted CAGR for revenue growth between 2015 and 2020 is 24.7%. 21
MWH MILLIONS USD Global Battery Forecast All Applications 800,000 $70,000 700,000 $60,000 600,000 500,000 $50,000 $40,000 400,000 300,000 200,000 $30,000 $20,000 100,000 $10,000 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Total Energy Capacity 67,176.6 78,448.2 89,717.2 101,507.3 114,472.6 163,180.9 199,098.4 243,783.5 347,680.6 372,224.9 485,747.3 759,383.7 Total Revenue 23,964.7 24,906.8 24,446.2 24,841.5 25,573.6 30,253.2 33,972.9 38,831.0 44,182.0 43,753.2 50,294.5 66,447.5 $0 22
QUESTIONS? Cairn Energy Research Advisors is a research and consulting firm with a focus on energy storage. We provide strategic insight and data that allows our clients to thrive in the dynamic global energy marketplace. We are based in Boulder, CO and work with clients in Asia, Europe, the Middle East and North America. +1 720 598 3048 info@cairnera.com 23 All rights reserved Cairn Energy Research Advisors 2016