Battery cell costs have continued to fall, with lithium-ion technologies now reaching a new milestone of $100/kWh. The drop in cell and pack prices — around 20% from 2023 to 2024 to $115/kWh, with a further double-digit fall expected into 2025 — is being driven by oversupply, larger factories, accelerating LFP adoption and cheaper raw-material inputs.
At the system level, IRENA reports that fully installed utility-scale BESS project costs have also declined sharply, falling to around $192/kWh in 2024. The steepest pack-price reductions continue to be seen in China.
Key Drivers Behind the Cost Decline
- Gigafactory capacity & scale-up — Manufacturing scale continues to reduce per-unit capital and overheads.
- Chemistry shifts (LFP uptake) — Lower-cost LFP cells, particularly for stationary storage and many EV segments, cut cell costs and reduce dependence on cobalt and nickel.
- Commodity cycles — The sharp fall in lithium and other raw-material prices after the 2022 peaks has lowered material cost contributions.
- Manufacturing & pack innovations — Cell-to-pack design, higher energy-density cells, automated assembly and more efficient BMS architectures continue to push costs down.
- Demand mix & utilisation — Rapid EV capacity growth initially strained supply, but slower-than-expected EV demand in 2023–24 created oversupply and further price pressure.
Effects on BESS Economics and Deployment
Falling cell and pack costs are transforming the economics of large-scale battery projects:
- Utility-scale BESS deployment is expanding rapidly, with improved returns and lower entry costs.
- Solar-plus-storage is now competitive with many thermal options for daily load shifting.
- System-level costs — inverters, balance-of-system and installation — still matter, but overall capital costs for 4-hour systems have dropped enough to make many projects bankable without significant subsidy.
Near-Term Outlook & Uncertainties
- Pack price outlook: Analysts, including Goldman Sachs, expect continued declines towards the $80–$120/kWh range over the next 1–2 years if current supply, demand and commodity trends hold. Some projections point to $80/kWh by 2026.
- Key uncertainties: Volatility in raw-material markets (especially lithium and nickel), trade policy (tariffs and incentives), the pace of domestic gigafactory build-outs outside China, recycling and circular-economy readiness, and the degree to which LFP continues to displace higher-nickel chemistries across applications.
Implications for the Market
- Project developers: Improved IRRs and more viable longer-duration storage solutions.
- OEMs: Cheaper packs reduce EV total cost of ownership and accelerate progress towards price parity with ICE vehicles (BloombergNEF).
- Policy makers: Falling costs support decarbonisation goals but heighten the need for supply-chain diversification and effective recycling strategies (IEA).
Project evaluation: We are seeing increasing interest from OEMs and BESS developers in NovAzure’s Value Calculator, used to model the financial performance of both front-of-the-meter and behind-the-meter BESS applications. With total cost of ownership and project IRR central to investment decisions, the ability to evaluate different configurations is becoming essential. If you’d like to know more, please reach out at p.cholerton@novazure.com.
