Lithium-iron-phosphate (LFP) batteries are likely to become dominant stationary storage chemistry by 2030, overtaking lithium-manganese-cobalt-oxide (NCM), according to Wood Mackenzie.
The consultancy said Aug.17 that it expected LFP chemistries to make up over 30% of the energy storage systems battery chemistry market share in 2030, up from 10% in 2015.
In comparison to the expected LFP growth, WoodMac Energy Storage Service forecast NMC batteries' share of the ESS battery chemistry market to fall from around 70% in 2015 to around 30% in 2030.
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The consultancy said current chemistries were suffering from diminishing returns and unfavorable economics at powered up durations of longer than four to six hours and growing demand from ESS and electric vehicles had created a need for advanced and improved lithium-ion batteries.
WoodMac senior analyst Mitalee Gupta said the ESS market had relied heavily on EV batteries in the past, but changing performance requirements were leading to an evolution of separate markets.
"Since 2010, the rapid rise in demand for EVs has driven down the cost of lithium-ion batteries by more than 85%. Historically, the ESS market has mostly deployed NMC batteries," she said.
Gupta said that in late 2018 and early 2019, demand for NMC batteries for ESS grew quickly, outstripping the available supply, while there was ample supply of LFP batteries, particularly in China.
"As lead times for NMC availability grew and prices remained flat, LFP vendors began tapping into NMC constrained markets at competitive prices, thus making LFP an attractive option for both power and energy applications," she said.
Recent data from the China Automotive Battery Innovation Alliance showed that China's power battery output jumped 6.4% year on year in July to 6.1 GWh, which was also 13.8% higher than in June, with the rise attributed to the surge in LFP batteries.
The output of LFP batteries rose 97.8% on the year to comprise 2.8 GWh, or 45.6%, of the total, up from 24.5% in July 2019.
In comparison, output of ternary batteries fell 23.1% on year to comprise the balance 3.3 GWh.
Divergence between battery types used
WoodMac expects demand from EVs and ESS to "skyrocket" in the coming years, but said evolving performance priorities were expected to create a divergence between the types of batteries used for ESS and those used for EVs.
As a result, OEMs are expected to start innovating and specializing their product offerings.
Gupta said that, in the ESS market, high recycling capabilities and high frequency would become more important than energy density and reliability.
"Cost and safety will continue to top the mind of battery vendors for multiple applications," she added.
While LFP was expected to "steal the show for ESS applications," WoodMac said this chemistry would also remain popular in the Chinese EV market, with the chemistry forecast to retain over 20% of EV battery installations through 2025.
However, it still needed to break into the global passenger EV sector.
WoodMac senior research analyst Milan Thakore said improvements in gravimetric energy density combined with cell-to-pack technology was the key to LFP becoming a more attractive proposition in the passenger EV space.
"Not only will cost and safety be a benefit, but OEMs won't have to worry about issues surrounding the supply of cobalt and nickel," he said.
The consultancy forecast EVs to continue to make up the majority of global lithium-ion battery demand over the next decade and as the ESS market also started to take off, it expected demand from portable electronics to drop from 26% in 2020 to 6% in 2030.
