Price vs The True Cost of Lithium-ion Batteries Simplified
Differentiating between price point and ‘cost’ is paramount to advancing the discussion in the solar + energy storage industry with regard to performance and real value over the life of the assets. When comparing the performance profile of batteries across chemistries such as lead acid, lithium ion, flow, or others, it becomes evident how different chemistries, form factors (cylindrical, prismatic, pouch) and battery designs can impact the true cost of energy delivered over the battery’s useful life. In particular, within the lithium-ion family of batteries, different chemistries and form factors play a significant, yet often overlooked role in the assessment of the true lifetime cost of a battery versus its up-front price point.
While it is common practice to make purchasing decisions based on the basic up front price point per watt calculation of a lithium-ion battery, determining the Levelized Cost of Energy (LCOE) over the battery’s useable lifetime is a more accurate and reliable method for understanding the true cost and ROI for your customer. This is particularly true for solar + storage leasing programs in which the longevity and amount of energy delivered over the period of the lease is critical to the economic modeling.
In commercial and residential energy storage, two basic categories of lithium-ion chemistries can be grouped together: those with cobalt oxide and those without it. Chemistries with cobalt include: Lithium Cobalt Oxide (LiCoO2 or LCO), Lithium Nickel Manganese Cobalt Oxide (LiNiMnCoO2 or NMC), Lithium Nickel Cobalt Aluminum Oxide (LiNiCoAlO2 or NCA). Cobalt oxide is toxic and unstable. It offers a shorter cycle life and can result in what is commonly referred to as ‘thermal runaway’. These battery chemistries are known as LI with cobalt and are the basis for all the fires and recalls in the lithium -ion family of batteries prevalent in today’s news, such as the Samsung Galaxy Note 7.
Chemistries without cobalt oxide include: Lithium Ferrous Phosphate, also known as Lithium Iron Phosphate (LiFePO4 or LFP). In the solar + storage market, This is the only lithium ion chemistry utilized by SimpliPhi Power.
To calculate the Levelized Cost of Energy in Watt hours (Wh) for any battery, this simple formula can be used:
Step One: Get the Numbers
- Price Per Watt-hour
- Cycle Life
- Depth of Discharge
- Available Capacity
- Efficiency Charge & Discharge Rate
Cycle Life is the number of full charge and discharge cycles expected over a battery’s lifetime while it has at least 80 percent of its original published capacity left, which is the industry standard End Of Life (EOL) definition. Some battery manufacturers do not hold to the 80 percent EOL, which makes it difficult to assess LCOE accurately. Based on published studies, LI with cobalt chemistries offer a cycle life of ~ 700 cycles EOL. By contrast, the primary advantages of the Lithium Ferrous Phosphate chemistry are the significantly longer cycle life, from 2,500 up to 10,000 cycles, for SimpliPhi batteries, and the absence of risk from overheating, fire and ‘thermal runaway’.
Depth of Discharge is how much total energy can be drawn from the battery in one complete charge/discharge cycle. With many LI with cobalt chemistries, DOD is limited to 50 percent of the battery to safeguard against overheating or fire, as well as voiding the warranty. On average, an 80 percent or deeper DOD is common for LI without cobalt. Very often it is the inverter that prevents a 100 percent DOD in an installation, whatever the chemistry, in order to ensure a level of voltage required by the inverter to ‘stay-on-line.’
Capacity involves how much energy in watt hours (Wh) can be stored in the battery. This is key when a limited depth of discharge is factored into the LCOE equation. When an LI with cobalt battery is discharged at a shallower depth, for example, the battery can last longer, but the shallower depth translates into less available and less useable Wh over the life of the battery. This means that there can very often be a difference between the ‘nameplate’ capacity and the available capacity (number of Wh) as a function of the depth of discharge. The shallow discharge can reduce the available capacity by 50 percent in some cases and therefore increase the total LCOE for a battery. In addition, to make up for this loss in available watt hours due to shallow discharging, more batteries and larger installations are often required to make up the difference, requiring more space and weight to provide the same amount of power and energy than batteries that do not require shallow discharging, like LFP. Shallow discharging leads to a higher LCOE when the difference between the ‘nameplate’ capacity is higher than the actual available capacity or output of a battery.
Finally, the efficiency rate indicates how much energy is lost or maintained in the charge and discharge cycle, or how much energy can be effectively stored in the battery and pulled back out for use. With an over 98 percent efficiency rate, SimpliPhi batteries deliver almost 100 percent of the Wh that they store in the charge and discharge cycle. This also translates into smaller, lighter batteries, smaller installations and a more efficient utilization of space and weight.
With many LI with cobalt batteries, the efficiency rate is lower and they therefore deliver less Wh relative to the number of Wh required to charge the battery. This means the LI with cobalt batteries offer less energy or Wh for actual use per pound and per square foot, which also adds to the overall cost of an installation. Lower efficiency rates, shallower depths of discharge and longer charge and discharge times are all techniques employed in LI with cobalt batteries to protect against overheating and thermal runaway. This can significantly reduce the total efficiency of the system, leaving less usable energy for offsetting electrical loads in an installation.
Taking a hypothetical example: assume a battery with a nameplate and usable capacity of 3.4 kWh with 98 percent efficiency. The battery can be discharged at 80 percent DoD for 10,000 cycles, and is sold at $2,550 USD. The LCOE calculation will then be: $2,550 divided by 3.4 kWh x 80% DoD x 98% round trip efficiency x 10,000 cycles, or $2550 divided by 26,656 kWh. Thus, the LCOE is 9.5 cents per kWh. This is lower than the national residential average electricity rate of $0.12/kWh. Such a battery will deliver 34 MWh over its useful life if it discharges to 100 percent DOD.
Step Two: Factor in Hidden Costs
In addition to the LCOE analysis developed above that is based on the performance profile of the battery itself, other ancillary costs of the installation, that erode a lower up-front price point in terms of the LCOE need to be factored into the equation.
Expected Ancillary Costs May Include:
- Overall square footage – use of valuable real estate
- Weight – shipping costs per Wh per pound
- Forklift and other installation equipment
- On-going maintenance
- External HVAC equipment to maintain optimal ambient temperature
- Containment and extra space for ventilation and set-back requirements
- Construction to support larger systems
- Replacement cost due to inefficiencies and shorter cycle life
Mitigating the heat buildup and potential for thermal runaway in LI with cobalt batteries requires extra space for ventilation, internal cooling equipment and special manufacturing materials. This adds significantly to the actual cost, size, and weight. Precautionary equipment and installation and maintenance guidelines to safeguard against heat or fire are required for LI with cobalt batteries.
Even so, some LFP manufacturers must also ventilate and cool their batteries for optimum performance because the battery management system, circuitry, and/or internal architecture generate heat. The exception is SimpliPhi Power, whose batteries are among the few LFP batteries that do not generate heat, do not require ventilation or cooling, resulting in a 98 percent efficiency rate, 10,000 cycle life with a wide operating temperature of -4 to 140 F.
In sum, the power electronics and internal architecture of a battery have as much to do with the overall performance, LCOE, and safety as the chemistry and form factor itself. Fundamental to identifying the true costs and benefits of any battery system is calculating its cost in lifetime watt hours (LW), as well as the other costs involved in installation, operation, and replacement over time that deliver the more complete Levelized Cost of Energy. We at SimpliPhi Power encourage those considering energy storage to evaluate the options carefully and with the above criteria in mind to determine what solution creates a more secure, cost-effective, non-toxic and sustainable future for customers.
Catherine Von Burg is the CEO of SimpliPhi Power, which combines non-hazardous LFP chemistry with its proprietary cell and battery architecture, power electronics, Battery Management System (BMS) and assembly techniques to create safe, reliable, durable and highly scalable on-demand power solutions for the residential, commercial, military, emergency response and film industries.