Average lithium-ion (Li-ion) battery cell cost will fall below $100/kWh in the next three years, while improved cheaper technologies and economies of scale will drive it down to $73/kWh by the end of 2030, according to a recent analysis by IHS Markit.

Significant contributors through the decade will be lower manufacturing costs derived from larger capacities. Low-cost cathode compositions and higher energy density will improve efficiencies making cells cheaper. Prices will fall as Li-ion batteries find extensive use in powering electric vehicles and provide resilience to power grids following large renewable generation capacity addition, according to the analysis.

“Cost is the name of the game. Technology advances and competition between different types of lithium-ion batteries are driving prices down,” says Youmin Rong, senior analyst at IHS Markit.

The firm estimated the average cost of batteries to have declined 82% since 2012. By 2023, this decline would reach 86% in a decade. Further cost reduction is vital in increasing competitiveness, broader adoption in electric transport, and in-grid storage.

“Progress in growing the share of low-carbon generation, such as solar and wind, in the global power mix, also brings a particular set of challenges—intermittency,” said Sam Wilkinson, associate director, clean energy technology at IHS Markit. “Improving the cost-effectiveness of energy storage, particularly batteries, will be key to providing needed flexibility to balance this supply of electricity with demand,” he added.

The cost of the Iron Phosphate (LFP) variant of li-ion batteries is already below $100/kWh. LFP price will remain lower than other available variants throughout the current decade, according to the analysis.

Costs of two other variants, Nickel Manganese Cobalt (NMC) and Nickel Cobalt Aluminum (NCA), are expected to fall below $100/kWh in four years. These will continue to command a majority share of the automotive and transport market due to their higher energy density.

Meanwhile, Chinese lithium-ion battery manufacturers are likely to retain their recently acquired number one position in the next five years, predicts a recent Bloomberg New Energy Finance’s (BNEF) ‘Global Lithium-Ion Battery Supply Chain Ranking. The ranking offers a snapshot of a country’s position in 2020 and indicated 2025 global rankings based on its current development trajectory. China secured the position recently by surpassing decade-old dominant players Japan and Korea, which are now in the second and third positions.

Battery energy storage companies received $536 million in VC funding in 1H of 2020, and Lithium-ion technology received most of this funding to date.