Batteries – the next big step forward in the energy transition.

Nick Butler

Time is a key dimension in the climate change debate.  With increasing evidence that climate change is already happening, the value of focusing on 2050 is limited.  Our focus should be on what can be done now.  Fortunately, one answer is available and affordable. That answer may not solve the whole problem, but it could buy us the time we need to develop other solutions.

The most important technology in the next phase of the energy transition will be batteries and energy storage.  There are numerous exciting possibilities for the medium- and longer-term future – small nuclear reactors, direct air capture, green hydrogen and even fusion.    But all are still many years away from commerciality or development at the industrial scale required.

When it comes to climate change however time is not on our side. As the research from Berkeley Earth shows global mean temperatures have exceeded the1.5 degree threshold in each of the last six months.

Fossil fuels still account for 80 per cent of global energy consumption and emissions are growing – with another 37 GT added to the total accumulated in the atmosphere last year.

The growth in the supply from renewables – wind and solar – is positive even though the costs associated with Chinese supply chains is reducing their cost advantage over coal. But the major shift which we need in the energy market has yet to come.  That shift has to include a rapid move away from coal – the main source of growing emissions – and in favour of electricity supplied from low carbon sources.

That is where the potential of batteries comes in.

At the moment electricity supplies 20 per cent of final global demand for energy. Batteries power our phones and laptops and a limited number of electric vehicles.  In addition, batteries also provide a growing amount of energy storage capacity.

The basic technology is well established, and costs have fallen.  Now a series of proven advances are set to dramatically increase the scale and range of potential uses making electrification across much wider parts of the economy easier and more economic.

The first advance has been a dramatic fall in prices. According to new work from the International Energy Agency Lithium-ion battery prices have fallen from $1400 per KWhr in 2010 to less than $140 today thanks to progress in technical research on economies of scale in manufacturing.  There have also been advances in energy densities enabling much lighter and more compact battery packs – a crucial feature for battery use in vehicles.

New battery content has also enabled a move to Lithium-ion phosphate (LFP) chemistries which do not contain nickel or cobalt, and which are less flammable and have a longer lifetime.  Lithium-ion batteries are more suitable for electric vehicles because of their energy density.   LFP batteries have less energy density and are therefore more suitable for energy storage applications.  LFP batteries accounted for 80 per cent of the new battery storage capacity added worldwide last year.

The two main markets for batteries are therefore growing rapidly.  By the end of last year there were some 45 million electric vehicles on the world’s roads and more than 85 GW of battery storage in the power sector.  Both are set to grow.  The process of phasing out internal combustion engines will take decades but the number of electric vehicles – including buses and light freight lorries is set to exceed 300 million within the next ten years.  If costs come down still further that figure could be significantly higher.

The most dramatic shift, however, is in the ability to store power.  Batteries can transform the already attractive costs of producing electricity from wind or solar power. Much of the renewable power produced through the use of wind turbines or solar panels is lost because it cannot be used instantly.  Because wind and solar are intermittent sources of power which cannot be relied upon to produce continuous flows of electricity, they require backup supplies to fulfil consumer needs when the wind is not blowing, and the sun fails to shine.  The backup usually takes the form of natural gas fired plants which can be turned on and off as needed but have to be kept on standby.  Storage of power at the point of production or by the end user in their home or factory eliminates these added costs, improves the productivity of every wind or solar facility and adds to energy security.  Storage reduces losses and congestion in power grids.

Perhaps most important of storage makes electricity a more attractive choice for energy users and has the potential over the next decade to shift demand across the economy away from oil, gas and coal.  Solar power coupled with storage is already competitive with new coal fired power in India and should soon be able to challenge, without subsidy, new coal and gas power in areas such as China and the U.S.


A doubling of electricity’s share of final demand from 20 to 40 per cent is the only available way to transform the climate outlook.  That would buy time for the other possibilities for change to be developed to the point where they are commercially viable and can be deployed at scale.

Storage is already being used to cover for very short-term breaks in supply resulting grid outages but is now set to be a much important and integral part of the energy supply system as the amounts which can be stored increase.  Supply contracts are now starting to include storage capacity.

Batteries also provide the simplest and most readily available means of providing access to energy, for instance through solar home systems and mini-grids to the millions of people worldwide whose homes and villages are unattached to the power grid. In the absence of access to electricity they would be forced to continue burning wood or coal.

The complication associated with the rapid and continuing growth in the use of batteries is that several key points in the supply chain are dominated by China as the supply of many of the key raw materials and rare earths required.  So too are the processing facilities.  China currently produces 85 per cent of all the world’s battery cells and although the US and Europe are seeking to build new supply chains and to increase their own production capacity.  As things stand China is the global industrial leader in batteries with the capacity to set global prices.


The case for expanding western capacity is very strong.  New sources of supplies of key minerals are being identified – for instance in the deep water offshore Northern Norway. Research continues on new chemistry for instance on sodium-ion batteries which do not rely on lithium and therefore have lower production costs and steady state batteries which offer substantial performance gains.   Overtime, large-scale recycling businesses will be needed with the aim both of managing the potentially dangerous waste involved and reusing materials wherever possible.  New businesses can also continue to widen the scope of battery use in different sectors which are not yet electrified.

Chinese leadership in battery technology has come as the result of coherent national policies covering technical research, production capacity and financial support.  The fact that Europe and the U.S. are so far behind is an indictment of past policy but also an indicator of what can be done.  President Biden’s Inflation Reduction Act which has stimulated investment by business in the energy transition now needs to be followed by a targeted industrial policy which sees batteries and energy storage as one of the most important sources of real progress towards a low carbon economy.  The U.S. and Europe should work together to reduce their dependence on China.

The risk of inaction is that dependence begins to become a vulnerability.  Strong and ideally diversified supply chains are a key element of energy security.  The shape of those supply chains is also a critical determinant of where the economic benefits of the transition will end up – the jobs, the wealth creation and the potential to create new businesses which can make use of local stored power.

The energy transition is not just a matter of protecting the climate. It is also absolutely fundamental to the shape of global economy in the 21st century.