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Report: Cut Battery Costs out of the Electric Vehicle Equation

Cutting the cost of the battery out of the cost of owning an electric vehicle could be a key way to push electric vehicles into the mass market. That’s according to a report (“Changing the Game”) released Thursday from consulting giant Accenture (s ACN), which studied EV pilot projects from the Netherlands to the U.K. to Japan.

The report found that amidst the many technical, regulatory and market challenges that remain between today’s nascent industry and President Barack Obama’s call for 1 million electric cars on U.S. roads by 2015, the main barrier is cost of EVs — and not surprisingly it’s the batteries’ fault.

“Until the cost per kilowatt-hour (kWh) [of a battery] dramatically decreases (to reach approximately $300/kWh), consumer uptake is likely to be limited to a dedicated and niche consumer market segment,” the report states.  The problem is, most EV batteries nowadays cost at least $450 per kWh — and that’s after decades of researchers making significant efforts to lower the cost. The limits of today’s battery chemistries just might have mostly been reached.

The solution, Accenture suggests, is “disaggregating” battery costs from the car, usually via leasing either the car or the battery itself. Not only would that bring down vehicle costs, but it would help deal with thorny warranty issues, given EV batteries will likely end up having a lifespan of 10 years or less.

Automakers would have to arrange those battery financing terms on their own, or they could partner with a player like Better Place, a Palo Alto, Calif.-based startup with plans for developing battery-swapping stations around the world. Changing out car batteries every 100 miles or so will require working with the EV manufacturers on warranties, and Better Place will have to figure out ways to pay for all those standby batteries.

Beyond the key battery-leasing concept, Accenture dived into how geographical differences will play into EV charging pilots. For example, BMW’s tests of its Mini-E plug-ins in key U.S. cities found range wasn’t as big an issue in New York and New Jersey, but all its drivers tended to have more than one car in the garage. BMW’s ongoing Mini-E tests in the U.K. and Germany may well yield different results. No doubt EV “roaming” (charging EVs across various service providers) will have to be worked out between utilities and charging infrastructure or automotive partners.

Utilities around the world are prepping for plug-in cars via pilot projects, and tools like PG&E’s new EV power pricing website are coming online to help consumers make sense of it all. Companies are partnering up to serve this new market, including Cisco’s link-up with car charging company ECOTality (c csco), Siemens’ (s si) co-marketing deal with Coulomb Technologies and General Electric’s pilots with Better Place (s ge).

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Image courtesy of NScale7 via Creative Commons license.

6 Responses to “Report: Cut Battery Costs out of the Electric Vehicle Equation”

  1. Accenture seems to have odd info. Tesla’s batteries reputedly cost way less than $450. Some analysts claim $200. Of course, it’s all relative – if the price of gasoline skyrockets …
    Considering all the various promising technological strategies being pursued vigorously by battery researchers, the claim that batteries have gotten as cost-effective as they ever will is a very strange claim. Just a month ago, a notable advance was announced by the DOT and Tesla says that battery prices continue to decline 6 to 8 percent year over year. Tesla and others (BYD) are also offering very fast recharging capabilities, which ameliorates the need for
    extensive driving ranges. When the Tesla Model S debuts next year, it will have a 300+ mile driving range and a recharge time of less than one hour. That car is superior to any gas vehicles in its class and will be, in my opinion, the first EV to be as practical and capable as its gasoline competitors.

  2. What if you had to pre-pay for all the gas you were going to use for the first 5 – 8 years when you bought a regular car? It would be a little hard to take. That’s kind of what we’re seeing with EV batteries. Charging costs are minimal – it’s almost like paying fuel tax. The “fuel” dollar-cost comparisons between EVs and gas vehicles are really close, but it’s a paradigm shift. You have to remember what we’re really saving by using electric cars. Less pollution, improved energy security, lower cost of ownership, etc. Electrics are really superior when viewed in the big picture.

  3. What a dumb suggestion. Users have to pay for the batteries if leased/bought whatever. The auto companies are not going to eat the cost. How stupid do they think people are?

  4. What if batteries could be securitized? I know people are afraid of that word but it would allow people to effectively lease batteries….there would need to be a credible clearing house but this is something the country could invest in itself as well as the government. Considering the number of plug-ins likely to hit the road over the next 5-7 years, most plug-in vehicles battery’s could be financed for under $3-4B….