Trend reversal: LFP batteries set to fully displace traditional NMC storage

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2024/10/10. A disruptive shift is emerging in stationary energy storage: Lithium batteries with NMC (Nickel-Manganese-Cobalt) cathodes are losing their dominant market position in favor of LFP (Lithium Iron Phosphate) batteries. In 2020, NMC batteries held 49% of the stationary energy storage market, significantly more than LFP batteries at 33%. However, the "Energy Storage" news service forecasts that by 2026, LFP batteries will capture 95% of the market.

The reason: While NMC and NCA batteries offer higher energy density, which is critical for electric vehicles where every kilogram counts, lower costs and longer lifespan are more important for stationary energy storage. As a result, LFP batteries, with lifespans of up to 20 years, are the better choice.

Technology shift leads to lower prices

This shift marks a divergence between the technological paths of traction batteries and stationary energy storage. The technology shift is also the main driver of the sharp decline in energy storage prices. According to a report by "Ecomento," LFP cells have the lowest global weighted average price at $95/kWh. In 2023, the average price for LFP cells fell below $100/kWh for the first time. On average, LFP cells were 32% cheaper than Lithium-Nickel-Manganese-Cobalt (NMC) cells in 2023. Since cathode material makes up about 40% of the total cost of a battery, this largely explains the lower prices.

Market growth in energy storage

Recent price developments have led to significant market growth. According to the International Energy Agency (IEA), 2023 saw the largest annual increase in battery installations. The IEA reported that last year, 42 GW of batteries were installed globally in utility-scale power plants, off-grid systems, and residential stationary solar energy storage. Batteries became the most-invested-in technology in the energy sector in 2023, according to the IEA.

Bright prospects: Lower prices and greater efficiency

In addition to lower prices, the positive outlook for LFP cells is also driven by increasing energy density. Recently, cells with more than 300 Ah were introduced for the first time. This not only boosts storage capacity per unit but also reduces the cost per ampere-hour (Ah). Furthermore, system integration efficiency improves due to fewer connections and more capacity per rack and container. For example, 20-foot containers can now hold 5MWh, up from 3.72MWh previously.

SVOLT is planning to introduce 710 Ah cells for 6MWh systems in the near future. However, one of the challenges for large-capacity systems is their weight. Transport options, especially for export and compliance with freight weight regulations in markets like Europe and the U.S., are significantly restricted for energy storage systems of this scale.