LFP to overtake NMC as dominant stationary storage chemistry by 2030

Lithium-iron-phosphate (LFP) is poised to overtake lithium-manganese-cobalt-oxide (NMC) as the dominant stationary storage chemistry within the decade, growing from 10% of the market in 2015 to more than 30% in 2030, according to new analysis from Wood Mackenzie.

Most lithium-ion energy storage systems currently installed run out of power at 4-6 hours. Today’s chemistries suffer from diminishing returns and unfavourable economics at durations longer than this.

However, a growing demand from electric vehicles (EVs) and energy storage systems (ESS) is creating the need to develop advanced lithium-ion batteries through improvements in battery cathodes, anodes and electrolytes.

“The ESS market has heavily relied on EV batteries in the past but changing performance requirements will lead to an evolution of separate markets.

“Since 2010, the rapid rise in demand for EVs has driven down the cost of lithium-ion batteries by more than 85%. Historically, the ESS market has mostly deployed NMC batteries. In late 2018 and early 2019, demand for NMC batteries for energy storage industry grew swiftly, outstripping the available supply.

“While there was a shortage of NMC batteries in the storage market, there were plenty of LFP batteries available - with capacity mostly in China.

“As lead times for NMC availability grew and prices remained flat, LFP vendors began tapping into NMC constrained markets at competitive prices, thus making LFP an attractive option for both power and energy applications,” said Mitalee Gupta, Wood Mackenzie Senior Analyst.

Demand from both EVs and ESS will skyrocket in the coming years. However, evolving performance priorities will create a divergence between the types of batteries used for storage and those used for EV applications. OEMs will begin to innovate and specialise their product offerings.

“Aspects like high cycling capabilities and high frequency will take precedence over energy density and reliability for the ESS market. Cost and safety will continue to top the mind of battery vendors for multiple applications,” added Gupta.

EVs will continue to make the lion’s share of global lithium-ion battery demand over the next 10 years. Demand from portable electronics will see a significant drop from 26% in 2020 to 6% in 2030, as both EVs and ESS markets begin to take off.

While LFP will steal the show for ESS applications, Wood Mackenzie says the use of LFP will remain popular within the Chinese EV market before breaking into the global passenger EV sector. The chemistry is expected to retain more than 20% of EV battery installations through 2025. 

“Improvements in gravimetric energy density combined with cell-to-pack technology is the key to LFP now becoming a more attractive proposition in the passenger EV space. Not only will cost and safety be a benefit, but OEMs won’t have to worry about issues surrounding the supply of cobalt and nickel,” said Milan Thakore, Wood Mackenzie Senior Research Analyst.