The Global Battery Alliance was launched at this year’s World Economic Forum in Davos, Switzerland, with the aim of promoting the sustainable development of the global battery industry. In recent years, there has been significant growth in the global battery market for energy storage and transport, with the cost of lithium batteries falling at an extremely fast rate. The cost of lithium batteries in 2015 was still higher than $350 per kilowatt hour, but at the end of 2018, the sales price of power batteries had dropped to $130/kWh, and the cost of energy storage systems had fallen below $200/kWh.

Until now, the growth of the world economy has been still coupled with an increase in energy consumption. The transformation to cleaner energy is the main tool to cope with the carbon emissions and climate change. The advancement of battery technology and the associated reduction in costs are the key to climate change mitigation and sustainable development. This is reflected in several aspects:

First, the development of electric vehicles provides an opportunity for the substitution of fossil fuel in the transportation sector. As the income level of developing countries increases, the energy demand of the transportation sector will continue to rise. The energy system of the current transportation sector is still dominated by oil. Automobiles account for more than 60 percent of the total demand for oil. The development of new energy vehicles can help the transportation sector break its dependence on oil.

Second, the cost of renewable energy, especially the cost of photovoltaic, has dropped significantly, it is already lower than the average electricity pricetariff. This shows that renewable energy has begun to be economically feasible for large-scale substitution of fossil fuels. However, renewable energy such as wind and photovoltaic has the disadvantages of beingfeatures intermittent and volatile, and the cost of grid infrastructure is high. Energy storage is the key for the grid to absorb and stabilize renewable energy. According to the current data, the cost of distributed photovoltaic plus and energy storage system has been close to the general industrial and commercial electricity tariffs in China. As the cost continues to decline in the near future, the competitive advantage of renewable energy will become more apparent.

Third, it is foreseeable that the future urban energy system couldwill be dominated bycomposed of photovoltaic energy, electric vehicles and energy storage. With electric vehicles becoming part of the electricity system, system efficiency will be substantially improved to deal with the large electricity peak loads increments due to the expected future growth in residential and commercial electricity demand.

Therefore, batteries will play a key role in the future energy system.

China will play an important role in the global energy storage and transportation market with the eye-catching development innoticeable battery, energy storage and electric vehicle industries. The At the beginning of 2018, more than 200 gigawatt hour capacity of battery power had been put into production or was planned in China. However, the actual production for the whole year was only 70.6 GWh. There is a structural surplus in the battery industry. Meanwhile, sales of electric vehicles have experienced rapid growth in China. In 2018, sales of electric vehicles increased 50.9 percent and almost reached 1 million units. The advanced deployment of the battery capacity will effectively support the growth of electric vehicles in the future.

Thanks to the rapid decline in battery costs, electric vehicles in China already is becoming more competitive than traditional fuel vehicles. The year 2017 marks the transition point in the development of electric vehicles. Before 2017, the overall cost of electric vehicles (involving the battery costs) is higher than that of fuel vehicles. But after 2017, the overall cost of electric vehicles began to be lower than that of fuel vehicles.

The growth rate of battery energy storage is also encouraging. In the first half of 2018, the sales of energy storage systems of the Contemporary Amperex Technology Co., Limited, the world’s largest power battery manufacturer, increased tenfold. At present, the outdated management of the electricity system in China is the main barrier restricting the large-scale application of battery energy storage. In the future, with the deepening of reform in the power sector and the gradual liberalizationfurther opening-up of the retail power market, battery storage is expected to grow explosively.

The technological progress and cost reduction of batteries and renewable energy provides a bright future for the global response to climate change and sustainable development. However, the transformation of the energy system is a systematic project that requires enhanced international cooperation and coordination of the industrial chain. This requires the coordinated global development of renewable energy, and the energy storage and electric vehicle industries should be effectively promoted. The governments of mMany countries have provided policies to encourage the development of renewable energy, energy storage and electric vehicles, but most of these policies have been launched in isolation and lack overall system coordination. Policy design in the future should pay more attention to the cooperation and coordination of the industrial chain.

Also trade protection and tariff barriers should be eliminated. Due to market scale and effective policy support, China’s battery and renewable energy have made great achievements. However, since the costs of battery and renewable energy have fallen too fast, mainly due to overcapacity, it has affected the related industries in some other countries and protectionist measures, such as anti-dumping tariffs, have been adopted. In fact, there are spillover effects in terms of technological advances, and China’s low-cost technologies and products could help the world to achieve clean transitions at lower costs. Rejecting Chinese products may make it more difficult for the global mitigation to climate change mitigation. International competition and cooperation in the fields of renewable energy, batteries, electric vehicles and other industries should be encouraged with a more open mind.

The World Economy Forum’s Global Battery Alliance brings together key global companies and top experts. With this platform, great contributions can be made to the global low carbon clean transition.

The author is a professordean of China Energy Policy Research Institute and dean of China Energy Policy Research Institute at Xiamen University. The views expressed do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.