This month Tesla’s chief technology officer JB Straubel predicted lithium-ion batteries could plummet to around $100 per kilowatt-hour by decade’s end enabling electric cars to be far more affordable and longer range than they are today.

Speaking in a sit-down interview along with CEO Elon Musk at the Edison Electric Institute annual convention in New Orleans, Straubel predicted this price range factoring a dynamic climate of increasing-and-shifting demand and increasing supply.

If $100 per kilowatt-hour sounds cheap, it is. The U.S. Energy Information Administration (EiA) projected in 2013 costs could be above $600 per kilowatt-hour and even out to the year 2040, they’d still be above $200.

From EIA's Vehicle Choice Modeling and Projections for the Annual Energy Outlook - January 2013.

From EIA’s Vehicle Choice Modeling and Projections for the Annual Energy Outlook – January 2013.

A stated goal by the U.S. Department of Energy Vehicle Technology Office’s 2015 outlook was to slash prices to $125 per kilowatt-hour by 2022 and by 2013 to $325/kwh. What automakers specifically pay to the dollar is a closely guarded secret, but none of them pay anywhere near $100.

But earlier projections were before the Gigafactory was announced, and Straubel’s statement, if proven correct, would suggest the market which is in flux may be harder to project than even others close to the issues can accurately do.

Enabling Model 3 and More

The context for Straubel’s statement was when he volunteered that the Model 3 will need cheap energy storage to sell for $35,000 and offer 200-mile-plus range.

When asked to expound, he replied a tipping point in the battery market is on the near horizon. For the past decade or two, he said, prices have been determined by demand for consumer electronics, but the plug-in car market and utility energy storage demand is increasing.

“I think maybe this year, maybe next, you know we’ll see this crossover where the majority of battery demand is driven by utility and also vehicle applications,” Straubel said. “So the growth curve on those types of markets is so much faster. It’s an order of magnitude more demand that we’ll see from vehicles and the grid than what people used in their cell phones and laptop computers. So that is going to drive down the prices [of li-ion batteries] much faster than what I think people will expect.”

JB STraubel

The Gigafactory being constructed in Nevada and due to start operation possibly next year is also part of the plan to induce this synergy.

Straubel said federal estimates on how fast the price of li-ion will come down are probably too bearish.

“I think most of the targets that we see from the likes of DoE or EIA are very much on the conservative side. And, you can sort of do the math on what a battery would have to cost, you know, for a vehicle that can travel 200 – 250 miles and still cost $35,000,” said Straubel, “but I think we would be disappointed if battery costs were not in the $100 dollar range [per kilowatt-hour] by the end of this decade, somewhere in this ballpark.”

If Straubel’s projection comes to pass, although he did not explicitly say so, it could mean another tipping point – for electrified cars improving affordability, range, performance, and where subsidies are no longer necessary.

Presently, high production costs are one major hurdle preventing manufacturers from more aggressive development, but this could potentially be removed.

As for Tesla, reports from this same meeting came out that 250-mile range for Model 3 was stated by Musk, and it was not. It was only implied by him and Straubel.

Musk actually said the Model 3 should “have at least 200 mile range, hopefully a fair bit more than that” and Straubel threw out the number 250 as quoted above.

What Musk did say are Model 3 as well as “full range” of cars and trucks it aims to build need to provide long range, good looks, good performance and electronics.

Thanks to Jeff Nisewanger for the tip.