3 ms·

>> A 600-fold increase in battery production made batteries much cheaper. >> Economists have found that manufacturing costs often decline at a predictable rate

by netcan 5y ago

>> A 600-fold increase in battery production made batteries much cheaper. >> Economists have found that manufacturing costs often decline at a predictable rate. In a model known as an experience curve, costs fall by the same percentage (called the learning rate) each time industry-wide volume doubles... So somewhat of a meta... Moore's law is a specific instance. The Y axis is price. The X axis is production volume, not time. Usually, rising production volume must overcompensate for falling prices to maintain a such a trend. Lunar travel, for example, did not get much cheaper over the decades because volume didn't increase. The automobile industries' golden years of annual price improvements ended in the 1920s. The US market had peaked^, because demand for cars was finite.^ If the price of a car halves, we don't triple the number of cars we buy. With computing, demand (or capacity to consume) has been able to "keep up" with Moore's Law. The market overcompensates for falling chip prices with increased consumption. More X for the X-axis. I think this is where we are currently for electric. Home installation, commercial and grid installations are still speculative. Vehicles are no longer speculative. The demand is there. It's not open-ended like computing, because once every vehicle has a battery... But for the next few years, demand will predictably rise to overcompensate for falling prices. ^https://hbr.org/resources/images/article_assets/hbr/7409/74501_A.gif https://hbr.org/resources/images/article_assets/hbr/7409/745...

bryanlarsen 5y ago
Excellent point. We need about 50 TWh of batteries to convert the world's cars to electric, and a similar amount to convert the world's grid to renewables. We're currently producing about 0.3 TWh annually, and have more than that coming online in each of 2022, 2023, 2024 and 2025. So we should have at least a decade of strong demand to keep driving down prices. Of course those low prices will probably stimulate more use cases, but it does seem likely that those new uses aren't as large as vehicles or grid storage.
- entropicgravity 5y ago
  It would require a lot fewer batteries if a large percentage of the cars were replaced with e-bikes. Not as crazy as it sounds now.
usrusr 5y ago
You're forgetting about market share. If prices don't sink further because demand elasticity is maxed out it has to be the result of some form of market failure. Either on the seller side (collusion, aka refusal to use pricing for market share increase) or irrationality on the buyer side (veblen goods, clearly a factor with cars and moon travel is, in a way, off the charts in that metric). I like to look at sinking prices of technology through the the mental model of an inherent minimum cost, where learning or scale doesn't just make it magically cheaper but reduces avoidable overhead. Plenty of product types that have started expensive and then became cheaper and cheaper have clearly seen all the economy of scale that could reasonably be expected, they wouldn't become any cheaper per unit if the market consumed 10x as much. Same for spending a few more decades making them, unlikely to learn ways to make it web cheaper.
- netcan 5y ago
  I disagree. >>If prices don't sink further because demand elasticity is maxed out it has to be the result of some form of market failure The "normal/natural" state is that prices do not simply continue dropping always. US automobile prices were at their best in the late 20s, with a model-T-costing <$10k adjusted. By that point annual sales were maxed, competition had taken most profits out of the game... Not incidentally, the depression was starting to happen. In the industry, cars-as-fashion became a thing. When an industry hits peak demand, prices don't just continue to fall until the industry becomes tiny. At least, that's not a very common pattern and the trend certainly doesn't just continue to here as a continuation of an expansionary learning curve. Welfarist/marginalist economic models don't take into account that time/history/economics is directional. Expanding markets don't follow the same rules as contracting ones.
  - usrusr 5y ago
    Replace "normal/natural" with "idealized": yes, free market theory promises quite strongly that if there is a more efficient way to produce something, eventually some contender will discover that way and begin pushing out competition until that competition adapts. That mechanism does not require demand elasticity at all, it can work just fine in a perfectly inelastic market. Food is the closest thing we have to an inelastic market and it's certainly not a market characterized by lack of price competition caused by that absence of demand elasticity. Yes, expanding markets work different than stable or contacting markets. But that difference is that the expansion can gloss over certain failure modes. Yes, Intel might have occasionally pushed out a new Pentium generation if x86 had been the only CPU architecture in the world and AMD (and Cyrix) had not existed, because the demand for instructions per second rises with availability (this abstraction conveniently groups demand from replacement upgrades and demand from new use cases into a single bin). But that would have still been a broken market, even while the brokenness was temporarily hidden by demand elasticity/expansion. Model T wasn't the most efficient moment of car manufacturing, not if you include features in the equation. A car with the performance of the model T wouldn't sell today for a dollar beyond scrap value, and even Tatas and Dacias can e.g. be started without cranking and so on. The closest equivalent to a Model T would be a Tuktuk and those are cheaper today even before adjusting for a full century of inflation.

by netcan 5y ago

bryanlarsen 5y ago

Excellent point. We need about 50 TWh of batteries to convert the world's cars to electric, and a similar amount to convert the world's grid to renewables. We're currently producing about 0.3 TWh annually, and have more than that coming online in each of 2022, 2023, 2024 and 2025. So we should have at least a decade of strong demand to keep driving down prices. Of course those low prices will probably stimulate more use cases, but it does seem likely that those new uses aren't as large as vehicles or grid storage.

entropicgravity 5y ago
It would require a lot fewer batteries if a large percentage of the cars were replaced with e-bikes. Not as crazy as it sounds now.

usrusr 5y ago

You're forgetting about market share. If prices don't sink further because demand elasticity is maxed out it has to be the result of some form of market failure. Either on the seller side (collusion, aka refusal to use pricing for market share increase) or irrationality on the buyer side (veblen goods, clearly a factor with cars and moon travel is, in a way, off the charts in that metric). I like to look at sinking prices of technology through the the mental model of an inherent minimum cost, where learning or scale doesn't just make it magically cheaper but reduces avoidable overhead. Plenty of product types that have started expensive and then became cheaper and cheaper have clearly seen all the economy of scale that could reasonably be expected, they wouldn't become any cheaper per unit if the market consumed 10x as much. Same for spending a few more decades making them, unlikely to learn ways to make it web cheaper.

netcan 5y ago
I disagree. >>If prices don't sink further because demand elasticity is maxed out it has to be the result of some form of market failure The "normal/natural" state is that prices do not simply continue dropping always. US automobile prices were at their best in the late 20s, with a model-T-costing <$10k adjusted. By that point annual sales were maxed, competition had taken most profits out of the game... Not incidentally, the depression was starting to happen. In the industry, cars-as-fashion became a thing. When an industry hits peak demand, prices don't just continue to fall until the industry becomes tiny. At least, that's not a very common pattern and the trend certainly doesn't just continue to here as a continuation of an expansionary learning curve. Welfarist/marginalist economic models don't take into account that time/history/economics is directional. Expanding markets don't follow the same rules as contracting ones.
- usrusr 5y ago
  Replace "normal/natural" with "idealized": yes, free market theory promises quite strongly that if there is a more efficient way to produce something, eventually some contender will discover that way and begin pushing out competition until that competition adapts. That mechanism does not require demand elasticity at all, it can work just fine in a perfectly inelastic market. Food is the closest thing we have to an inelastic market and it's certainly not a market characterized by lack of price competition caused by that absence of demand elasticity. Yes, expanding markets work different than stable or contacting markets. But that difference is that the expansion can gloss over certain failure modes. Yes, Intel might have occasionally pushed out a new Pentium generation if x86 had been the only CPU architecture in the world and AMD (and Cyrix) had not existed, because the demand for instructions per second rises with availability (this abstraction conveniently groups demand from replacement upgrades and demand from new use cases into a single bin). But that would have still been a broken market, even while the brokenness was temporarily hidden by demand elasticity/expansion. Model T wasn't the most efficient moment of car manufacturing, not if you include features in the equation. A car with the performance of the model T wouldn't sell today for a dollar beyond scrap value, and even Tatas and Dacias can e.g. be started without cranking and so on. The closest equivalent to a Model T would be a Tuktuk and those are cheaper today even before adjusting for a full century of inflation.