Earlier this year, Telsa Motors made headlines when it announced that the company would start selling Tesla-branded stationary storage batteries. The move was expected, but a bit odd—battery storage for homes has been around for years, but it has never really been cost-effective enough in most households to merit the kind of treatment that Tesla gave it. While Tesla successfully nurtured a luxury electric vehicle market, it still seemed out of place to see a luxury brand going out of its way to put car batteries on homes.

Ars argued that the real news behind Tesla's stationary storage announcement was not that of the consumer-focused Powerwall , but that of the power pack , Tesla's stationary battery system for industrial use cases.

The truly surprising part of Tesla's Powerwall announcement, however, was its price point. In 2014, the average cost of installing a stationary Li-ion battery in a California home was $23,429, according to The Wall Street Journal. In May, Tesla CEO Elon Musk said that these batteries would start at $3,500, plus a $500 installation cost.

It's no secret that Li-ion battery packs have been getting cheaper, and it's unsurprising that Tesla, would experience some economies of scale to allow that kind of price point (whether or not the price is subsidized by the company). And the price is only likely to come down, as the company is in the process of building a massive “gigafactory” outside of Reno, Nevada, with Panasonic to produce Li-ion batteries. Beyond Tesla, however, a recent paper published in Nature Climate Change gathered data to confirm that the cost of Li-ion battery packs for electric vehicles are falling for everyone. If trends continue, the paper suggests, electric vehicle battery packs and their stationary brethren could compete more effectively against gas cars and backup generators not too far into the future.

The research suggests that the cost of producing battery packs for electric vehicles has fallen dramatically between 2007 and 2014, to lower price points than previous optimistic projections had expected. “Results show that costs in 2014 were probably already below average projected costs for the 2020 time frame,” Björn Nykvist and Måns Nilsson wrote in their recent paper.

Nykvist and Nilsson say their data indicate that battery pack costs will continue their precipitous decline, perhaps even reaching the point where Li-ion battery systems on electric vehicles reach parity with gas-guzzling vehicles. (Although the authors of the paper admit that this point, if we ever reach it, is still far in the future—not something we're likely to see this year or next.)

“The single most important factor in achieving a compelling and affordable mass-market BEV [battery electric vehicle] is its relative cost,” Nykvist and Nilsson wrote. “It is commonly understood that the cost of battery packs needs to fall to below US$150 per kWh in order for BEVs to become cost-competitive on par with internal combustion vehicles.”

Nykvist is a research fellow at the Stockholm Environment Institute (SEI), and Nilsson is the Research Director at SEI. The two aggregated cost estimates for electric vehicle battery packs that were found in scientific journals as well as estimates found in “the most cited grey literature, including estimates by agencies, consultancy and industry analysts; news items of individual accounts from industry representatives and experts; and, finally, some further novel estimates for leading BEV manufacturers.” The two researchers did not distinguish between different variants of Li-ion battery chemistry because there was too little data to break out each technology separately, nor did they take into account the costs of hybrid car batteries.

What they found was that the cost of battery backs for electric vehicles has decreased from about $1,000 per kWh in 2007 to about $450 per kWh in 2014. And that's taking all battery electric vehicle manufacturers into account. When you separate out the largest companies making electric vehicles, the cost reductions get even more dramatic. “[T]he cost of battery packs used by market-leading BEV manufacturers are even lower, at US$300 per kWh,” the researchers added.

The authors admitted that their data was imperfect due to secrecy surrounding business deals. But public statements made by electric vehicle makers were used to confirm some of the numbers that the researchers found. “Current average cost at US$300 per kWh for market-leading actors in 2014 is, however, very close to key information given by Tesla Motor chief engineer JB Strubel,” the paper asserts, “who has indicated in 2013 that the costs of the Tesla Model S battery pack is below 25 percent of the total costs of the car in most cases, corresponding to approximately US$310 per kWh. Similarly, other industry experts have also estimated that battery packs in general make up 25 percent of vehicle prices, which corresponds to approximately US$300 per kWh, for example, Nissan Leaf in 2014.”

To explain the shift, the researchers measured what they called the “learning rate,” which they defined as “the cost reduction following a cumulative doubling of production.” For BEV manufacturers around the world, the learning rate was found to be between 6 and 9 percent. And that rate could climb: “There are still R&D improvements to be made in, for example, anode and cathode materials, separator stability and thickness, and electrolyte composition,” Nykvist and Nilsson wrote. “Among these factors, input material cost is among the most important, and costs as low as US$300 per kWh due to such improvements have been discussed. Together with improvements due to economies of scale, a 12-14 percent learning rate is conceivable.”

Venkat Viswanathan, an assistant professor for mechanical engineering at Carnegie Mellon University (with whom Ars has talked about Tesla's batteries before), said he was “cautiously optimistic” about the paper's findings, and noted that an analysis from Bloomberg New Energy Finance offered similarly optimistic results. In April at Bloomberg's New Energy Finance summit, a presentation on renewable energy showed that the learning curve for Li-ion batteries has closely followed the learning curve for solar photovoltaics from 1974 to 2014 (slide 13).

All this means that, barring any circumstances we can't yet foresee, the future is looking good for those trying to keep electric vehicle costs down (although getting people to buy electric vehicles is a separate problem, recently addressed by the National Academy of Sciences). And that might mean good things for stationary storage units like the ones Tesla announced in May. In an e-mail to Ars, Nykvist wrote that costs for stationary storage Li-ion batteries “appear to translate” from the electric vehicle battery pack analysis.

“It is too early to say for certain, but it is clear that the innovation systems around Li-ion batteries for all types of applications (consumer electronics, cars, stationary storage) are connected and benefit from the same basic R&D and learning over time,” he continued. “For Tesla specifically, it is definitely the case.”

Perhaps as a signal to those outside boardroom discussions, more and more automakers are not only developing electric-only vehicles; in recent months, many have jumped into the stationary storage game. Daimler announced its new home storage battery in late May for customers in Germany (one of the few areas in the world where stationary storage makes sense for individual home owners right now, due to the country's vast solar infrastructure). In June, GM suggested that it might consider refurbishing old electric vehicle batteries to sell for stationary storage use. Around the same time Nissan made the same claims.

Although none of these companies announced pricing or specs for their stationary storage plans, Tesla, not to be outdone, announced in June that it would double the output of the 7kWh Powerwall from discharging 2.2 kilowatts during continuous use to discharging 5 kilowatts. "We took some of the negative feedback to heart," Elon Musk said at a shareholders' meeting, referencing one of the main criticisms of the $3,500 unit—that despite its capacity, it might not be able to discharge enough energy at one time to feed a household.

So, this race to bring Li-ion batteries to a market that may be on the cusp of affording them is likely to continue. But when will Li-ion batteries reach a price point where they make more economic sense to use in cars and in stationary storage than gasoline or gas generators? Nykvist told Ars: “It is impossible to assess when such a low level of USD 150/kWh will be reached as it is too far into the future, but we conclude in the paper that the trajectory is very positive, and if the current momentum lasts for a couple of years... a cost level somewhere around 200-250 USD/kWh before 2020 is quite likely.”