3.4 million used electric vehicle (EV) batteries are expected to hit the market by 2025, representing a cumulative capacity of 95 GWh, and potentially meaning just as much hazardous waste. Environmental regulations are growing more and more stringent, especially in Europe, and disposing of such amounts of used batteries is hardly conceivable, while recycling processes are yet not convincing from an ecological standpoint. However, developing business models supporting the extension of batteries’ lifetime in second life applications is a promising market: the European industry (car original equipment manufacturers/OEMs, battery producers and utilities) must seize the opportunity to maximize the residual value of these assets, while at the same time leverage their environmental stance into a competitive advantage.
Old EV batteries: should they be re-used or recycled?
Recycling processes for industrial Li-ion batteries remain immature and expensive, and are not expected to take off for a while. While the cost of fully recycling a battery is falling towards €1 per kg (approx. €10 per kilowatt-hour), this is still approximately 3 times higher than what can be expected from selling the reclaimed materials on the market.
For instance, lithium cannot be recovered from smelting processes, instead ending up as a byproduct unfit for reuse in batteries. Additional processes can help reclaim lithium, but these are so costly that currently less than 3% of battery lithium is recycled. As a comparison, some sources claim that about 90% of a lead acid battery can be recycled for use in new batteries, almost in a closed loop. The design and production processes of Li-ion batteries make them harder and more expensive to recycle. Only the recovery of cobalt makes recycling li-ion batteries just about economically interesting, but this raw material included in the composition of some cathodes is subject to strong upward and downward price fluctuations. Paradoxically, innovation in battery chemistry tend to make li-ion battery recycling even less profitable, by aiming at reducing the share of high-value materials, such as cobalt, in their composition (thus materials economically interesting to retrieve).
The solution to absorb the mass of used batteries will probably not be found in recycling, at least on the short to mid-term. Developing a second life for these assets would instead maximize their value while giving the recycling sector more time to structure and find its profitability model.
A wide range of applications possible to turn used batteries into valuable assets
Although used EV batteries are no longer adapted to supplying energy to demanding engines like cars, most of them retain 50 to 90% of their capacity after their first life in a vehicle. The upfront cost of second life batteries is attractive, even after factoring upcoming cost reduction: the cost of a second life repurposed battery is around $50/kWh, versus $200-300 for new build today, and should remain competitive at least until 2025, when the price of a new battery should reach $90/kWh.
Less demanding applications than mobility, such as stationary uses, may constitute promising options to harvest the spared value of used EV batteries. In such applications, old batteries are expected to be able to provide services for about ten years more. The first generations of used EV batteries are already being tested for various purposes around the globe, such as managing peak demand or regulating grid frequency.
Several profiles of the players involved in this landscape can be identified:
- Car OEMs are particularly active in this field: as sellers of EVs, they either remain the owners of the batteries leased with their vehicles, or in any case are, according the EU regulations, responsible for collecting and recycling them. In this context, BMW set up a battery storage farm in Leipzig, relying on 700 new and second-life i3 battery packs. The facility has a capacity of 15MW, and provides storage capacity to local wind energy generation and grid balancing capability.
- Major utilities, often in partnership with car OEMs, are also more and more involved in second life battery projects. Trying to find the best combination between new and used batteries, they expect to benefit from grid services that could be provided at lower costs. With this objective in mind, Nissan partnered with EDF Energy to explore how second-life batteries can be used to support demand-side management.
- Smaller players, such as providers of residential and commercial storage, or portable storage, are also starting to develop projects at a smaller scale, often repacking old modules themselves into new products. For example, Powervault partnered up with Renault to turn old Renault Zoe battery packs into home storage systems, helping households cut electricity bills by more than a third.
Other projects are mushrooming and being tested around the world, but low volumes are preventing real large-scale applications using second life batteries from really taking off yet.
Some obstacles must be overcome to push the transformation of the batteries’ lifecycle
While working with key players active in the second life battery market, the following risks have often been mentioned:
- Cumbersome transportation regulation: due to stringent European regulations on dangerous goods and the lack of harmonization between countries, moving used or damaged battery packs across borders is logistically and administratively complicated. At current volumes, such logistical issues can make the cost of second life battery projects unsustainable.
- Unclear safety and environmental standards: the lack of perspective on aging properties, together with current regulations on safety mostly adapted to new batteries, limit the number of applications possible, such as in-house residential storage. Ongoing works on the Ecodesign and Battery directives at the EU level should help clarify part of the two first points by 2020.
- Lack of data on the performance of different batteries chemistries and designs: assessing the remaining capacity at the cell level remains difficult, as first-generation BMS (Battery Management System) have not been developed for a close monitoring, nor do they provide a full range of technical data history of batteries at different levels.
- Inexistent roadmap on recycling: uncertainty remains regarding the potential take off-of recycling as a main competitor to second life battery projects.
The European battery industry can strongly benefit from collectively developing business models for second life batteries: maximizing the remaining value of their assets while setting foot on the EU battery market
Several conditions can be secured to tackle the challenge:
- Secure partnerships with local stakeholders dealing with the batteries end of life (collectors, recycling companies,…) at the end of car lifetimes;
- Crack the logistics conundrum to centralize the collection and testing of used batteries, reach economies of scale, and reduce transportation & storage costs to a minimum
- Push the development of energy management systems that can combine 1st and second life batteries, using different brands, chemistries and designs. In this regard the use of artificial intelligence will play an important role
- Stay in close connection with battery manufacturers to understand their technological roadmap and anticipate disruptive innovation
As Asian players gain ground in the production of battery cells, with 60% of the world market in 2018, second life applications could constitute a way of competing in the battery business by capturing the residual value of already amortized assets and limiting the need for cells imports to supply stationary storage projects. It is time to find the right balance between tackling the environmental imperative and developing sustainable business models for second life battery projects, to make sure European battery players stand up in the world battery value chain.
Capgemini Invent activities on second life batteries
Connected to a strong ecosystem of industrial partners, Capgemini Invent Energy and Utilities team conducts studies on second life battery applications and supports major players in developing their projects. Our team can support you in designing the right project to make the most of used batteries, using an end-to-end approach.
To know more about Capgemini Invent projects on second life batteries, or to be assisted in your project, please contact email@example.com
About Capgemini INVENT
As the digital innovation, consulting and transformation brand of the Capgemini Group, Capgemini Invent helps CxOs envision and build what’s next for their organizations. Located in more than 30 offices and 22 creative studios around the world, its 6,000+ strong team combines strategy, technology, data science and creative design with deep industry expertise and insights, to develop new digital solutions and business models of the future.
Capgemini Invent is an integral part of Capgemini, a global leader in consulting, technology services and digital transformation. The Group is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of over 200,000 team members in more than 40 countries. The Group reported 2018 global revenues of EUR 13.2 billion. People matter, results count.
Visit us at www.capgemini.com/invent
|This document contains information that may be privileged or confidential and is the property of the Capgemini Group.
Copyright © 2019 Capgemini. All rights reserved.