By 2025, roughly 11 million electric vehicles (EVs) are expected to be sold worldwide, corresponding to 11% of predicted annual global light-duty vehicle sales.  The emergence of EVs, however, is not only shaking up the automotive industry. Through the increased electrification of the transport sector, a growing link to the power market is emerging, leading to new opportunities and challenges for stationary energy storage players.
At Apricum, we see three major trends arising from the increasing convergence of the transport and power segments, namely:
- Battery-buffered charging stations
- Second-life batteries
In the last installment of a three-part series on each individual trend, we will investigate the increasing availability of used EV batteries, the challenges and trends of applying them to “second-life” storage installations and the expected impact on the stationary energy storage world.
“Second life” – a price breaker for stationary battery storage?
All EV batteries degrade over time, leading to a loss in total storage capacity and resulting in range constraints. While it is the first priority of car OEMs to avoid the (often complex) disassembly and keep the battery in the car as long as possible, e.g., by adapting leasing rates to the reduced range, the battery will eventually become unsuitable for further use in cars. However, at this point, the batteries can still be suitable for less intensive or less critical stationary storage applications – and can therefore be repurposed accordingly, referred to as the “second life” of a battery.
An estimated 80 GWh of batteries were deployed in EVs in 2018.  Even if only a smaller share were suitable for second-life applications about seven years later, this would still translate into a sizeable amount of GWh. In fact, Bloomberg New Energy Finance recently estimated that ~25 GWh of second-life EV batteries will be available for stationary storage in 2025 – at a time when total annual stationary storage demand will be ~20-40 GWh. 
Whether to first repurpose and then recycle a battery or recycle it directly depends on whether returns from the sale of the second-life battery plus the projected (and discounted) returns from recycling exceed the returns from immediate recycling. This in turn depends on a multitude of factors that vary over time, such as raw material prices, the cost of recycling and repurposing, the price of a new battery, expected margins and savings as well as the overall capabilities of storage integrators to cope with second-life batteries and resulting demand.
So how likely are second-life batteries to flood the market and to further reduce the battery price level?
Car OEMs embrace the second-life concept
With transport electrification plans ramping up globally, the focus on second-life opportunities for EV batteries has increased. Especially for car OEMs, which in many regulatory environments such as China and Europe are already obliged to collect and take back used batteries, the idea of generating additional revenue before feeding the batteries into the recycling process is attractive. What’s more, repurposing allows recycling efforts to be deferred to a time when recycling economics have improved, as recycling generally remains a net-cost process today. Hence, it is not a big surprise that car OEMs are at the forefront of the second-life energy storage field.
In 2009, Nissan and Sumitomo announced plans for a second-life EV battery business. This led to the formation of 4R Energy Corp, a joint venture specialized in the reuse and recycling of EV batteries. In 2014, the company announced one of the first large-scale second-life storage projects, a 600 kW/400 kWh system consisting of 16 used EV batteries. In early 2018, the company opened a dedicated remanufacturing and repurposing facility for EV batteries in Japan to offer second-life batteries for both EVs as well as large-scale energy storage systems.
Several large-scale second-life projects have been realized over the last decade. Nissan, Eaton and The Mobility House have provided the Amsterdam Arena with back-up power based on Nissan Leaf batteries. BMW, Bosch and Vattenfall commissioned a large-scale (2 MW/2.8 MWh) stationary energy storage system in Hamburg in 2016, based on 2,600 used BMW battery modules. BMW commissioned a large-scale second-life battery plant in Leipzig in late 2017. Renault joined forces with Powervault, a UK-based energy storage company that year, launching residential energy storage solutions based on used Renault batteries. One year later, Renault and The Mobility House announced plans to deploy a 70 MW/60 MWh second-life battery storage system at various locations in France and Germany, with the maximum capacity to be reached by 2020. Nissan followed quickly with a new partnership announcement with EDF Energy, focusing on the evaluation and deployment of second-life batteries for demand side management.
Outside Europe, Daimler subsidiary Mercedes-Benz Energy and BAIC subsidiary Beijing Electric Vehicle (BJEV) have very recently entered into a development partnership for second-life battery storage systems in China. The partners intend to jointly build the first second-life energy storage system at their Beijing location in order to even out fluctuation in Chinese grid systems and support power-failure management. To give another example, in 2018, China Tower, the world’s biggest operator of telecommunication towers, announced partnerships to work on second-life batteries with over 16 major Chinese EV and battery manufacturers, including BYD, Guoxuan High Tech and YinLong New Energy. China Tower has close to 2 million telecom towers across China, with around 54GWh in battery storage demand for back-up power across their telecom base stations.
It is also worth mentioning that Daimler, together with different partners, has commissioned three large-scale second-life storage projects in Germany since 2016, totaling over 35 MW/40 MWh. These projects are special in that they include a 17 MWh spare parts storage system that cycles replacement batteries for Daimler’s e-Smart to prevent deep discharging, hence deploying EV batteries for stationary storage before even entering their “first life.” Since all car OEMs have to frequently cycle their in-stock replacement batteries to keep them “active and healthy,” it is fair to expect that many more spare batteries will be available for stationary applications in the near future – on top of the likely glut of second life batteries entering the market.
Rebirthing EV batteries is difficult…
Recycling EV batteries is no easy matter. Assuming there are no regulations blocking second-life use in the first place, various challenges remain which may impact its economic viability versus direct recycling, as described above. First, although this applies to recycling as well, there is the sourcing and transportation of used battery packs to a dedicated facility. This can be complicated and costly because used lithium-ion batteries are considered to be hazardous waste and require special handling. They have to be packaged in rigid containers to avoid damage and leaks. There are also restrictions on who can handle them (e.g., only authorized logistics companies, no air freight). This is compounded by the lack of established value chains and limited investment in collection mechanisms due to the inadequate volume of used EV batteries available on the market today.
Afterwards, the health of the battery has to be assessed in order to put together storage systems that perform at a consistent and predictable level. There are two possible options for conducting this assessment: 1) pack disassembly, component testing, categorization and reassembly, or 2) whole battery pack testing and utilization.
The first option involves disassembling the battery packs, analyzing the health of each component (either on the module or cell level) and grouping and reassembling those with similar conditions in order to make a more or less homogenous second-life battery. Especially if the analysis is conducted on the cell level, the entire process can be unwieldy and expensive due to long testing times and corresponding high labor costs for test technicians. Furthermore, automation is made more difficult by the differences in battery pack form factors, cell shapes and chemistries.
The second option involves testing the health of the whole battery pack with non-invasive procedures (e.g., thermal imaging, parsing data from the BMS ) and then using it directly for second-life applications. This is less expensive and less complicated, but the resulting battery is less flexible and more cumbersome, as it may include some non-performing components.
Last but not least, different second-life batteries have to be combined together in a functioning energy storage system. Here, the biggest challenge is to make the various control systems work together properly and to deal with variations in the battery packs and their voltages, typically through categorizing and an updated, overarching master BMS.
Although solvable, all the challenges described above require resources and thus impact the business case for a second-life system and its competitiveness vs. newly manufactured batteries.
…but improvements are on the way
The good news is that the industry has acknowledged these issues and is starting to take action. For the reasons described earlier, car OEMs have a particularly strong incentive to help improve repurposing processes and to drive down related costs.
As noted above, pilot programs are being implemented to gain experience with networking multiple batteries with different use histories, and to identify challenges and find workarounds. Improvements have also been made in the repurposing process, starting as early as the battery design stage. BMW, for instance, has redesigned its batteries to be self-contained – making it possible to dismantle them from cars with intact housing, heating, cooling and battery management systems. In fact, most EV batteries are now assembled in this manner, although cell chemistries and battery form factors continue to be non-standardized.
Further downstream at the repurposing facilities, 4R Energy Corp’s new second-life plant in Japan can reportedly analyze Nissan Leaf battery packs (48 modules) in only four hours, a procedure that previously took 16 days. Furthermore, specialized companies like US-based Spiers New Technologies have started to provide optimized battery life-cycle management, offering services such as advanced qualitative analysis of used battery packs and logistics management. In this context, artificial intelligence will play an increasing role in reducing the time and cost of assessing used batteries and in accurately predicting the remaining cycle life, as recently demonstrated by research from the Toyota Research Institute together with MIT and Stanford University.
In addition, guidelines such as the UL 1974 standard are being developed to define how to sort and grade battery packs, modules and cells – thus helping to reliably diagnose a battery’s state-of-health – and to introduce ratings for determining the viability of their continued use. Just recently, the 4R Energy Corporation was the world’s first company to obtain the UL 1974 certification.
Probably most importantly, the trend is moving towards more granular and transparent battery performance data, thanks to telemetry devices and cell-level BMS – to the point that the health of a battery pack and its components can be determined even while the battery is still in the car and before entering the second-life plant. As an example, Bosch recently introduced a new service named “Battery in the Cloud” which will continuously collect details on a battery’s performance while in use and will apply machine learning to analyze the obtained information. On top of providing increased transparency, this service acts as an “extended BMS” to improve battery performance.
Second life is coming
In summary, vast numbers of batteries will reach the end of their first lives in the near future, as an increasing number of EVs hits the road. A significant share of these batteries is likely to be technically suitable for repurposing, but economic viability depends on current and future raw material prices, recycling and repurposing costs, prices for new batteries, expected margins and savings as well as the overall capabilities of storage integrators to cope with second-life batteries and resulting demand.
However, as returns from recycling are not given up but only deferred (to a time of lower recycling costs), car OEMs are very happy to squeeze some extra returns from their batteries before that and will most likely accept a rather modest margin in order to be competitive with new batteries. If second-life revenues are not already priced in the EV’s original sale, used batteries could therefore be offered more or less at the costs of repurposing. Consequently, as economies of scale and process improvements drive repurposing costs down, second-life batteries will be available at increasingly low prices, offering sufficient savings compared to newly manufactured batteries.
As a result, second life batteries have the potential to further accelerate the downward trend for battery prices. In suitable, i.e., less demanding use cases, the competitiveness of energy storage solutions as a flexibility option is therefore significantly improved – benefiting both stationary storage players and the energy system as a whole.
Now that we have completed our three-part analysis on the impact of e-mobility on stationary storage, it’s time for an overall conclusion.
With basically all large car OEMs incorporating e-mobility into their strategies to meet increasing obligations for decarbonization, the electrification of the transport sector is a done deal. For the energy system, EVs can mean a surge of distributed loads and potentially elevated demand peaks straining the grid, but at the same time their batteries constitute a viable, additional source of flexibility. The impact for stationary energy storage is therefore multifold.
In the future, EVs will be increasingly used to address the growing need for flexibility in the power system through vehicle-to-grid, driven by more and more variable renewable energy, but also by e-mobility itself. This can result in growing competition for stationary storage, as “providing flexibility” is the overarching theme of all the use cases serviced today.
Already today, stationary energy storage is starting to become an important enabler for the further expansion of e-mobility. By “battery buffering” charging stations, the convenience for recharging EVs will improve and will make e-mobility attractive for an increasing share of the population. This creates a significant new business opportunity for stationary storage players.
Finally, the increasing availability of cheap, second-life batteries from EVs is likely to further drive down hardware costs for stationary battery storage and thereby improve competitiveness. New use cases and applications will be unlocked, making grid flexibility even more affordable.
To “gear up for power on wheels,” stationary storage players should start preparing now. The specific impact of the described trends on individual business models needs to be assessed carefully to mitigate resulting challenges and to seize new, attractive opportunities. Most importantly, maintaining a flexible strategy remains a must in order to effectively deal with the new level of complexity and variability e‑mobility will add to the stationary energy storage market.
For questions or comments, contact Florian Mayr, partner and head of the energy storage and green mobility practices at Apricum – The Cleantech Advisory.
 BNEF, Wood Mackenzie
 Battery management system
Photo: Second-life battery system in the Amsterdam Arena © J. Lousberg/Nissan