The market dynamics of the second life industry are on the cusp of fundamentally shifting to meet the growing demand. Currents has conducted research with innovators and early adopters to understand the biggest challenges and opportunities to drive incredible growth and establish a global marketplace.

Abstract

Second life (2L) integrators are on the verge of scaling and providing sustainable energy storage solutions for retired electric vehicle lithium-ion batteries, but they must acquire batteries at prices that allow their businesses to be economically viable.

Problem

Inflated prices for retired lithium-ion batteries are prohibiting 2L integrators from offering competitive prices relative to new batteries, thus preventing the industry from moving forward.

Background

After conducting extensive research which included interviews with leading 2L integrators, academics, and industry experts, the consensus is that the two main drivers for increased second life adoption are sustainability and price. Energy storage customers are highly attracted to the sustainability benefits of second life, especially when considering life cycle analysis [1]. However, due to the considerable costs associated with second life, integrators must offer their systems at a ~50% lower sale price per kWh compared to new batteries.

Solution

For 2L economic sustainability, integrators need to pay $25-$50 per usable kWh for retired batteries. Unique costs for second life include shipping, logistics, testing, reassembly, and racking, all of which are included in the price new batteries. The addition of these costs and a low gross margin for 2L integrators allows for a 2L end-price of $75-$100 per kWh, which is competitive with new battery installations of $150-$200 per kWh.

The primary benefit for OEMs is transferring the ownership and recycling costs to 2L integrators. Batteries sold to 2L integrators will have end-of-life (EOL) management plans and will ultimately be recycled. Importantly from a sustainability standpoint, 2L defers recycling costs 7-10 years which provides time for the recycling industry to improve scale and efficiency.

Conclusion

For the second life industry to be a viable solution, the economics must be sustainable for 2L integrators. The result will be an industry that can purchase retired batteries at scale from OEMs, thus eliminating OEM recycling costs, reducing net battery costs, and significantly increasing environmental sustainability. Furthermore, we expect tax related incentives for reuse in the near future where OEMs have the opportunity to be pioneers.

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Sources

[1] Richa, K., Babbitt, C.W. and Gaustad, G. (2017), Eco-Efficiency Analysis of a Lithium-Ion Battery Waste Hierarchy Inspired by Circular Economy. Journal of Industrial Ecology, 21: 715-730. https://doi.org/10.1111/jiec.12607