Opportunities to capture value in the BaaS model

Second-life battery storage

EV batteries have around a 10-year lifespan before needing to be replaced due to a material loss of charging capacity and the accompanying reduction in range. It is projected that by 2030 there could be around 13mn tonnes of EV batteries available for reuse and, by 2035, global requirements for stationary energy storage could be met by second-life batteries. Research has found that extending the life of a battery in a repurposed application has the potential to cut its embedded emissions by 50%. Around 70-80%
of the battery’s original capacity is maintained in the ‘end-of-life’ batteries and they are therefore a valuable resource for energy storage systems. Jonathan Smart, Partner and Head of Mobility at Shoosmiths highlighted the importance of developing second-life activities and this is only likely to grow as batteries become a key source of power and more research and development is carried out.

By replacing the most degraded cells in an ‘old’ EV battery, the battery can be reused in another application outside of a vehicle for up to an additional 12 years based on calculations from the sustainability campaign group and industry platform, RePurpose. Research has found that a properly managed system of used EV batteries could be a ‘good profitable investment’ as long as the batteries cost less than 60% of their original price. For it to be successful it would need a number of stakeholders to be involved,
including the EV manufacturer, the lithium-ion battery manufacturer and the project developer. Second-life EV batteries used in energy storage systems that are integrated into photovoltaic and wind power plants can last up to an additional 10 years in these less demanding roles.

Recycling and utilising a pr oduct and its components with a sustainability focus is on most major developers’ agendas now, according to Shoosmiths’ Jonathan Smart. Polestar (the Geely/ Volvo joint venture), for example, recently announced that they were looking to make the world’s first truly carbon neutral vehicle whereby the entire production is sustainable. There are also many examples where end-of-life EV batteries have been used for energy storage systems.

However, one of the main barriers to attracting more capital into the second-life battery industry is safety. Retrofitting lithium-ion EV batteries for reuse requires extensive testing and upgrades to ensure the reliability of performance in its new application. Investment in the second-life battery industry is more likely to be free flowing if these R&D hurdles can be overcome. One such example of R&D into second-life battery safety is that of RePurpose which is developing a ‘non-destructive fire suppression system’ that can detect imminent battery failure and prevent the battery from overheating without damaging other electrical components.

Whilst the second-life opportunities for an EV battery are not unique to the BaaS model, by disaggregating the battery from the vehicle it provides an extra supply of batteries, with varying capacities, to be used in second-life applications.

The advantages of re-using ‘old’ EV batteries are:

• More value is realised from the embedded resource.
• The environmental impact of new battery production and of decommissioning old batteries is displaced.
• Battery recycling is delayed until the processes for it are more efficient and cost effective.
• The batteries’ residual value is increased and the economics of transport electrification improved.
• It allows EV manufacturers or battery owners – if the battery is leased – to generate additional revenue.
• It reduces the costs of commercial and grid-scale battery installations.

Some car manufacturers themselves have explored the opportunities for second-life batteries:

• In 2015, Nissan piloted second-life EV batteries in a grid-scale storage installation.
• BMW tested used batteries in demand response events in an 18-month pilot project with Pacific Gas & Electric. Also, in 2015, Daimler AG announced it was to build a 13MW/h second-life battery storage unit at a recycling plant in Germany.
• In June 2017, Powervault and Renault announced a partnership to re-use electric batteries in home energy storage units as part of a trial.
• Retired Nissan LEAF batteries are being used to provide back-up power to Amsterdam Arena under a 10-year agreement. The project went live in June 2018 with the xStorage Buildings System – compromising 148 LEAF batteries – providing 3MW of power and 2.8MW of storage capacity.
• In 2019, Mercedes-Benz Energy worked with Beijing Electric Vehicle to build an energy storage system using retired EV batteries.
• Other manufacturers such as Rivian and Proterra have designed the battery packs in their trucks and electric buses to make end-of-life repurposing as easy as possible from the start.

End-of-life recycling opportunities

An assessment by the IEA suggests that to reach the goals of the Paris Agreement on climate change – namely, a global temperature rise below 2°C relative to pre-industrial levels – would mean a quadrupling of mineral requirements for clean energy technologies by 2040, while achieving net zero globally by 2050 would require six times more mineral inputs in 2040 than today. A major contributor to this is the demand for minerals for use in EVs and battery storage, needing to grow at least 30 times by 2040. Lithium is expected to see the fastest growth in demand, with an increase of over 40 times by 2040. However, these demand trajectories are subject to large technological and policy uncertainties.

Recycling would not eliminate the need for continued investment in the supply of virgin materials, but the IEA forecasts that recycling could meet up to 12% of the EV industry’s demand for lithium, nickel, copper and cobalt by 2040. It noted that the security benefits of recycling could be much greater for regions where there is wider deployment of clean energy technologies due to greater economies of scale. With the transition to EVs, it is important to ensure that the UK has not only battery manufacturing capabilities, but also recycling capabilities in place to deal with the waste management challenges that end-of-life batteries present. This also creates an opportunity to produce a supply of critical materials for manufacturing new EV batteries. Coventry University’s Professor Bhagat highlighted that this is particularly important for the UK, which does not have many indigenous supplies of the materials for EV battery manufacture.

Battery recycling also has the potential to reduce the CO2 impact by making already extracted material available for the production of new batteries, avoiding the processing of new raw materials – an incredibly carbon-intensive process, especially for materials like Lithium. Research has shown that using recycled materials can decrease the energy demand in material production by 48%, providing that the recycling process does not consume more energy than the process of the virgin raw materials it is replacing. UK-based original equipment manufacturers (OEMs) pay £3-8/kg to recycle end of life lithium-ion batteries that are exported abroad for the extraction of re-usable materials; materials which must then be later repurchased.

As a consequence, vehicle manufacturers themselves are investing in battery recycling, with the Volkswagen Group recycling up to 3,600 batteries a year during a pilot phase at its new plant in Germany, while Jaguar Land Rover’s venture capital and mobility arm, InMotion Ventures, has invested in Battery Resources, a lithium-ion battery recycling and materials company.45 End-of-life swappable batteries could provide value to the battery owner involved in the BaaS model, particularly if the recycling and battery manufacture is done ‘in-house’. This would save on costs and emissions relating to exporting the battery for recycling and repurchasing the battery materials if it is recycled off-site.

Case studies

ReLiB 

ReLiB project aims to ensure there are facilities and regulations for the safe, economic and environmentally sound management of materials contained within lithium-ion batteries at the end of their first life to enhance the overall efficiency of the raw materials supply chain. It aims to devise and develop alternative recycling routes that could provide UK businesses with a competitive advantage.

Technology Minerals

Technology Minerals owns 49% of Recyclus Group Limited, a battery-recycling business. The company focuses on extracting raw materials required for lithium-ion batteries and recycles them for re-use by battery manufacturers. Its first two battery recycling plants were commissioned in February 2022 with one processing plant for lead-acid and one for lithium-ion technologies. It is locating these sites close to market for ease of collection and converting it to black mass.

Network flexibility programmes

Alongside their primary role supporting the BaaS model for EVs, battery swap stations can also be utilised in a range of ways to provide flexibility to the national power grid, and therefore provide additional income for the provision of those services. Any market entrants looking at BaaS should be thinking about network flexibility because “it is the batteries themselves that are a very valuable asset to the grid regardless of whether they get swapped in and out of vehicles,” according to an industry source. They also noted that “if there are stations where batteries are being stored and charged, ready for the next customer to take them, then it would be expected that those locations would be doing load balancing according to the grid connection”. They further added that the aggregated battery resource should be flexed in order to store energy when it is cheap and available, and then used to alleviate other local constraints or for balancing. This aids the power grid both through providing additional flexibility and reducing the load on the grid at peak times. However, battery swapping demand would need to be prioritised with any network services as secondary.

Bi-directional grid charging

Battery swap stations have the potential to participate in demand side response activities such as bi-directional grid charging. The batteries at the swap station could be charged when electricity is cheap and then act as battery storage for the grid at times of system stress or high demand by providing a proportion of their charge back to the grid while still allowing availability for batteries to be swapped.

Localised flexibility

Local flexibility services are a relatively new market in the UK but one that has seen a lot of growth over the past three years, with the government’s Smart Systems and Flexibility Plan suggesting that flexibility could reduce energy system costs by £10bn a year by 2050. Battery swap stations have the potential to provide localised flexibility services to distributed network operators by offering the capability to turn demand up or down. Although, this must be balanced with maintaining sufficient fully charged batteries for EV battery swapping, particularly at times of high swap demand at the station. When choosing the location of battery swapping stations, the load level of the power grid may be a factor which affects where they can be located.

Trading on the balancing mechanism

The balancing mechanism (BM) is used by National Grid to balance electricity supply and demand in real-time. When electricity generation and consumption are out of balance, National Grid can purchase additional generation, or pay to reduce excess generation, to ensure generation and consumption align. In January 2021, the first domestic EV aggregated unit was registered in the BM with a partnership between Flexitricity and ev.energy. Flexitricity said it would use ev.energy’s smart EV charging platform of over 10,000 EVs and trade the flexibility from this, using its demand response portfolio of battery storage assets. EV owners set a ‘ready by time’ to indicate the window in which their EV needs to be charged, Flexitricity’s automated platform then interacts with the ev.energy platform to develop and deploy the optimal charging strategy. The flexibility from the EV batteries is then used in the BM and charging occurs when demand is at its lowest and generation is highest, while still allowing the batteries to be fully charged by the set time.

Although there is an opportunity for battery swap stations to operate in the BM, there would need to be management of the sites to know what each site can bid into the BM. According to Joe Camish, Senior Analyst at Cornwall Insight, availability to the BM would be dependent upon demand at the battery swap station and the variable level of charge of the batteries on site at any given time. Using end-of-life batteries from the BaaS model to create a battery storage asset at the battery swap station is another option where a battery swap station could work flexibly with the grid and the BM. The co-located battery storage asset could be charged at times of low grid demand or when there is plentiful supply on the grid and could also provide the ability to discharge back to the grid without compromising the charge level of fully charged batteries at the swap station. This would also allow for cost avoidance of peak prices.

Frequency response services

National Grid has a licence obligation to control system frequency at 50Hz, plus or minus 1%. Frequency is constantly varying and will fall if demand is greater than generation or will rise if generation is greater than demand. A 2021 study by Zhang et al. found that the operating income of battery swap stations could be increased by participating in frequency response services to maintain system balance. By enabling battery swap station clusters to participate in frequency response, it can make use of idle batteries to increase revenue. It found that under optimised operations, the battery swap income and frequency response income were complementary, so when the battery swap income was high/low, the frequency response income was the opposite. This study was based on battery swap stations in China. However, Joe Camish, Senior Analyst at Cornwall Insight, noted that such battery swap stations could broadly support frequency response services in the UK as well.

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