(NASDAQ:TSLA) (BME: ELE): Used EV batteries could spark an energy-storage revolution
The current generation of Teslas, LEAFs and Volts might still look sparkly and new — but in 8 or 10 years’ time, the shine will have come off, and their owners will need to start thinking about how to dispose of batteries that are depleted, out of warranty, and ripe for replacement. That could create a booming secondary market in used EV batteries, which at will likely retain about 70 percent of their nameplate capacity — not enough to take a Model S on a road trip, but sufficient for a wide range of stationary “second life” power-storage applications.
While the second-life sector hasn’t yet taken off, it’s likely just a matter of time: EV batteries will start to become available for repurposing “at unprecedented rates starting in 2018,” according to a research note published by Navigant last year. And with the sector’s revenues projected to boom from $16 million in 2014 to $3 billion in 2035, second-life battery usage could have a significant impact both on the economics of the EV industry itself, and on the bottom lines of the wide range of investor-friendly companies — especially utilities — that have significant and growing needs for energy-storage solutions.
According to NREL research, the raw materials in spent EV batteries aren’t worth much — but the batteries retain enough capacity for at least a decade of secondary use. Experts envision regional battery collection hubs harvesting and refurbishing used batteries at a cost of about $500 a piece, with car owners receiving a credit of about $1,000 for their depleted batteries. “We not only confirmed that reusing batteries this way is feasible, we found that it has potential to deliver great benefits to automakers and utilities, as well as car owners,” says NREL energy-storage specialist Ahmad Pesaran.
While it’s clear that batteries will retain enough value to comfortably cover the costs associated with end-of-life processing, estimates of their exact worth vary widely. Depending on how much the cost of new EV batteries falls, resold batteries could earn their original owner as much as $100 per kWh in nameplate capacity, according to a recent NREL study. That would add up to about $2,400 in resale value for a Nissan (OTCMKTS:NSANY) LEAF battery, or as much as $8,500 for a more capacious Tesla (NASDAQ:TSLA) Model S battery.
Some industry executives have suggested dramatically rethinking EV economics to account for this residual value, with Mitsubushi Heavy’s (TYO:7011) Ichiro Fukue suggesting that up-front costs could be split between owners and the utilities who would later inherit the batteries. Even without such radical shifts in pricing strategy, second-life sales will make owning an electric vehicle cheaper. “In the near term, the residual value of second-life batteries could help lower upfront electric vehicle costs, as automakers and consumers alike factor in the resale value as part of a reduced purchase price,” notes UCLA researcher Ethan N. Elkind.
Even if only half of EV batteries are ultimately repurposed, Elkind adds, the electric automobiles now on the road in California could provide 425 megawatts in energy storage capacity — about a third of the total that the state’s utilities are required to procure by 2020 under new energy-storage mandates.
All that adds up to a big business opportunity both for vehicle manufacturers, who see a path to cutting the cost of EV ownership without eating into their profits, and for utilities, which see a potentially cost-effective solution to their energy-storage needs. General Motors (NYSE:GM) has been working with Swiss power-tech company ABB (NYSE:ABB) for several years to research grid-connected second-life battery arrays, and this summer announced a commercial energy storage service, aimed at homes and businesses, that uses depleted Volt batteries. “This secondary use application extends its life, while delivering waste reduction and economic benefits on an industrial scale,” says Pablo Valencia, senior manager of GM's battery life cycle management program.
Nissan this year announced a similar program, developed in partnership with startup Green Charge Networks, to use repurposed LEAF batteries in commercial applications. The move builds upon and extends the company’s previous creation of a joint venture with Sumitomo Corp. (TYO:8053) of Japan to research applications for the company’s used batteries.
Pacific Gas and Electric Company (NYSE:PCG) and BMW (FRA:BMW), meanwhile, are teaming up for a 100 kilowatt pilot project using both repurposed MINI E batteries and in-service EV batteries for peak shaving purposes. "We have more than 60,000 electric vehicles in our service area," says Aaron Johnson, senior director of customer programs at PG&E. "Collectively, they represent a huge and growing resource.” Other utilities including Southern California Edison (NYSEMKT:SCE-E) and Duke Energy (NYSE:DUK) are also actively researching applications for second-life batteries, in preparation for the expected surge in battery availability.
While most second-life programs are still in the early stages of development, there’s little doubt that there’s serious money to be made from repurposing depleted EV batteries. Navigant predicts that the global energy storage market will be worth $15.6 billion by 2024, up from $675 million last year. Investors should take note: the key to unlocking much of that value could be under the hoods of electric cars that are already cruising American streets.
Companies to watch
* Taiwanese startup Gogoro plans to sell an electric scooter that relies on battery-swapping rather than plug-in recharging. That paradigm would help establish a steady stream of depleted batteries for second-life functions, with CEO Horace Luke even envisioning a third-life role for his company’s batteries running lighting and appliances in rural areas.
* California-based FreeWire is using second-life batteries sourced from Nissan and other automakers to create mobile EV charging stations, allowing it to dramatically reduce its costs. “What people expect to pay in 2030 for battery prices, we pay today,” explains CEO Arcady Sosinov.
* Spanish utility Endesa (BME: ELE) has developed the first fixed rapid-charging point to incorporate a second-life EV battery. The company’s technology uses a Renault battery for peak-shaving purposes, reducing the impact on the local grid of energy intensive fast-charging points.
Ben Whitford is the U.S. correspondent for The Ecologist. He has written for the Guardian, Newsweek, Mother Jones, Slate, and many other publications.