Challenges Abound in the Second-Life PEV Battery Market

In the lead-up to the launch of the first generation of lithium ion (Li-ion) batteries for plug-in hybrid and battery electric vehicles (collectively PEVs) over 6 years ago, industry stakeholders had anticipated that the battery packs in these early models might begin to demonstrate reduced power and energy capacity by now. However, due in part to thorough design and testing protocols, automotive OEMs and Li-ion battery manufacturers now recognize that many of these batteries have shown less degradation and better performance than anticipated. In an exciting example of this trend, a recent HybridCars article highlighted how a 2012 Chevrolet Volt owner recently surpassed 300,000 miles driven without any apparent battery degradation issues.

These developments notwithstanding, stationary energy storage system (ESS) stakeholders remain interested in obtaining used PEV Li-ion batteries for second-life stationary energy storage applications. Furthermore, several automotive OEMs may also be interested in new revenue models that could capitalize on the residual asset value of second-life PEV batteries. Given that battery ESSs remain too expensive for many applications in the near term, reusing end-of-life PEV Li-ion batteries for stationary energy storage applications could help address this problem.

Guidehouse Insights’ recently published Alternative Revenue Models for Advanced Batteries research brief examines the key drivers, challenges, and potential market size for reused PEV Li-ion batteries. Guidehouse Insights estimates that the annual global capacity of PEV Li-ion batteries available for second-life stationary ESS applications is expected to reach 11 GWh by 2035.

Improving Protocols

One of the key challenges for the second-life market for PEV batteries is the development of new battery pack screening, testing, and grading protocols that are relevant to specific customer or utility-sited ESS battery reuse applications. Guidehouse Insights believes that research being conducted by Oak Ridge National Laboratories and by the team at Spiers New Technologies will help close this gap over time.

Once the application-specific grading and testing protocols are developed, there will remain an even more vexing challenge: at what price and performance threshold in the future will stationary ESS project developers and automotive OEMs consider reusing second-life PEV Li-ion batteries over procuring new, fully warranted batteries?

Guidehouse Insights anticipates that automotive OEMs will be uniquely positioned to overcome these and other challenges outlined in our research brief to consider new business models that could include partnering with ESS project developers and financiers to deploy ESSs. Just as automotive OEMs did with development of intellectual property around internal combustion engines over the last century, it will be interesting to see how OEMs capitalize on the expertise they’ve developed with Li-ion batteries.