Globally, experts estimate there are 16.5 million electric vehicles (EVs) on the road. While they vary in age from brand new to a decade-plus-old, these vehicles have one thing in common—their battery packs. As demand for clean energy and power storage grows around the world, automakers and standalone startups alike are eyeing those batteries.
Of course, there’s one problem. What if drivers don’t want to give up their car’s battery within a “reasonable” timeframe to swap it for a new one?
This is one of many challenges startups seeking to revolutionize the second-life EV battery economy are facing. Despite the idea’s potential, experts are unsure if repurposing EV batteries is feasible from a business standpoint.
Just like smartphones, the batteries that power electric cars see their capacity slowly dwindle over time. After eight to ten years, a battery’s max capacity is roughly 80-85% of what it was when new. That’s discouraging to drivers, who must recharge their vehicle more often and deal with a significantly lower driving range.
Despite having less capacity, the battery is still perfectly functional. Startups like Circular Energy Storage and automakers including Nissan and Mercedes-Benz want to put them to work. The key application for old EV batteries is renewable energy storage. For instance, when a wind farm captures more power than users demand, electricity is stored in a massive battery grid instead of turning off the windmills and wasting the opportunity to generate more clean energy. Other applications include taking the place of existing batteries in boats and even gas-powered cars.
However, the inconvenience of lower capacity isn’t enough to prompt many drivers to cough up the cash for a new battery at that all-important 10-year mark. That’s a reality experts got wrong when EVs were introduced to the mainstream and continue to grapple with today. Now, in the face of economic hardship and record inflation, consumers are even more reluctant to splurge on a new battery until necessary.
As a result, companies seeking to create a “circular economy” for EV batteries face a problem—there are no batteries to buy. Circular Energy Storage founder Hans Eric Melin told Reuters, “The assumption that EV batteries are only going to last eight-to-10 years and then owners will swap them out is just not true. It’s going to be tricky to make second-life work.”
Meanwhile, demand and competition in the industry have caused the price of used batteries to skyrocket. Today, buyers can expect to pay double the cost carmakers pay for new units. The 75KWh battery pack found in the long-range Tesla Model 3 costs nearly $18,000 (about $235 per KWh) used. The prohibitive price point makes getting into business immensely difficult if not impossible.
Further exacerbating the reuse problem is another competitor in the classic environmental triad—recycling. EV batteries contain a treasure trove of valuable raw materials. In many
cases, recycling a battery for parts may simply be more profitable than reusing it—even though it leads to more carbon emissions.
These forces combine to make the used EV battery market a desolate wasteland. With consumers expected to keep their cars on the road longer than ever, there is no end to the shortage in sight.
With such a challenging outlook for the industry, why are so many companies still pursuing a circular economy for used EV batteries? Because demand is already high. Over the next 10 years, it’s expected to grow even higher as countries around the world turn their focus to renewable energy.
So, companies like Smartville are getting creative with how they source their used batteries. The U.S. startup buys packs from vehicles that have been written off by insurers—before refurbishes and international buyers have a chance to purchase them at salvage auctions. Notably, even minor damage to an electric vehicle often results in the entire car being scrapped since insurers can’t assess the cost or extent. This means Smallville can work directly with insurance firms to purchase batteries that often have like-new capacity to power its energy storage solutions.
Experts currently predict global battery storage capacity could reach 680GWh by 2030, a massive increase from the 16GWh capacity of 2021. Though used EV batteries won’t be solely responsible, they could contribute a significant chunk. Smartville CEO Antoni Tong claims over 1GWh of salvaged EV batteries will enter the U.S. market each year by 2026.
Continuing to find creative ways to salvage and reclaim batteries from electric vehicles will be more important than ever in the next few decades. As countries and carmakers alike push to get more EVs on the road, a circular economy that makes the most of batteries with waning capacity benefits everyone. Whether or not the model is sustainable remains to be seen.