The value of an end-of-life strategy for lithium-ion batteries – in million dollars

Lithium-ion batteries have become increasingly important in a number of industries. The most obvious segment is electric cars which is now driving the lithium-ion battery demand. But the growth rate, in relation to the technologies the battery replaces, is in fact higher in several other industries. Buses, fork lifts, energy storage, backup power, recreational and utility vehicles, e-bikes and scooters are applications where the lithium-ion battery already is outperforming the former alternatives both in terms of cost of ownership and operational performance.

With the increased adoption a question that eventually reaches the management’s attention is how to deal with the batteries when they reach end-of-life.

Many times this is described as the Achilles heal of lithium-ion. Inefficient and expensive recycling, or even lack there of, makes companies realise they might build up liabilities although they are hard to quantify. Often the problem is taken care of when it arises, with hope of less expensive alternatives in the future.

In a way this make a lot of sense. After all lithium-ion batteries are still fairly new and most of the attention is still needed on sourcing, design and manufacturing. But there are significant costs that could have been saved with a more active end-of-life strategy. And there are huge opportunities to be seized.

The findings in our research, confirmed on a daily basis in our contacts with players in the lithium-ion value chain, shows that already with an end-of-life volume of 50 kWh per year the difference between the worst and best case exceeds $20,000 (USD). 50 kWh per year is what a larger golf court might expect to deal with when their carts use lithium-ion batteries. The difference between best and, the more common, worst case could in fact finance 2-3 new golf carts a year.

The biggest difference is found between what we call an active end-of-life strategy and an active second life strategy. If only the golf court company wants to arrange for a more efficient recycling, instead of calling the nearest waste hauler, their savings will amount to $3,000. It’s when they actively start to arrange for different second life solutions the difference starts to become significant.

Most likely a user of batteries with such a limited volume will not engage directly with second life solutions although they might very well host the batteries in their own energy storage system. Hence some of the revenues will be lost to contractors and specialists.

Still the potential of making money instead of losing them is still attractive for anyone.

The numbers obviously increase by volume, and their significance to an organisation varies. For battery manufacturers or car makers the difference only between the best and worse recycling scenarios sum up to amounts that simply can’t be ignored. With an annual end-of-life volume of 25 MWh the difference is $1.5M – a cost of $1M or revenues of $500,000. The potential earnings from second life is more than $9M!

The move from costly disposal to a profitable energy storage business is not easy. It requires a deep understanding of the market – and determination. A strong involvement already in the product development and willingness to invest is essential for obtaining sustainable margins in a new field, outside a company’s core business. However, there are many intermediary steps that can be taken through partnerships or adjustment in the company’s business model.

Whether end-of-life batteries represent a cost or a revenue is not something that is determined externally by the market. It’s a choice. A cost is always somebody else’s revenue. With a good understanding of the market you can decide what it will be for your company.

Hans Eric Melin