May 9, 2016 by

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Battery costs are plummeting to levels that make EVs a truly disruptive technology, as we’ve explained. That’s why electric vehicle (EV) sales are exploding world-wide, and why Tesla broke every record for pre-sales with its affordable ($35,000), 200+ mile range Model 3 last month.

But what you may not realize is that major EV makers — BMW, GM, Nissan, Toyota — are now exploring how much value their EV battery has for use in the electricity storage market after that battery can no longer meet the strict requirements for powering its car. This potential second life for EV batteries is a clean energy game changer for two reasons:

  • These used EV batteries hold the promise of much cheaper electricity storage for renewables than is available today.
  • If used EV batteries have value, then EV makers can charge less for their cars, making them even more affordable

Together, these two factors make EVs even more disruptive than most people realize, particularly for enabling deep and rapid penetration of renewables in the 2020s.

We already knew electric cars hold the prospect of providing low-cost storage directly — during the 95 percent of the time the car is parked and the battery isn’t being used. Now imagine what the potential flood of hundreds of thousands — and ultimately millions — of second-life EV batteries into the electricity storage market will mean. Indeed, with hundreds of thousands of EVs already sold in the U.S., at least one company that purchases used EV batteries has indicated the price is an astounding $100 per kiloWatt-hour, far cheaper than anything on the market today.

Used Chevy Volt Batteries Help Power New GM Data Center

“Even after the battery has reached the end of its useful life in a Chevrolet Volt, up to 80 percent of its storage capacity remains,” as Pablo Valencia, GM’s senior manager for Battery Life Cycle Management in a 2015 news release.

The key point is that the battery is only useful in an EV as long as it retains the vast majority of its original storage capacity so it can provide the range and performance promised to the EV buyer. A typical EV battery lifetime might be 8 to 10 years. But after that point, the battery still has significant value for the far-less-demanding job of storing electric power.

Used EV

Used Chevy Volt Batteries Help New GM IT Building Use Solar And Wind Power. Via GM.

GM is one of many car companies that has been testing the second-life use of its EV batteries. Batteries from the Chevy Volt extended range EV are being used at GM’s new Enterprise Data Center in Milford, Michigan: “A new solar array and two wind turbines feed the administration building’s circuit breaker panel, where the five Volt batteries work in parallel to supply power to the building, delivering net-zero energy use on an annual basis.”

The batteries helped the building “attain LEED Gold certification from the U.S. Green Building Council,” and they also “provide back-up power to the building for four hours in the event of an outage.”

A year ago, Toyota turned on its off-grid 85-kilowatt-hour (kWh) energy storage system built with 208 repurposed Toyota Camry Hybrid nickel-metal hydride battery packs. The batteries work with a new 40-kilowatt photovoltaic solar array system to “provide all-day, renewable power at the remote facility for the first time in its history.”

BMW has had over 18 months of testing that demonstrates its used batteries can deal with “demand response” requests from the California utility Pacific Gas & Electric. Demand response is rewarding consumers and businesses for adjusting their electricity use during peak hours (or during times when the sun isn’t shining or the wind isn’t blowing).

Under the program, PG&E manages 100 kilowatts of demand from BMW, made up of repurposed BMW Mini E batteries in a stationary unit and a charging program for up to 100 BMW i3 vehicles.

When PG&E alerts BMW the grid is short of electricity, BMW signals vehicles to stop charging (thereby reducing the load). If a vehicle is plugged in or the customer isn’t participating, then the array of second-life batteries is used: “Since July, PG&E has sent BMW 26 demand-response events, and the automaker delivered on all of them. Depending on the time of day, the vehicles met between 10 percent and 75 percent of the capacity needed. So in every case, the system relied on the second-life batteries.”

Imagine combining second-life batteries and electric vehicles at a large scale for use in both demand response and storage of solar/wind power. This is yet another reason “Why The Renewables Revolution Is Now Unstoppable,” as I wrote in February.

Repurposed Nissan Batteries For $100 Per KiloWatt-Hour?

It is simply incredible how quickly battery costs have come down in price. In 2013, the International Energy Agency estimated EVs would achieve cost parity with gasoline vehicles when battery costs hit $300 per kWh of storage capacity, which the IEA said would happen by 2020. Then, last spring, a detailed analysis in Nature concluded that as of the end of 2014, “the cost of battery packs used by market-leading BEV manufacturers are even lower, at US$300 per kWh.” That study concluded:

“If costs reach as low as $150 per kilowatt hour this means that electric vehicles will probably move beyond niche applications and begin to penetrate the market more widely, leading to a potential paradigm shift in vehicle technology.”

Yet GM disclosed last fall that the battery cell they are getting from the South Korean company LG Chem for their forthcoming all-electric Chevy Bolt will cost just $145 per kWh, an astounding price. That’s how GM is able to offer its 200+ mile range EV later this year for a sticker price of $37,500 (and “as low as” $30,000 if the buyer gets the $7500 federal tax credit) — while still asserting they will make a substantial profit on the car.

Yet GM is expecting the paradigm-shifting, game-changing $145 per kWh to continue to drop, as it made clear in this chart:



This means that a used or second-life battery will eventually be priced at $100/kWh or even less. Significantly, Greentech Media reported last year that the startup FreeWire “is buying repurposed Nissan batteries for $100 per kilowatt-hour.”

How much of a game-changer would $100 per kWh storage batteries be? Consider the attention given to Tesla and CEO Elon Musk when we learned last year “the company will charge $3,500 for a 10-kilowatt-hour energy storage pack that includes batteries, thermal management, and software.” That is $350/kWh. Musk also quoted a price of $250 per kWh for the larger 100-kWh industrial and utility units. Those were far lower prices than such battery packs had just a few years ago.

To be clear, Tesla’s battery system is a commercial product and has a 10-year guarantee. On the other hand, last year, Nissan launched “a full-scale commercial business with startup Green Charge Networks” to use second-life batteries from Nissan Leafs for electricity storage. “Nissan has given Green Charge a 10-year warranty on the usability of these second-life packs,” as the CEO of Green Charge Vic Shao explained last June. “That allows us to commercialize…[and] get financing for our systems.”

Also, the head of 4R Energy — the second-life battery joint-venture Nissan formed with Sumitomo Corp. — said in 2015, “A used battery and new battery perform very similarly on many performance metrics.” This is especially true for the demand-management applications that are currently the most popular use of Green Charge’s second-life battery pack in buildings.

Exactly where second-life batteries prices end up clearly depends on many factors, including just how fast the electric vehicle market scales up, and how quickly prices for new batteries continue to drop.

Consider that by mid-2015, some 180,000 Nissan Leafs had been sold since the car’s launch in 2010. “That represents multiple gigawatt-hours of energy storage capacity,” explained Shao. “Four and a half years later, Nissan is starting to get used battery packs back on its shelves.”

Ultimately Tesla and GM and the other major EV companies are going to sell hundreds of thousands of vehicles over the next few years with battery packs that cost as little as $145/kWh. That means a staggering amount of low-cost used batteries will be available by the middle of the next decade.

When the trickle of second-life batteries turns into a flood, the business of electricity storage and demand response — both of which enable far deeper penetration of renewable power — will never be the same.

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