Renewable energy storage from second-life batteries is viable but may benefit from subsidies

Transitioning public energy supplies to renewable sources poses several challenges. One of these is optimising the use of surplus renewable energy produced at times of low demand, such as by wind turbines running overnight. Various solutions are available for storing this surplus energy for use at times of high demand or low production. Large-scale battery storage is one option, but the installation of new battery systems is expensive. Also, the use of new batteries generates environmental pollutants (including hazardous waste and greenhouse gases) in manufacturing and recycling.

The global market for electric vehicles is growing rapidly and is expected to reach 16% of total vehicle market share by 2030. These vehicles typically use lithium-ion batteries with a lifespan of around 10 years in the vehicle. After this, the batteries still perform adequately for energy storage applications (called ‘second life’ use). This increases the lifetime of the battery by a further 7–10 years, reducing the need for new batteries and contributing to targets set by the  EU regulatory framework for batteries and in line with the European circular economy action plan and the European Green Deal.

This study focused on the Spanish island of Tenerife, which has an isolated energy system unconnected to the other Canary Islands. Focusing on two wind farms, which together produce around 23% of the island’s wind power, the researchers developed a methodology to assess the technical and economic feasibility of developing an energy storage system for each facility from electrical vehicle batteries recovered on the island. The technical assessment considered battery availability and projected energy surpluses, while the economic assessment considered profitability (net present value and internal rate of return), the likely impact of subsidies, and the sensitivity of the results to changes in underlying factors.

According to the researchers, current lack of suitable batteries would limit profitability in the short term, but crucially, from 2025 onwards, an energy storage system at either facility would become economically viable. From that time, net present value would rise steadily for wind farm A and exponentially for wind farm B up to 2031, they say. Internal rate of return would rise to about 10% for wind farm A in 2027, and to around 14% for wind farm B in 2030.

Operating expenditure subsidies did not affect the profitability of the installations, according to the researchers. However, a 15% subsidy on capital expenditure would increase the internal rate of return up to 2027 from around 10% to over 14% for both facilities. Continuing this subsidy to 2030 would increase the internal rate of return from 12.6% to 16.8% for wind farm A and from 11.7% to 18.5% for wind farm B – generating a rate of return above that of the subsidy itself in both cases.

Profitability was not affected by manipulating assumptions about electric vehicle sales volumes, types of lithium-ion batteries used in vehicles or costs of installing the energy storage system, the researchers report. However, they say that future wholesale market electricity prices have a substantial impact on profitability. Noting the sharp rise in electricity prices in 2021, they say that if prices dropped to pre-2021 levels neither facility would be profitable without subsidies on both operating and capital expenditure.

The researchers highlight the environmental benefits of using second-life batteries in terms of recovering surplus renewable energy, supporting the grid with services such as frequency regulation and demand response, and extending battery lifetime. They say that up to 2031, these systems could avoid around 0.7–1.2 kilotons of accumulated battery-related waste, circumvent 28–90 kilotons of CO₂ emissions by recovering renewable energy, and save about €5–7 million in battery recycling costs.

The researchers suggest that policymakers consider such issues when assessing second-life batteries against other energy storage solutions such as pumped hydro (consisting of two water reservoirs at different elevations that can generate power as water moves down from one to the other, passing through a turbine) or green hydrogen. They argue that while subsidies were not essential in these scenarios, a capital expenditure subsidy of 15% would make profitability more resilient if electricity prices fall. They suggest that future research could look at using second-life batteries in other energy storage systems and propose that a wind farm facility on Tenerife, such as those described here, could function as a valuable ‘living lab’.

Further Information

Caveat: until 2024, the capacity of batteries in both wind farms is limited by the scarcity of available second-life batteries, due to low uptake of electric vehicles. This begs the question would Tenerife be able to collect and install the necessary used batteries without importing them from the Spanish mainland? However, from 2029, the researchers say that the expected growth of the EV market would be able to fulfil the needs of either wind farm. There is also the question of meeting the cost of collecting and installing the used batteries.

• Landfilling of batteries is contrary to the spirit of the new EU batteries regulation (2023/1542). Regarding waste industrial and EV batteries – an implicit 100% rate of collection of for treatment is assumed.
• CIRCUSOL (Circular business models for the solar power industry) is a H2020 project which focuses on using second-life batteries in other energy storage systems: https://www.circusol.eu/en/overview/about-circusol

Source:

López, A.I., Ramírez-Díaz, A., Castilla-Rodríguez, I., Gurriarán, J., and Mendez-Perez, J.A. (2023)

Wind farm energy surplus storage solution with second-life vehicle batteries in isolated grids. Energy Policy 173: 113373. Available from: https://doi.org/10.1016/j.enpol.2022.113373 [Accessed 2 August 2023].

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“Science for Environment Policy”: European Commission DG Environment News Alert Service, edited by the Science Communication Unit, The University of the West of England, Bristol.

Notes on content:

The contents and views included in Science for Environment Policy are based on independent, peer reviewed research and do not necessarily reflect the position of the European Commission. Please note that this article is a summary of only one study. Other studies may come to other conclusions.