“Buy low and sell high” may be the ultimate expression of how to be successful in business. It works, whether you are selling apples, oranges, or electricity. Most of us don’t realize how much the cost of electricity varies during each day, each week, and each month. If you can buy electricity cheaply now and sell it back to the grid later for more money…well, that is the essence of a successful business.
That is what entrepreneurs Freeman Hall and Michael Stern are doing. They have created B2U Storage Solutions, which uses old Nissan LEAF batteries to store electricity from the grid when there is an excess and then sell it back to the grid when it is in short supply. Batteries typically get swapped out of cars when they get down to around 80% of their original capacity, but are still capable of storing energy for uses other than driving. B2U has been operating its first facility in Lancaster, California for about a year, and is making a profit doing so.
That has attracted a $10 million investment from Japanese trading conglomerate Marubeni, whose power division led a Series A funding round recently. Marubeni views second-life batteries as a source of cheap grid storage and a solution to the recycling needs of the electric vehicle industry, Minako Wakayama, head of Marubeni Power International, told Juilan Spector of Canary Media in an email, “Marubeni believes B2U’s business model demonstrates how the auto industry can turn potential challenges into compelling business opportunities in a very eco-friendly way,” she wrote.
B2U is starting small while it learns how to manage the second-life batteries and perfect its arbitrage techniques. B2U’s trading strategy plays across several different wholesale market products, depending on what is most lucrative at the moment.
The old LEAF battery packs are stored in metal cabinets that look like scaled-down shipping containers. The current system is small — 2.75 MW/4 MWH — which is minuscule compared to most grid-scale battery storage facilities, but construction is underway that will more than quadruple the capacity of the Lancaster site.
The prices for grid storage systems are dropping rapidly, but the cost of second-life batteries is still cheaper than new batteries. B2U installed the Lancaster project at below $200 per kilowatt-hour. That’s roughly two-thirds the cost of a 2-hour storage project using new batteries in 2020, according to analyst James Frith, the head of energy storage research at Bloomberg New Energy Finance.
A recent survey published by the National Renewable Energy Laboratory found that mid-range cost projections for lithium-ion battery storage projects won’t fall below the $200 per kilowatt-hour threshold until 2030. That analysis looked at storage plants capable of 4 hours of discharge at their rated capacity. In other words, B2U is claiming a significant discount relative to building the same project with brand new batteries. And if the cost structure holds for longer duration projects, it would create even more of an advantage relative to the conventional approach.
Building cheaper means that a storage project should pay itself off faster than a new battery, paving the way for early profits. That’s particularly compelling for projects that are sensitive to capital expense or “capex,” Frith notes. “However, this low capex cost has to be balanced against the lifetime of the project. In our assessment, a second life battery would need to be able to perform between 2,000 and 4,000 cycles in order to compete with a project using new cells.” The upfront savings are attractive, but not if the batteries give out much sooner than the brand new batteries that come with a warranty.
B2U will use the new funding from Marubeni to increase the size of its projects and improve its technology. It needs to improve its battery diagnostics and learn how to integrate battery packs from different cars with a variety of chemistries. B2U has a number of pending projects that total 46 megawatt-hours of storage.
CEO Freeman Hall says he is considering licensing the technology to other developers as more used batteries become available. That would position his company as a technology provider for other companies, leveraging its expertise to evaluate used battery packs and ensuring they work properly.
That strategy, however, depends on other developers wanting to give the second-life concept a try, and that’s a big question mark at the moment. B2U would need to address concerns about how long former EV batteries last in a grid storage function, something Hall believes his company can do.
“All batteries follow a degradation curve, and as we gain experience, we’ll be able to demonstrate reliable degradation curves for the second-life batteries utilized in our projects, where we’re able to control for the relevant factors affecting cycle life, including depth of discharge, charge and discharge speeds, and cell temperatures,” he says.
A large facility packed with hundreds or thousands of used batteries, each with its own history of degradation, poses a new kind of challenge for safety management. Hall isn’t worried. The LEAF batteries were engineered to survive driving conditions which are more strenuous than what grid storage batteries have to deal with, he says. B2U backs its systems with real time thermal controls and hazard monitoring and was able to obtain a UL 9540 fire safety certification for its Lancaster project.
Despite the challenges, Minaku Wakayama foresees significant long-term market potential. “When you have a clean energy option that can be practically deployed to the grid in scale, contributing to the transition to an increasing reliance on an otherwise intermittent renewable energy supply, you have the potential for a large multibillion-dollar market,” she says.
With B2U showing that second-life battery storage facilities can generate profits, it won’t be long before other companies and more investors are attracted to this new energy storage opportunity. Volkswagen is already doing its own experiments with second-life batteries in conjunction with its MAN division at a bus depot in Hamburg, Germany. Second-life battery systems are an alternative to battery recycling, which is already developing its own momentum.
Reducing the cost of energy storage is good news for everyone. Kudos to Freeman Hall and Michael Stern for seeing a new opportunity and running with it. Apparently the fears that EV batteries will wind up in landfills are greatly exaggerated, as are the rumors that EV owners are just driving their cars into lakes and rivers when their batteries die. There may be hope for this electric car thing yet!
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