Economic Viability of Second-Life Electric Vehicle Batteries for Energy Storage in Private Households

TL;DR: In this paper, the economic viability of second-life batteries from electric vehicles for load shifting and peak shaving in residential applications is examined, and the conditions for which investments in second use batteries are profitable are examined for three scenarios.

Abstract: We examine the economic viability of second-life batteries from electric vehicles for load shifting and peak shaving in residential applications. We further investigate the expected impact of a growing number of residential storage systems on the electricity market. For the analysis a simulation model of a private household with integrated PV-storage system is used that is parametrized for an electricity demand of three people and a location in southern Germany. The conditions for which investments in second use batteries are profitable are examined for three scenarios. The central scenario S2 tackles an expected net increase in the electricity price by 4% per year. Upward and downward deviations from this price trajectory are covered by scenarios S1 and S3. For scenario S1, we find that investments in storage systems are profitable for all Li-ion battery costs assumed. In scenario S2, the breakeven battery price is found to be 107 € kWh-1 , whereas in scenario S3 with the lowest electricity price growth the battery price has to be equal or lower than 73 € kWh-1 to maintain economic viability.

Summary

1. Introduction

• Renewable energy technologies are a promising way to mitigate the consequences of climate change and the finiteness of fossil fuels.
• Energy storage technologies can help to match supply and demand.
• The discussion shows the relevance of using batteries as energy storage systems, and the importance of taking a closer look at the requirements for a successful implementation, the consequences, and the resulting implications.
• Finally, there is the question concerning which implications and guidance can be derived from the results for energy companies, grid operators, car manufactures, and policy makers.
• Furthermore, a large share of the German PV market consists of residential small-scale systems which could profit from a storage system [15].

2.2.1 Technological parameters

• The technological input parameters can be grouped into the parameters concerning the elec- tricity generation, the electric load and the electricity storage.
• The data consists of the global solar irradiation and the diffuse solar irradiation.
• This will be discussed later in subsection 2.3.1.
• Figure 4 shows the electric load profiles for the different days in the transitional period.
• It is apparent that for weekdays and Saturdays the energy demand in the evening hours is higher than over the rest of the day.

2.2.2 Economic parameters

• The economic input parameters can be divided into general assumptions and the parameters concerning the electricity generation, the electricity market and the electricity storage.
• For defining electricity price scenarios the retail price of the period from 2008 to 2015 is regarded.
• The question which components and which level of detail are necessary to be modeled can only be answered considering the specific research issue.
• If the electricity demand excels the generated electricity the difference can be provided by the grid or the battery storage if the SOC (state of charge) is above the lower limit.

2.3.1 Power generation

• The input parameters of the model are the in-plane irradiance G and the module temperature Tmod.
• In order to project the solar irradiation onto the plane of the PV module the actual position of the sun has to be known.
• For the location of Stuttgart, 12 a tilt of 30° and a southward orientation has been chosen.
• Depending on the installed capacity, the annual power generation is about 980 kWh/kWp for an average year.

2.3.2 Energy storage

• There are many individual effects and mechanisms that, in combination, lead to aging of the battery pack.
• The power loss in the battery causes a heat input and thereby an increase of the temperature according to the heat capacity of the battery pack.
• Figure 8 shows the relations between the different parameters/quantities involved.

3. Results

• Enabling to compare the model’s behavior and results with those from other studies.the authors.
• In this section the viability of investments in second-life batteries is discussed and the profitability evaluated.
• The NPV is calculated for a time period of 10 years and results in values between €-326 and €825, depending on the chosen scenario and battery price.
• The sensitivity analysis illustrates how the NPV changes when varying the given parameters.
• This is not crucial though because the feed-in tariff is fixed for the duration of the investment.

4. Discussion

• The presented results have shown that investments in second-use battery storage systems are profitable for the homeowner under certain circumstances.
• For the rational homeowner, the strategy should be to maximize profit and to maximize the self-consumption rate.
• The battery cannot fulfill its role of peak-shaving.
• Establishing a market for second-use batteries could lower the battery costs and raise the market share of electric vehicles, although Neubauer et al. [21] found that battery second-use is unlikely to have a notable impact on today's battery prices [21].

5. Conclusion

• When traction batteries of electric or hybrid electric vehicles reach a capacity of 80% or lower they are often considered to have reached their end-of-life because of the limited range.
• The authors evaluate conditions under which investments in repurposed battery storage systems will become economically viable.
• Upward and downward deviations from scenario S2 are covered by scenario S1 and scenario S3.
• For the electricity sector the operating strategy of the integrated PV-storage system is a crucial part.
• Only with grid-optimized operating strategies positive effects on the electricity grid are achievable.

Figures

Table 1 Input parameters for the economic model

Fig. 44. Comparison of (a) non grid-optimized; and (b) grid-optimized battery operating strategies. Source: [34], p.4.

Fig. 1. System architecture. Source: adopted from [1], p.7.

Fig. 5. Retail electricity price in Germany.

Table 2 Input parameters for the technical model (left two columns: PV system, right two columns: battery storage system)

Fig. 31. Net present value for different scenarios and battery prices.

Fig. 12. Optimal storage size.

Fig. 7. Coherences between altitude, azimuth and the position.

Fig. 2. Solar irradiation data in 2014.

Fig. 13. Sensitivity analysis.

Fig. 20. Development of the battery capacity and inner resistance over the examined time period of 10 years.

Fig. 6. Topology of integrated PV-storage system [22].

Fig. 4. Electric load profiles for the transitional period.

Fig. 3. Ambient air temperature in 2014.

Figure 10 depicts the behavior of battery capacity and inner resistance over the examined period of ten years. The capacity starts at 80% of its beginning of life (BOL) value, as this is the remaining capacity at the time the battery is replaced in the electric vehicle. Over the second life the available capacity decreases to roughly 60% of its original capacity. At the same time the inner resistance increases from 150% to 320% of its BOL value. The increasing inner resistance results in a decrease of the efficiency due to power losses.

Full text

FCN Working Paper No. 7/2016
Economic Viability of Second-Life Electric Vehicle
Batteries for Energy Storage in Private Households
Alexander Kirmas and Reinhard Madlener
July 2016
Revised April 2017
Institute for Future Energy Consumer
Needs and Behavior (FCN)
School of Business and Economics / E.ON ERC

FCN Working Paper No. 7/2016
Economic Viability of Second-Life Electric Vehicle Batteries for Energy Storage in
Private Households
July 2016
Revised April 2017
Authors´ addresses:
Alexander Kirmas
RWTH Aachen University
Templergraben 55
52056 Aachen, Germany
E-Mail: alexander.kirmas@rwth-aachen.de
Reinhard Madlener
Institute for Future Energy Consumer Needs and Behavior (FCN)
School of Business and Economics / E.ON Energy Research Center
RWTH Aachen University
Mathieustrasse 10
52074 Aachen, Germany
E-Mail: RMadlener@eonerc.rwth-aachen.de
Publisher: Prof. Dr. Reinhard Madlener
Chair of Energy Economics and Management
Director, Institute for Future Energy Consumer Needs and Behavior (FCN)
E.ON Energy Research Center (E.ON ERC)
RWTH Aachen University
Mathieustrasse 10, 52074 Aachen, Germany
Phone: +49 (0) 241-80 49820
Fax: +49 (0) 241-80 49829
Web: www.eonerc.rwth-aachen.de/fcn
E-mail: post_fcn@eonerc.rwth-aachen.de

1
Economic viability of second-life electric vehicle batteries
for energy storage in private households
Alexander Kirmas
a
and Reinhard Madlener
b,*
a
RWTH Aachen University, Templergraben 55, 52056 Aachen, Germany
b
Institute for Future Energy Consumer Needs and Behavior (FCN), School of Business and Economics / E.ON
Energy Research Center, RWTH Aachen University, Mathieustrasse 10, 52074 Aachen, Germany
July 2016, revised April 2017
Abstract
We examine the economic viability of second-life batteries from electric vehicles for load shifting and
peak shaving in residential applications. We further investigate the expected impact of a growing
number of residential storage systems on the electricity market. For the analysis a simulation model of
a private household with integrated PV-storage system is used that is parametrized for an electricity
demand of three people and a location in southern Germany. The conditions for which investments in
second use batteries are profitable are examined for three scenarios. The central scenario S2 tackles an
expected net increase in the electricity price by 4% per year. Upward and downward deviations from
this price trajectory are covered by scenarios S1 and S3. For scenario S1, we find that investments in
storage systems are profitable for all Li-ion battery costs assumed. In scenario S2, the breakeven battery
price is found to be 107 € kWh
-1
, whereas in scenario S3 with the lowest electricity price growth the
battery price has to be equal or lower than 73 € kWh
-1
to maintain economic viability.
Keywords: E-vehicle, Residential electricity, Battery storage, Load shifting, Peak shaving
1. Introduction
Renewable energy technologies are a promising way to mitigate the consequences of climate
change and the finiteness of fossil fuels. However, the intermittent electricity output from
technologies like solar photovoltaic systems is volatile and depends on daytimes or local
weather conditions. Energy storage technologies can help to match supply and demand. Reused
batteries from (hybrid) electric vehicles may provide a storage technology with environmental
*
Corresponding author. Tel.: +49-241-80-49-820; fax: +49-241-80-49-829; E-mail address:
RMadlener@eonerc.rwth-aachen.de (R. Madlener)

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and economic benefits to utilities, companies and homeowners. In the upcoming years the
global society is confronted with a variety of challenges. Climate change and fossil fuel
resource depletion are some challenges the energy economy has to find solutions for.
Renewable energy technologies will play a significant role in mitigating the consequences of
these challenges [1]. Governments of many countries have passed laws to support the transition
to sustainable energy generation. In Germany policy makers decided to foster the development
of renewable energy technologies through the provision of guaranteed feed-in tariffs. This
funding made rooftop photovoltaic (PV) systems attractive to private homeowners. However,
the energy generation from PV systems strongly depends on time of day and local weather
conditions and brings an element of uncertainty to the power grid [2]. Furthermore, the peak in
energy generation around noon produces a mismatch in demand and supply and is a threat to
the stability of the electricity system [3].
A feasible way to compensate for this mismatch is to adjust the energy supply by using
conventional power plants (like modern gas-fired power plants) which can be modulated
relatively quickly. But with limited capacities and an increasing amount of energy fed in by
renewables, other options have to be considered. The mismatch exists because the power supply
generated by PV systems is highest during the day with a peak around noon, whereas power
demand is low during the day and increases in the evening hours. The use of storage
technologies and smart grid technologies represents a promising way to shift energy demand
from the evening hours to the hours with a surplus of renewable energy generation.
In battery storage systems the electricity is stored through an electro-chemical process. Due
to decreasing battery costs they have become a potentially important alternative to other storage
technologies and several pilot projects have been started in recent years. Although battery costs
have declined, [4]-[6] could not find evidence that investments in battery storage were
profitable under present conditions. The costs per kWh decrease further if used battery storage
units are taken into consideration. In this case, the benefits from lower costs have to be balanced
with the downsides (e.g., lower capacity and efficiency, earlier replacement need of used battery
systems).
In the automotive industry the “second life” of retired batteries from electric vehicles is a
much debated issue, and nearly all of the major car manufacturers are currently determining
possible applications for their batteries after they have reached a capacity between 70-80%
through aging during their “first life” in the vehicle. Most industry experts expect them to be
used as stationary storage for renewable energy production, since they still retain significant
capacity. In recent years, several projects were implemented in order to gather knowledge about

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the feasibility and the capabilities of the second life usage. For instance, Nissan and Green
Charge Networks, a large provider of commercial energy storage, have embarked on a
partnership for the commercial use of the retired batteries from the Nissan Leaf, which is one
of the world’s top-selling electric vehicle [7]. Toyota started a partnership with the Yellowstone
National Park and provides a ranger station and education center with power from a hybrid PV-
battery system [8]. General Motors has tested their batteries from the Chevrolet Volt to provide
solar and wind power to their new IT center in Milford, Michigan. However, the projects of
Toyota and General Motors are mostly isolated applications, whereas in Germany grid-
connected solutions by Daimler and BMW are explored. A cooperation between Daimler, The
Mobility House, GETEC and REMONDIS provides a 13 MWh energy storage unit to balance
the energy in the electricity grid [9] and BMW, Bosch and Vattenfall operate a battery pack as
part of a virtual power plant in Hamburg [10]. The discussion shows the relevance of using
batteries as energy storage systems, and the importance of taking a closer look at the
requirements for a successful implementation, the consequences, and the resulting implications.
The question arises concerning the conditions under which the economic viability of the
residential PV-storage system is given. The purchase and maintenance not only of the battery
but of the other system components, like the inverter, has to provide a benefit to the decision
maker, in this case the homeowner. Possible benefits for other involved parties, like the grid
operators, may be shared with the decision maker in order to positively influence economic
viability. In addition to that, policy makers may foster the spread of the storage technology
through various incentives like credits at reduced interest rates. Further, it is important to
estimate what impact a growing number of residential battery storage systems has on the
market, the electricity sector, and policy-making. Finally, there is the question concerning
which implications and guidance can be derived from the results for energy companies, grid
operators, car manufactures, and policy makers.
The research objective is to determine the economic viability of the implementation of a
used battery from an electric (EV) or hybrid electric vehicle (HEV) in a residential application
for load-shifting and peak-shaving. Precisely, a household with a PV generation system is
considered and the benefit of combining it with a battery storage system is examined. The
battery technology is limited to lithium-ion as it is the dominant technology for EVs and HEVs
today.
The economic viability is evaluated based on literature research and a precise and time-
dependent calculation of the cash flows and the resulting net present value. The research issues
described can be examined using different approaches. Battke et al. [11] examined lifecycle

Frequently asked questions

Q1. What contributions have the authors mentioned in the paper "Economic viability of second-life electric vehicle batteries for energy storage in private households" ?

The authors examine the economic viability of second-life batteries from electric vehicles for load shifting and peak shaving in residential applications. The authors further investigate the expected impact of a growing number of residential storage systems on the electricity market. The conditions for which investments in second use batteries are profitable are examined for three scenarios. 

Q2. What have the authors stated for future works in "Economic viability of second-life electric vehicle batteries for energy storage in private households" ?

Finally, it should be noticed that the simulation model developed in their study is flexible regarding the input parameters and can be parameterized to examine a number of further research questions.