Fair Market Valuation of Electric Vehicle Batteries in Second Life Applications

The rapidly growing number of lithium-ion battery packs deployed in electric vehicles (EVs) entails enormous economic potential for used EV batteries to be redeployed in a second life application, e.g., for behind-the-meter stationary energy storage. To examine this potential, we develop a generic economic valuation model for used capacity assets in which second life usage requires repurposing costs and delays the receipt of recycling payoffs. Our model estimates point to a robust economic case for repurposing battery packs with iron-based cathodes (LFP batteries). Specifically, we project that the fair market value of LFP batteries exiting from electric vehicles generally exceeds 40% of the market value of a new battery. The value retention shares of used LFP packs are substantially higher in the U.S. market than in China, owing to the fact that new batteries are traded at higher market prices in the U.S. In contrast, our findings point only to a marginal economic case for repurposing batteries with nickel-cobalt-based cathodes (NCX batteries) in the context of the U.S. market. This finding reflects the relatively large recycling payoffs available from nickel and cobalt as well as the relatively short life cycle of NCX cathodes. For the Chinese market, we obtain the unambiguous conclusion that owners of NCX batteries are better off not incurring the requisite repurposing costs but instead immediately collecting the available recycling payoff.