Used EV batteries are storing solar power at grid scale — and making money at it

B2U Storage Solutions raises $10M to scale up site that sells solar power stored in Nissan Leaf batteries in California’s wholesale markets.

Freeman Hall, president of B2U, in front of stacks of used Nissan Leaf batteries. (Julian Spector)
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LANCASTER, California — In a parched corner of the Mojave Desert, car batteries are at the center of a revolution.

Instead of fading into obsolescence when they retire from propelling zero-emission Nissan Leafs, these battery packs now work together to store California solar power and discharge it in the evening when the grid needs it most.

That’s something that energy futurists talk about as a potential breakthrough, something the state of California disburses millions of dollars to research and demonstrate. But B2U Storage Solutions, the developer and owner of the Lancaster project, has been doing it for over a year, and making money at it, too.

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The rewards are necessary because B2U largely self-funded this project as a sort of experiment. Repurposed car batteries are not an asset class that mainstream renewables investors have shown much interest in. But the year of runtime data and profits B2U accrued helped it close a $10 million Series A raise this month and commit to a significant ramp-up in battery capacity at the site.

The operational project in Lancaster attracted the attention of Japanese trading conglomerate Marubeni, whose power division led the Series A investment. Marubeni views second-life batteries as a source of cheap grid storage and a solution to the recycling needs of the electric vehicle industry, said Minako Wakayama, head of Marubeni Power International, 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. 

Seeing is believing

As a clean-energy reporter, I’m reflexively skeptical when a company says it’s done something the rest of the industry hasn’t figured out yet. So when I got a pitch from B2U, I had to see it for myself. I rented an electric car and zipped out to Lancaster to verify the claims. You can see for yourself in this video I made.

Next to a 1-megawatt solar array, there is indeed a series of sheds filled with unbroken Nissan Leaf battery packs. They load up on solar generation and discharge to the local grid based on B2U’s optimization of wholesale market pricing. 

We make good money on that,” said B2U President Freeman Hall. The core business proposition is arbitrage: fill up on cheap solar power and sell when prices shoot up, generally in the evening hours. But B2U’s trading strategy plays across several different wholesale market products, depending on what is most lucrative at the moment.

The battery packs currently total 2.75 megawatts/​4 megawatt-hours, quite diminutive compared to new batteries popping up elsewhere, but construction is underway to more than quadruple the storage capacity on site.

Grid batteries, but cheaper

Energy storage is the hottest growth sector of the U.S. power industry, expanding faster than solar, wind or any of the older types of power plants. Expansion in battery manufacturing capacity pushes prices down, making the technology more cost-competitive over time (short-term supply shortages aside).

Second-life batteries promise even lower costs. Since the original Nissan Leaf owner already paid for the battery, the subsequent customer gets it at a steep discount. Batteries typically get swapped out of cars when they get down to around 80 percent of their original capacity, but they’re still capable of storing power for uses other than driving.

B2U installed the Lancaster project at below $200 per kilowatt-hour, all in, using batteries it sourced from Nissan and other manufacturers (the Leaf debuted in 2010, so it’s had more time to run through battery packs than other mass-market EVs). That’s roughly two-thirds the cost of a two-hour storage project using new batteries in 2020, according to analyst James Frith, head of energy storage at research firm BloombergNEF.

A recent survey published by the National Renewable Energy Laboratory found that midrange cost projections for lithium-ion battery projects won’t fall below the $200 per kilowatt-hour threshold until 2030. That analysis looked at storage plants capable of four 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 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 noted — which is often the case in the early days of the storage industry. 

However, this low capex cost has to be balanced against the lifetime of the project,” he noted. 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, warrantied alternative.

Will second-life batteries scale?

B2U now has outside funding to grow its projects and improve its technology — to further hone the battery diagnostics, for instance, and integrate different car batteries and chemistries. 

Still, $10 million is a very modest sum at a time when storage companies are raising $100 million rounds with some regularity. That displays a level of forbearance unusual in an industry with a lot of easy money suddenly sloshing around. Then again, it shouldn’t be hugely capital-intensive to buy cheap used batteries and install them on solar farms developed by B2U’s predecessor, Solar Electric Solutions.

The question now is how much impact B2U can have with this strategy. Building small utility-scale projects where the opportunity arises certainly nudges California’s grid in a cleaner direction. But that’s not commensurate with the revolutionary potential of the second-life battery concept. 

For now, B2U is focused on its own pipeline of projects, which add up to 46 megawatt-hours of storage in the works. But Hall said he’d consider licensing the technology to other developers as more used batteries become available. That would situate B2U as a technology provider for other companies’ projects, vetting the battery packs and ensuring they work properly. Licensing could greatly expand the reach of B2U’s technology because it would no longer be limited to projects B2U itself is building. 

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 alleviate concerns about how long former EV batteries last in a grid-storage function. 

Hall believes his company can do this. 

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,” Hall explained.

There are also safety concerns to assuage: Even new, factory-made lithium-ion batteries have caught fire, albeit infrequently. A large facility packed with hundreds or thousands of used car batteries, each with their own histories of degradation from their former lives, poses a new kind of challenge for safety management.

But Hall noted that the Leaf battery packs were engineered to survive all kinds of driving conditions, which are far more strenuous than the duties of stationary grid-storage batteries. And B2U backs them up with real-time thermal controls and hazard monitoring, and it received the UL 9540 fire safety certification for the Lancaster project.

The facility’s data set of battery performance expands every day. But this track record, while it satisfies B2U’s desire to expand, may not suffice for investment committees contemplating projects that are hundreds of megawatts in size.

Wakayama, though, foresees vast long-term market potential, which is why her company chose to invest in B2U.

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 said.

Second-life batteries are doing commercial work on the California grid. They have a clear pathway to powering more small or medium-sized grid-scale plants, currently limited by B2U’s appetite for in-house development. Truly transformative use of this concept depends on others buying into it and practicing it themselves. 

But now that one company is making money at it, others will follow.

Julian Spector is senior reporter at Canary Media.