Why battery circularity may stall before it starts
The promise of battery circularity—repurposing electric vehicle (EV) batteries for second-life applications—has captured the attention of policymakers and businesses alike. Lower costs, extended battery life, and reduced waste make it an appealing sustainability strategy. Yet, despite its potential, the path to large-scale adoption is fraught with challenges that could stall progress before it begins.
Regulatory Complexity and Fragmentation
Global regulations remain inconsistent. While the EU has introduced the Battery Passport under its 2023 Battery Regulation to ensure traceability and sustainability, similar frameworks in the U.S. and Asia are still evolving. This lack of harmonisation creates uncertainty for manufacturers and investors, slowing the development of standardised processes for testing, safety, and liability management.
Economic Pressures and Market Dynamics
The economics of second-life batteries are less compelling than anticipated. According to BCG, recycling at scale offers a clearer business case than reuse, as falling costs of new lithium-ion batteries erode the price advantage of second-life alternatives. Maintaining a meaningful cost differential is critical, yet increasingly difficult as new battery prices continue to decline. IDTechEx forecasts the second-life EV battery market to reach $4.2 billion (USD) by 2035, but warns that repurposing costs—driven by logistics, labour-intensive disassembly, and testing—remain a significant barrier.
Safety, Quality, and Perception Challenges
Second-life batteries vary widely in age, chemistry, and performance. Without universal standards for State of Health (SoH) and robust safety protocols, trust in these products remains low. Buyers often perceive second-life batteries as inferior, despite potential cost savings of 30–70% and an additional 5–10 years of service life. Overcoming this stigma requires rigorous quality assurance and transparent communication.
What Business Leaders Should Do
To unlock the potential of battery circularity, companies must:
- Invest in automation and advanced diagnostics to reduce repurposing costs and improve scalability.
- Engage in policy shaping to accelerate harmonised global standards and regulatory clarity, which in turn should lead to improved customer confidence.
- Explore strategic partnerships across the value chain to share costs and mitigate risks.
Let’s not forget that Governments also have a vital role to play by introducing financial incentives and mandating recycled content in new batteries. Without these measures, second-life batteries risk remaining a niche solution rather than a viable alternative BESS option for customers to consider.
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