How fleet managers can benefit from longer electric vehicle life cycles
Fleet managers are under constant pressure to reduce costs. Electric vehicles (EVs) provide an alternative to internal combustion engine (ICE) vehicles and significant savings during operation. However, less understood is the potential of EV batteries once the vehicle reaches the end of its initial life, this article seeks to set out the potential paths of revenue EV batteries can offer, thus help further reduce the costs of fleets.
EVs have far fewer moving parts than a typical ICE vehicle. ICE vehicles have more than two thousand individual components, from the alternator, drive shaft, oil, fuel, and water pump, values, rotor, pistons, the list goes on and on…
On the other hand, EVs have only a few. The EV drivetrain contains three main components, the motor, controller and battery pack.
Why EV batteries change the conventional life cycle
The most expensive component of an EV is the battery pack, and while the costs of battery cells are declining, it remains a significant cost to the production of an EV. However, despite the high costs, battery packs will outlive the life of a vehicle, therefore provide further opportunities.
Once an EV retires, batteries are likely to have plenty of life to offer. For example, an exhaustive study on Tesla battery degradation shows that after the first 100,000km the majority of EV batteries reflect around 10% deterioration. Therefore, it is plausible to suggest that at the end of an EV’s life, the battery will have sufficient capacity for repurposing.
Recycling Li-ion batteries can be a costly and wasteful process, finding innovative ways to repurpose for a second life will maximize the environmental and economic potential of the battery before recycling is even necessary.
Second-life EV battery applications
Discovering alternative uses for EV batteries is crucial, especially when the number of EVs on the roads will only increase in the coming years. Furthermore, as EV batteries are the most valuable asset of an EV, it is arguably a sensible path to pursue. OEMs have been the first to showcase the potential of second-life batteries on an industrial scale.
For example, this year, Nissan launched a new initiative to use second life Nissan Leaf batteries as an energy storage facility for street lights. The effort employs the batteries to store energy generated from solar panels during daylight hours; then the energy store can be deployed when required.
Similarly, Nissan has built a new power plant in a joint venture with 4R Energy Corporation. The plant repackages used Nissan Leaf batteries for repurposing. Battery modules with more than 80 percent capacity will be sold as replacement Nissan Leaf batteries. Lesser batteries with less than 80 percent will be repackaged and sold as batteries for lower-energy applications such as forklifts and golf carts.
By prolonging the lifecycle of batteries, the hope is that the residual value of EVs will increase, making them more attractive to fleet operators. The good news doesn’t end there. EV batteries have further applications.
How Utilities will benefit
EV batteries can also act as a management mechanism for the electricity grid. Vehicle-to-grid (V2G) is a two-way system that allows electricity to travel between an EV, plug-in battery-electric and hybrids and the power grid.
Demand response systems are one of many energy storage and delivery technologies, which help reduce electricity demand pressures on the grid. At periods of peak demand, energy from the EV battery can be sold back to utilities.
For example, EVgo is developing a storage facility alongside its fast charging system in Union City, California. Energy generation from solar will be stored using used BMW i3 batteries and delivered to reduce the grid stress when fast charging is in operation.
Integrating EV batteries and the power grid helps support network stability, reduce electricity costs, and provide a more flexible energy system that can better accommodate renewable energy sources, creating a more sustainable future.
The total cost of ownership implications
Establishing secondary uses of EV batteries will not only increase the residual value but also reduces the total cost of ownership (TCO). EV batteries will last much longer than the vehicle it operates within, therefore creates revenue opportunities.
Traditional TCO models have already highlighted the benefits of operating an EV over an ICE fleet. For instance, the cost of fuel for an EV is significantly cheaper than an ICE vehicle. Why? It’s relatively straightforward; ICE vehicles run off gasoline or diesel, on the other hand, EVs run off electricity.
According to the U.S Department of Energy, a gallon of regular gasoline costs around $2.80. In contrast, the equivalent gallon of electricity, known as the eGallon costs as little as $1.20. Therefore, based on the cost of fuel, EVs are less than half the cost of ICE vehicles, which is significant when you take into consideration the average fleet size and miles driven, savings can potentially be substantial.
Similarly, EVs have further advantages. For example, Thor Trucks, a new and prominent player in the electric trucking space, claim that their trucks will reduce maintenance costs by up to 60% and TCO by 30%, creating significant cost efficiencies.
TCO models for EVs are in the early stages of development; this is mainly the case with EV battery revenue opportunities beyond the initial life of a vehicle.
From an operating perspective, fuel costs and maintenance repairs are likely to reduce EV operating costs significantly. There is less certainty over the potential revenue from EV batteries such as stand-alone storage and V2G. However, as the technology develops and data becomes available, better cost estimates will be possible.
Evidence suggests that EVs already provide a viable alternative for fleets. Overtime enhanced TCO models will incorporate these new opportunities to help fleet managers fully understand the savings of EV fleets.