The global push for electrification is driving an unprecedented production of lithium-ion batteries. However, due to various factors, including overproduction and canceled projects, approximately 10 to 15% of new batteries remain unused in their intended first-life applications.
This trend is particularly notable in the electric vehicle (EV) sector, where rapid innovation and scaling often leave functional batteries underused. In the EV industry, second-life batteries could be key in expanding access to affordable energy storage for residential charging systems, grid backup, and mobile charging applications.
Battery recycling offers a critical role in recovering critical materials like lithium, cobalt, and nickel, reducing environmental impact, and supporting a more sustainable battery supply chain.
While recycling is critical for end-of-life batteries, the concept of second-life reuse, where unused and surplus batteries are repurposed for other applications, offers tremendous environmental and economic benefits.
Despite its promise, the second-life battery market in the United States remains underdeveloped, hindered by significant challenges. This article explores the issues limiting its growth and what it will take to unlock its potential.
The untapped potential of second-life batteries
The elephant in the room is that many lithium-ion batteries retired today (many new, never cycled, or used with a state of health exceeding 80%) are sent directly to recycling facilities instead of being sold for a second-life application.This includes new surplus batteries, manufacturing fallout (unused but functional cells and modules), and lightly used batteries.
Regardless of being cheaper than new batteries, these batteries are overlooked mainly for reuse in favor of recycling.
The elephant in the room: Many surplus and lightly used EV batteries are sent straight to recycling — despite being viable for second-life use. This is due to warranty gaps, testing costs, and the falling price of new batteries.
There are a few reasons for this inefficiency. Surplus and retired batteries are less desirable due to lack of warranty, logistical challenges, testing requirements, and the perception that new batteries, which are decreasing in cost, are a better investment.
Yet, giving these batteries a second life would reduce waste and lower the carbon footprint associated with manufacturing new batteries.
The challenge of costs
The current decline in new lithium-ion battery prices has created a significant obstacle for the second-life market. In 2024, prices for new cells in China fell as low as $30 to $50 per kWh.
This is because of:
- Oversupply. The rapid expansion of battery manufacturing capacity has outpaced demand, leading to intense price competition.
- Technological advancements. The emergence of cheaper battery chemistries, such as lithium iron phosphate (LFP) and sodium-ion, has further driven down costs.
- Market dynamics. Innovation and scaling in the battery market have created an environment where new batteries are often priced competitively with second-life alternatives.
Low prices for new battery cells have made it challenging for companies using second-life batteries in their products to offer a sufficient discount to attract buyers. Many buyers prefer to purchase new batteries with warranties and the latest technology, leaving second-life batteries struggling to compete.
Logistical and operational barriers
The logistics and operations involved in repurposing lithium-ion batteries are another significant hurdle. These issues include:
- Testing and certification. Batteries require rigorous testing to ensure safety and performance. This process is costly and time-consuming, especially when dealing with large quantities.
- Regulatory compliance. Shipping and handling batteries involve intricate regulatory requirements, including classification, packaging, labeling, and documentation. Missteps delay shipments and increase costs.
- Lack of standardization. The absence of standardized processes for testing and grading batteries adds complexity to transactions and discourages buyers and sellers.
Owners of retired batteries and cells also face significant costs and risks when disposing of or selling batteries for second-life use. Contracts can take months to finalize, and domestic and international shipping costs are high. For example, cross-country truck shipments can cost between $5,000 and $6,000. International shipments also often require costly UN-certified packaging.
Lithium-ion battery prices, cost/kWh, and pack/cell split. (Credit: BloombergNEF)
Why the US lags behind other markets?
The second-life battery market in the United States trails behind its counterparts in Asia and Europe, where the industry is more mature. Asian and European companies have developed the infrastructure, financing, and expertise to handle large volumes of retired batteries across various chemistries and form factors.
In contrast, the US market remains fragmented and immature. A significant challenge in the country is the disconnect between first-life battery owners and second-life buyers. First-life owners often expect to recoup 50% or more of the original value of their batteries. However, second-life companies typically aim to pay only 10 to 20% of the original price to remain viable. This disparity, coupled with the rapid obsolescence of older battery technologies, creates a mismatch of expectations.
Additionally, first-life owners’ lack of standards and testing capabilities slows down transactions. Second-life buyers often require comprehensive testing, but many first-life owners lack the equipment or resources to test batteries on a scale.
The path forward
Despite these challenges, the large-scale second-life battery market has immense potential for environmental and economic benefits. Reusing batteries extends their lifecycle and reduces waste and the environmental impact of lithium-ion battery production.
Second-life batteries provide affordable solutions for battery energy storage and e-mobility, accelerating electrification efforts globally.
To realize this potential, several steps must be taken.
- Standardizing testing and grading processes will reduce inefficiencies and the prices of second-life batteries by removing labor costs.
- Designing batteries for second use can help a lot. Starting from easier disassembly to accessible and reliable structured data on each battery and cell in a digital battery passport (mandatory in EU as of 2025).
- Raising awareness among first-life owners about the benefits of second-life reuse (both environmental and financial) and demystifying legal risks can help shift market behavior.
Conclusion
The second-life battery market represents a critical opportunity to reduce waste, lower costs, and support a more sustainable future. However, overcoming the barriers to market growth, ranging from pricing challenges to legal and logistical inefficiencies, will require collective action from stakeholders across the industry.
As EV adoption accelerates, enabling a viable second-life market for retired and surplus EV batteries will be essential to reducing the full lifecycle emissions of electric mobility and maximizing the value of existing battery resources.
Filed Under: Batteries, FAQs