THE SURGE IN THE DEPLOYMENT OF UTILITY-SCALE AND ELECTRIC VEHICLE BATTERIES REQUIRES A REGULATORY REGIME TO GOVERN WHAT WE DO WITH ALL THESE BATTERIES ONCE THEY ARE NO LONGER FIT FOR THEIR INITIAL PURPOSE . THE EXISTING REGIMES IN THE EU AND UK ARE NOT FIT FOR PURPOSE – HOWEVER , THEY APPEAR TO BE ADVANCING . BY RO LAZAROVITCH , PARTNER , NICHOLAS NEUBERGER , SENIOR COUNSEL , AND CATHERINE TODD , SENIOR ASSOCIATE , BRACEWELL ( UK ) LLP .

Recent exponential growth in battery deployment and use has swung commercial and regulatory focus to the treatment of “ spent ” batteries . The focus , in particular , is how we treat the new wave of larger batteries used for utility-scale energy storage and electric vehicles ( EVs ) and behind-themeter domestic purposes .

Existing regulations primarily anticipate the use of small , portable batteries , such as traditional alkaline AA batteries or lead-acid batteries used in petrol and diesel cars to supply current to the starter motor and ignition system . However , draft EU regulations providing a more modern and robust battery recycling regime that address modern uses or large batteries have been published and are expected to come into force in 2022 . Other countries , including the UK , are expected to follow suit with their own regulations . An overhaul of the current dated regulations is overdue .

We explore below the drivers for these changes and the key features of the expected regulatory developments .

Second life drivers Large batteries are rife and are set to significantly multiply . Battery growth has been accelerated by the global drive to reduce emissions backed by multi-government pledges to achieve net zero – by varying dates and varying degrees of commitment – which now cover more than 70 % of global CO 2 emissions according to the IEA . By 2030 , global energy storage capacity is projected to be twenty times larger than capacity in 2020 according to BloombergNEF . Similarly , the IEA projects that the current 10m EVs on the road globally could grow to as many as 230m by 2030 . In the UK , the government ’ s ambition is to end all sales of petrol and diesel cars by 2030 , with projections of the UK ’ s EV stock reaching up to 16m by that date in the UK alone .

This leaves the world with a lot of batteries reaching the end of their initial purpose , even before we look to growth in utility-scale energy storage and uses for batteries in the drive for decarbonisation . The environmental interest in not disposing of toxic batteries in landfills and reducing the scope of mining activities required to extract raw materials is perhaps obvious , but there are other less altruistic reasons to recycle or repurpose batteries , such as :

• Financial – When a battery can no longer maintain its initial purpose , it may still be able to perform other functions . For example , after several years of use an electric bus battery may not hold sufficient charge to continue powering the bus , but it may still hold enough charge to function as part of a larger utility-scale battery storage facility . Once a battery is no longer fit to perform any other useful function , there may still be value in recycling the battery and extracting its raw materials . Repurposing and recycling therefore add value to a battery ’ s life and may provide an economic justification for greater use and implementation of batteries in various elements of our lives .

• Geopolitical – The Western world ’ s geopolitical interest in batteries lies mainly in the Chinese dominance of the battery supply chain . China controls much of the global mining for lithium , cobalt and other materials critical for battery cells , as well as the vast majority of the world ’ s raw material refining and manufacturing capacity for batteries . If raw materials can be recycled or repurposed from existing batteries , the dependence on one nation for the production and processing of new raw materials is reduced and energy security bolstered .

Battery life Lithium-ion batteries , which are the predominant type of battery used in EVs and utility-scale battery storage today , as with all batteries , degrade as energy is processed . Lithium-ion batteries are typically assumed today to reach their end-of-life when the battery degrades to 70 % -80 % of its initial capacity . Power is still there , but it is insufficient to fulfil its initial purpose .

How long it takes for batteries to reach this stage will depend primarily on the type of battery and its use . For example , batteries used in buses are cycled much more regularly than a typical EV battery , so will reach end-of-life more swiftly . Relatedly , utility-scale batteries are used in very different conditions to EVs and might only discharge for a duration of a few minutes or even seconds per day .

However , most of these batteries are currently expected to have a lifespan of about 5 to 10 years .

Project Finance International Febuary 23 2022 69