The concept of second-life batteries presents a compelling opportunity to extend the useful lifespan of energy storage systems, particularly those retired from electric vehicles (EVs). As the EV market grows, so does the volume of batteries that no longer meet the stringent performance requirements for automotive use but still retain significant capacity for less demanding applications. Evaluating the economic viability of different business models for these batteries—leasing, resale, and energy-as-a-service—reveals varying levels of profitability, market suitability, and operational challenges.

Leasing models for second-life batteries involve companies retaining ownership of the batteries while customers pay for their use over time. This approach reduces upfront costs for end-users, making it attractive for applications like commercial energy storage or backup power systems. The leasing model benefits from predictable revenue streams and greater control over battery lifecycle management. However, it requires substantial capital investment to acquire and refurbish batteries, as well as robust logistics to handle distribution and eventual retrieval. Companies like Renault and Nissan have experimented with leasing second-life EV batteries for stationary storage, demonstrating moderate success in Europe and Japan where energy costs are high and regulatory support exists. Profitability hinges on the ability to minimize refurbishment costs and maximize the lease duration while maintaining performance guarantees.

Resale models, where second-life batteries are sold outright to customers, offer a different set of advantages and challenges. This model appeals to buyers seeking lower-cost energy storage solutions without long-term commitments. The resale market is particularly viable in regions with strong demand for affordable storage, such as off-grid communities or small businesses. However, profitability depends heavily on the condition and remaining capacity of the batteries, which can vary widely. Refurbishment and testing costs must be carefully managed to ensure resale prices remain competitive with new batteries or alternative storage technologies. Startups like ReJoule and Moment Energy focus on grading and certifying second-life batteries to build consumer trust, a critical factor in overcoming skepticism about performance and longevity.

Energy-as-a-service (EaaS) models represent a more innovative approach, where companies provide storage solutions as part of a broader energy management service. In this model, customers pay for the energy delivered or the savings achieved rather than the physical batteries. EaaS is well-suited for grid-scale applications, where second-life batteries can be aggregated to provide frequency regulation, peak shaving, or renewable energy integration. Companies such as Connected Energy and B2U Storage Solutions have deployed second-life batteries in large-scale storage projects, leveraging their lower cost compared to new batteries to improve margins. The EaaS model benefits from scalability and the ability to monetize multiple revenue streams, including grid services and demand charge reduction. However, it requires sophisticated software for energy management and partnerships with utilities or grid operators, increasing operational complexity.

The profitability of these business models varies significantly across markets. In regions with high electricity prices and supportive policies, such as parts of Europe and California, leasing and EaaS models tend to perform well. In contrast, resale models may find stronger demand in emerging markets where affordability is a primary concern. The application also plays a critical role; for instance, second-life batteries used for residential storage face different cost pressures and customer expectations compared to industrial or grid-scale deployments.

Barriers to the economic viability of second-life battery business models are substantial. Collection logistics pose a major challenge, as batteries must be transported from automotive manufacturers or recycling centers to refurbishment facilities. The lack of standardized battery designs complicates disassembly and testing, increasing labor costs. Refurbishment itself is costly, requiring specialized equipment to assess health, replace degraded components, and ensure safety. Consumer perception remains another hurdle, as many potential buyers are wary of used batteries due to concerns over reliability and warranty coverage. Companies addressing these challenges often invest in advanced diagnostics and transparent reporting to build confidence in their products.

Startups and established players in the second-life battery sector are adopting diverse strategies to improve profitability. Some focus on vertical integration, controlling the entire process from collection to deployment to reduce costs. Others partner with automakers to secure a steady supply of retired batteries. Collaborative efforts, such as pooling batteries from multiple manufacturers, can also help achieve economies of scale. Meanwhile, technological advancements in battery health assessment and modular designs are lowering refurbishment expenses and expanding the range of viable applications.

The economic case for second-life batteries is further influenced by the declining costs of new lithium-ion batteries. As prices for new storage systems fall, the margin advantage of second-life batteries narrows, particularly in applications where performance and warranty assurances are critical. However, second-life batteries remain cost-competitive in scenarios where their lower price outweighs the reduced capacity or cycle life. For example, in applications with intermittent use or lower power requirements, such as backup power or rural electrification, second-life solutions can undercut new batteries on price while still meeting performance needs.

In summary, the economic viability of second-life battery business models depends on a combination of factors, including regional market conditions, application-specific demands, and the ability to overcome logistical and perceptual barriers. Leasing, resale, and energy-as-a-service each offer distinct advantages, with profitability varying based on execution and market alignment. While challenges remain, the growing volume of retired EV batteries and increasing focus on circular economy principles provide a strong foundation for the expansion of second-life battery applications. Companies that can innovate in logistics, refurbishment, and customer engagement will be best positioned to capitalize on this emerging market.