Authors: Philipp Zeng, Innovation Consultant Intern at Bax & Company
Batteries play a crucial role in powering a wide array of applications today, spanning transport and IT, to household use. They facilitate services by storing energy and releasing it on-demand, regardless of temporal fluctuations in supply and demand. However, batteries have finite lifespans due to degradation processes, necessitating replacement once they reach their End of Life (EoL). Yet, even at this stage, they retain value, underscoring the importance of managing waste streams to mitigate the environmental impacts from raw material sourcing.
The inherent structure of the lithium-ion battery (LiB) market is characterised by a high level of entropy for various reasons. The sheer diversity in cell compositions and forms results in a highly fragmented waste stream, encompassing everything from nickel-based NMC cells to iron-based LFP cells, as well as pouch cells, cylindrical cells, and prismatic shaped cells. Moreover, cell conditions such as State of Health (SoH) or remaining State of Charge (SoC) often remain unknown until diagnosis and dismantling, hindering the predictability of returning battery value streams. Additionally, repurposers are usually unaware about the timing of EoFL battery returns, thereby impeding their ability to forecast a reliable supply stream.
Cling Systems has positioned itself within this EoL battery ecosystem. Founded in 2020, the Swedish company has developed the world’s first b2b market platform for spent EV batteries. In doing so, they enable the coordinated handling of End of First Life (EoFL) batteries, accelerating battery circularity, and allowing for more scalable trade. Through their trading platform for used LiBs, Cling Systems aims to overcome these hurdles by facilitating a closer alignment between returning streams from the market (supply) and the prospective applications they could serve (demand). The concept facilitates the reversal of the battery flow with the goal of revolutionising the EV battery loop towards a more sustainable and circular one.
The platform: Space for EoFL owners and repurposers
Whether batteries originate from EoFL applications or are the result of other feedstock sources such as off-specification, scrap, or warranty batteries – they still retain significant value. On one hand, batteries possess an inherent energy value, rendering them potentially suitable for reuse in similar applications, or repurposed for different applications such as energy storage. On the other hand, if the residual energy value is lower than the raw material value, the appropriate strategy for handling the battery involves the recovery of raw materials through recycling.
Consequently, there are two primary stakeholders in this process: EoFL battery owners aiming to maximise the monetary value of their batteries, and 2nd life battery users and recycling facilities aiming for a steady and reliable supply of batteries. After subscribing to the platform, users can access information about the batteries at the pack, module, or cell level that are available for trading and their order of magnitude. The platform offers filtering options for specific search criteria such as capacity, voltage level, and chemistry, along with insights into the battery’s history and previous usage. There is a significant emphasis on first-life usage data, as traceability is key in understanding the battery’s current health status (SoH, SoX etc.). At the moment there are 394 users registered on the platform, representing 347 companies across 31 countries.
Cling Systems has developed an extensive database of battery types with varying cathode chemistries currently available in the market. They track more than 2,500 different products, classified as battery packs, modules, and cells, including data from in-field testing. Buyers can identify batteries that meet their criteria and express interest by requesting an offer for a specific product. Then Cling Systems assesses the potential suitability for a trade upon notification. They have successfully executed more than 45 trades, and 70 shipments in 12 different countries worldwide in 2023, positioning themselves as leaders in the reverse logistics market of batteries.
The business model: data management and building partnerships
The company’s value proposition addresses the challenges inherent in the highly dispersed and fragmented market for reverse logistics of batteries. EoFL batteries are geographically dispersed, with variations in battery chemistry ranging from nickel-manganese-cobalt based compositions to iron-phosphate based ones. Additionally, their remaining SoH and voltage levels may vary even within a single battery system.
Cling Systems facilitates the reverse material flow by establishing a pool that enables both sides of the market to access supply or demand. They offer trading services by assuming ownership of the traded goods and actively seeking customers. Moreover, they provide tracing services by gathering and providing data of the previous-life usage of batteries, and transportation services via partners who test, diagnose, dismantle, and ship. The company therefore internally requires several experts in regulation, software development, business strategy, and the battery value chain. Externally, a wide network of strategic partners is crucial for the smooth operation of reverse logistics. EoFL and 2nd life owners of Li-batteries such as OEMs and fleet owners serve as sources for used batteries, dismantlers and testing partners assess the batteries’ SoH and Remaining Useful Life (RUL), warehouses store the parts until needed, and logistics companies ensure safe and efficient transport in compliance with industry standards such as the European agreement ADR.
Handling, processing, and providing data play key roles in business activities, as customers are only willing to purchase goods with known origins and ideally health statuses. However, this is especially challenging due to privacy regulations and intellectual property (IP) rights, which hinder the easy exchange of data. The company must provide transparent and user-friendly datasets, both for customers to know what they are purchasing, but also for internal product assurance. Below you can see Cling Systems’ business model canvas.
Current challenges: Supply forecasting and lack of industry standards impede large-scale reverse streams
As previously explained, the battery reverse logistics industry faces significant challenges due to its fragmented nature, hindering the establishment of a smooth reverse stream on a larger scale. The biggest hurdle lies in the difficulty of forecasting a steady, long-term supply of EoFL batteries. Acquiring data from 1st or even 2nd life users can be challenging, as data sharing may be restricted by IP rights or may only be available for a limited period of the battery’s lifespan. Although the EU New Battery Regulation, adopted in July 2023, aims to address data-sharing issues, a consistent standard has yet to be implemented in the industry. This is a key issue for Cling Systems, as the commercial value of their traded goods relies heavily on trust and the availability of comprehensive data.
In addition to data and compliance regulation concerns, the most prevailing hurdle is the necessity for a network of experts ranging from traders to testers and customer service professionals to facilitate successful trades. The inherent complexity of chemical variations, differing battery health conditions, and widespread geographical distribution complicates the scalability of the market. That’s why Cling Systems continually strives to establish trustworthy partnerships throughout their business operations.
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Furthermore, current assessment methods and dismantling strategies lack standardisation, leading to time-consuming processes. The associated cost for testing, dismantling, shipping, and transportation must be carefully weighed against the monetary value that can be obtained from the battery. Some EoFL battery owners anticipate a reduction in reverse logistics process costs in the future and therefore choose to retain their batteries, hoping for higher returns on their batteries and spare parts. This behaviour undermines the long-term predictability of returning battery streams.
Outlook: Circular Asset Management
The company is aspiring to an even higher level of tracking and providing data for their customers on previous trades. One of their pilot projects with a current customer allows them to access a circular asset management tool. This service offers a comprehensive overview of past trades, including location, second life application, and the proportion between second-life usage and recycling. The goal is to develop a platform that incorporates all recent trading activities for a customer, providing valuable insights into the utilisation of their EoFL batteries. With these tools, they strive to be at the forefront of enabling large-scale trade of EoFL batteries across Europe.
To overcome initial investment costs for new projects, Cling Systems is continuously working with financing partners to evaluate larger deal potentials.
This case study was elaborated as part of the BatteReverse project by Bax & Company with input from Cling Systems. The article is part of the Circular Business Cases series, which analyses existing business models for Li-ion batteries.
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