BaaS In Review

Battery as a Service (BaaS) allows customers to keep their vehicles charged up and running, without recharging the drained-out batteries. The concept allows customers to lease out batteries as a separate component from the car, on a subscription based model, and swap it for a fully charged one as and when it depletes power.

Last year Shoosmiths published a report highlighting the benefits of the BaaS business model, driven by the increasing use of battery storage technology.  This report identified various advantages such as:

• A reduction in range anxiety.
• A reduction in the upfront cost of an EV.
• Eliminating multiple barriers of entry to EV ownership, such as on-street parking and prohibitions on the installation on a home EV charger.
• Flexibility.
• Prolonged battery life caused by an overall reduction in rapid charging.
• Broader opportunity to extract value from EV batteries - via second-life battery storage solutions and end-of-life recycling opportunities.
• Just over a year on, we revisit the themes of that report to chart the growth of this versatile and convenient service to see if its promising user prospects have been realised.

Take-Up

BaaS has become particularly prevalent in China, where NIO has recently installed upwards of 1000 battery swapping stations, each of which stores multiple batteries and recharges swapped ones once they have been removed from a vehicle.  Users can lease a battery and both swap to a fully charged battery with a 380 mile range in three to five minutes and pay to upgrade to a larger-capacity one if they need more driving range for a longer trip. 

Technology War

Crucial to the adoption, and overall success of BaaS, is battery technology.  As the technology of choice in EVs and the electrical storage industry more broadly, lithium-ion batteries will play a significant role in the global migration to net-zero. Perhaps unsurprisingly, we have now entered what can best be described as a ‘battery war’, with two technologies competing to spearhead a potentially lucrative industry and by 2035 global lithium-ion battery pack revenues are predicted to reach $730bn a year!

So, how will this ‘war’ play out? On the one side, we have South Korean manufacturers LG and Samsung, who produce NMC (nickel, manganese and cobalt) batteries - a technology used in the majority of electric vehicles sold in the West offering higher energy and lower upfront cost, but a shorter life cycle.  Alternatively, we have a number of Chinese companies who, collectively, account for 99% of the world’s output of LFP (lithium-ion phosphate) batteries - which are cheaper and offer a far greater life cycle.

With the two technologies vying for supremacy, there will no doubt be winners and losers as time develops as competitors race to supply demand internationally.  The prevailing technology will likely help or hinder the global advancement of the supplier counties of various cathode materials and in turn, the behaviour of consumers, politicians and global original equipment manufacturers (OEMs) will play a significant role in either firming up or weakening China’s potentially dominant grip over the global electric vehicle (EV) market.

Battlegrounds

Whilst Western start-ups are working on developing their own LFP technology, and global OEMs are asking Korean companies to make LFP batteries, neither is able to firmly compete with China which has already developed the means of scaling up this technology in an affordable manner, this largely due to enormous state backing.  In the coming decade, it is predicted that the biggest swing in the battery market would be whether the West pursues NMC or LFP - a decision described as a “delicate balance” between reducing reliance on China (i.e. retaining control of this technology but, perhaps, risking a slower energy transition as a consequence) or accepting it as the cost of maintaining access to highly competitive and affordable technologies!

Whilst BaaS has clearly created a viable and cost-effective solution for EV ownership, its development has been halted by technological competition in the development of lithium-ion batteries and its continued global advancement appears to be largely on-hold until the West adopts one technology or the other.