Business model description

Figure 4.2 B2U challenges: Case study I

4.2.3 Business model description

This section presents the BM of second-life batteries developed by the major stakeholders in this case study. The BM is analysed and described using the analytical framework developed in Section 3.5. The activity system of second-life batteries in case study I is firstly illustrated in Figure 4.3. It presents how Company A develops second-life batteries with Company B and C through a series of activities and transactions. This explains, at the system level, how the major stakeholders interact to develop B2U business models that transform second-life batteries into the final solutions for the end-customers. The B2U business models of Company A, B and C are then respectively analysed in detail at the firm level.

• Competition from increasingly cheap new batteries

• Lack of standardisation and transparency from the OEMs:

¨ Lack of a steady and secure battery supply

¨ Lack of transparent battery pricing

¨ Lack of standardized contracts

¨ Lack of proper warranties

• Lack of regulatory incentives for second-life batteries

Figure 4.3 The activity system of second-life batteries: Case study I

Activity system of second-life batteries

In this case study, the activity system of second-life batteries includes the value creation activities conducted by the major stakeholders and the transactions in between that transform second-life batteries into the final solution for the end-customers. Company D is a joint venture set up by Company A in Japan with the specific purpose of developing B2U. Most of its activities worldwide are currently research and development rather than operating B2U businesses, and in North America this activity is currently conducted as a department within Company A (North America). As illustrated in Figure 4.3, Company B firstly needs to get approval from Company A and be labeled as “authorized users” of the second-life batteries at the start of their relationship. After a consensus has been reached, Company A sells used EV batteries at a very cheap price ($85/kWh as referred to by one of the interviewees) through the distributor Company C. What is worth noticing here is that there is no transaction between OEM collect used EV batteries from the dealers, transport the batteries and store them at their

Company A

facilities. On the other side, Company C provides battery repurposing services to Company B, helping them with battery testing and grading. Company B then integrates the graded second-life batteries with power electronics and software to build their energy storage systems and provide mobile charging services to the end-customers. In this case, Company B does not get any warranty for the second-life batteries from either Company A or C because a warranty incurs extra costs. At the EOL of the second-life batteries, Company B is responsible for the recycling of the batteries.

Business model of Company A for B2U

For Company A, the BM is business to business (B2B) and the direct customer of second-life batteries is Company C. Its value proposition is the asset, the cheap used EV batteries.

Company A’s value creation in terms of B2U in this case study is very limited. They just collect the used batteries from EV owners through their car dealers and make them available for collection. They introduced the new stakeholder Company C who did most of the repurposing work. In this BM, Company A is merely the battery provider. They make profits by selling the used batteries at very cheap price, which contributes to their additional revenues.

Besides, by selling the used batteries Company A also avoids the battery recycling cost. From the environmental perspective, postponing the battery recycling phase reduces the pollution, wastes and energy usage caused in the recycling process. In addition, repurposing a second-life as a cheap but still capable battery also helps reduce the system cost for energy storage, which helps create new business opportunities for companies like Company B and C.

The key attributes of Company A’s business model for B2U in this case study are summarised in Table 4.4.

Table 4.4 Summary of key B2U business model attributes for Company A: Case study I

BM attributes Description Customer value

proposition

Cheap used batteries

Value creation Battery collection from EV owners;

introduction of new stakeholder for battery repurposing Value network

position

Second-life battery provider

Value capture Additional revenues through selling the batteries;

avoided battery recycling cost Social &

environmental value

Reduced pollution, wastes and energy usage for battery recycling;

new business opportunities for energy storage

Business model of Company C for B2U

For Company C, their BM is to provide battery lifecycle management services to extend the lifetime of retired batteries. In this case, Company C’s customers are the OEM and the energy storage company. Company C buys batteries from Company A, disassembles the battery packs, tests and grades them, and then sells graded battery modules to Company B. On top of that, Company C provides relevant services to both sides. Company C’s value proposition for Company A is the logistic service: they collect used batteries for Company A from the car dealers, transport the batteries and store them at their own facilities. The value proposition for Company B is the delivery of tested and graded second-life batteries: they provide battery testing and grading services and sell the batteries at certain health to Company B. However, because Company A did not provide any data on the battery historical usage, the testing “is not going to tell you the performance forward because that requires a lot more information from the OEM.” (L-1) The importance of battery data collection and sharing between stakeholders will be discussed in detail in Chapter 5.

The value creation of Company C includes logistics (battery collection, transportation and storage) and battery repurposing (battery testing and grading). Company C has the knowledge and expertise in battery grading which helps “understand where the batteries come from, how good are they and what is the best usage profile” (L-1). In this BM, Company C acts as the distributor, battery repurposer and battery lifecycle service provider that connects the OEM and the B2U system provider. Company C makes profits from providing relevant services to Company A and B: “We offer many different services from the logistics to grading…we charge Company B for doing the repurposing job, and we also charge OEMs because we collect their batteries from the dealers. We make money from both sides” (L-1). At the society level, extending the lifetime of the batteries for other applications through the battery lifecycle management services contributes to improved material efficiency, reduced resource exploitation and reduced environmental impacts. The key attributes of Company C’s business model for B2U are summarised in Table 4.5.

Table 4.5 Summary of key business model attributes for Company C: Case study I

BM attributes Description Customer value

proposition

For the OEM: logistic service

For energy storage company: graded second-life batteries Value creation Logistics: battery collection, transportation and storage;

Battery repurposing: battery testing and grading Value network

position

Distributor, battery repurposer and battery lifecycle service provider environmental impacts through extending the battery lifetime

Business model of Company B for B2U

The product developed by Company B is an intelligent mobile charging system built around second-life batteries. Company B designs the system to be able to move to the vehicles so that EV owners can access charging at any spot. The targeted customers are the corporations who have quite a few employees driving EVs. Those corporations are facing the problem of constructing expensive charging infrastructure at their companies. To solve this problem, Company B develops the intelligent mobile EV charging solution.

For Company B, the BM is to provide mobile EV charging as a service to the end-customers.

Its customer value proposition is threefold. The first is the flexible and easily scalable EV charging service. As commented by the CEO and founder of Company B: “For our customers, the most important part is that they have a much easier process to scale EV charging by taking away the need for construction projects” (E-1). The mobile charging exempts the corporations from tedious and expensive charging infrastructure construction, which helps them avoid large upfront costs. The second value proposition is the savings in electricity costs especially the demand charges caused by peak-time EV charging: “Because we are using night-time rather than day-time electricity which saves money…and also saves customers in demand charges which could be huge in California” (E-1). The third value proposition is more convenience in EV charging for the end-users. The EV drivers can access charging at any parking lot without bothering to rotate in and out of the charging spot during work.

Supported by Company B’s software platform, the EV drivers can register their preferred time of charging and have EV charging on site.

Company B’s value creation includes second-life battery system integration, product and charging service development that “include everything the customers would need from attendant to hardware and software to insurance, literally everything they need to get it working” (E-1). In this BM, Company B is the B2U system integrator and provider, as well as the EV charging service provider. Company B has many patents in hardware and software and they “know how to work with second-life batteries” (E-1). Company B built the system that

“can extend the lifetime of second-life batteries” (E-1). Since they use cheap second-life batteries, Company B is able to reduce the system cost to provide cost-effective solutions for the end-customers. Company B makes profit from providing charging services to the end-customers, who pay for the service by month.

In Company B’s business model, the mobile charging service also helps quicker EV adoption by addressing the charging problems. This is an additional value created for the OEM and the society as a whole in terms of building a cleaner transportation system. Besides, the intelligent energy management enables the batteries to store off-peak time electricity to charge the EVs during the day. This will benefit the grid through shifting the demand peak caused by simultaneous EV charging. The key BM attributes for Company B are summarised in Table 4.6.

Table 4.6 Summary of key business model attributes for Company B: Case study I

BM attributes Description Customer value

proposition

Flexible, easily scalable and cost-effective EV charging;

avoided large upfront cost for charging infrastructure;

reduced demand charges and electricity bills;

Value creation B2U system integration, product development and all-inclusive charging service

Value network position

B2U system integrator and provider;

EV charging service provider

Value capture Monthly payment for the charging service Social &

environmental value

Addressing EV charging problem that promotes EV adoption for a cleaner transportation system;

Demand peak shifting for the grid