Levelized Cost Analysis of Second-Life and New Lithium-Ion Batteries in Microgrid Applications

The need for sustainable battery energy storage alternatives has led to the exploration of second-life electric vehicle batteries for microgrid applications. This study evaluates the levelized cost of storage for second-life and new lithiumion batteries in microgrids, considering both scenarios with and without electric vehicle integration. A mixed-integer linear programming optimization model is developed to minimize the total electricity cost of microgrids while calculating the optimized size of battery energy storage. The net present value approach is used to account for future costs, including operational costs, investment costs and replacement costs, ensuring a comprehensive economic analysis over the complete planning horizon. Simulations were performed for three microgrids in British Columbia, Canada. Results show that second-life batteries require 50 % more replacements than new lithium-ion batteries over the planning horizon. However, second-life batteries have a <tex xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">$\mathbf{5 0 \%}$</tex> lower investment cost as compared to new batteries. The optimized battery sizes reflect the need for larger capacity of second-life batteries to compensate for performance degradation. Furthermore, the levelized cost of storage analysis shows that second-life batteries have up to 30 % higher levelized cost of storage compared to new lithium-ion batteries which makes them less cost-effective over time. Levelized cost of storage increases with the integration of electric vehicles for both battery types, with up to a 10.5 % rise for new lithium-ion batteries and up to an 11.1 % rise for second-life batteries. Contrary to the popular belief, the findings highlight that new lithiumion batteries perform better in the long-term and emerge as a more economical option due to their higher efficiency, increased maximum and minimum state-of-charge, longer lifespan, and lower overall levelized cost of storage.