Ever since Tesla announced its PowerWall battery project earlier this year, interest in stationary storage and battery technology in general has been explosive. Now, Mercedes Benz has put together an interesting project built around recycled batteries that might help drive even more interest in grid scale utility storage and help to blend the consumer and commercial markets for batteries.

Under Mercedes’ new project, a consortium of companies is going to create the world’s largest grid storage facility using used batteries in Lunen, Germany. The project will have the capacity to store 13 megawatts of power (enough to meet the demand of 130,000 homes) based on reusing automotive batteries. The basic premise is that when the battery from an electric vehicle or a plug-in hybrid vehicle is no longer reliable enough to start a car, it still has up to 80% of its original storage capacity remaining. As a result, a large series of these batteries can be connected to store energy from renewable sources like solar and wind power. Related: Undeterred By Volatile Markets, Resource Investors Ramp Up Investments

The project is especially interesting because it could help to make electric vehicles more viable. Batteries from EVs are currently being mostly thrown away after being used. If instead, those batteries have some economic value for projects like the one in Germany, than companies might be willing to pay consumers some salvage value for the battery even after its useful life in the car has ended. If that becomes the case, it would lower the effective cost of EVs for consumers and help make them attractive to a broader audience. It is unclear at this point if firms engaged in energy storage would pay for the used batteries or just try to buy them in bulk from other companies that are disposing of them on behalf of consumers. Yet, at this point at least, there is a possibility of the used batteries helping to improve the economics of EVs – a possibility which has previously been absent. Related: Oil Finds Some Support As WTI Hits $40 Mark

Grid scale storage in theory helps to move the world closer to an “internet of energy” based on renewable power being generated and stored for later use. Such a system is at least a decade away from widespread feasibility, but Mercedes’ interest demonstrates an “out of the box” approach to the grid scale energy issue which is rapidly being recognized as a serious economic need. It’s unlikely that recycled or reused batteries would ever come close to meeting the need for grid scale storage on their own; car batteries are just not that big compared to the need for household energy usage. But second life batteries can play a role in the overall equation. Related: Oil Prices Testing August Lows As Inventories Swell

In particular, as more and more renewable power comes online, ever larger amounts of energy storage will be needed. The recycling of batteries could become a multibillion dollar business by some estimates over the coming decades. So far, the battery recycling business is quite small though. Auto batteries generally carry an 8 year/100,000 mile warranty, and many seem to be outlasting that. Add to that fact the issue that hybrids and EVs have only started to see meaningful sales in the last few years years; for instance just 19,000 Honda Insights and 33,000 Toyota Prius’ were sold in the US through the 2003 model year. Those numbers have increased over time, but a basic look at the math shows that battery recycling still needs some time before it can ramp up. For now Mercedes’ move is probably mostly PR, but the industry might start to feed a real economic need in the years to come.

By Michael McDonald of Oilprice.com

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