Price drops! LFP makes new batteries more attractive

A Cactos BESS unit. The company provides primary and secondary BESS solutions. Image: Cactos

Finland-based BESS solutions company Cactos has revealed that the increasing cost competitiveness of LFP (lithium iron phosphate) batteries is making first-use batteries more attractive than second-use batteries. The announcement came after the company raised €26 million ($28.5 million) in funding.

OP Finland Infrastructure LP and the Finnish Climate Fund have led a €26 million investment in a new company called Cactos Fleet Finland LP, which will purchase and operate battery energy storage system (BESS) units for major commercial (I) and industrial (C) customers under Cactos’ no-down-payment leasing model.

When the company raised €2.5 million back in November 2022, it said it was primarily converting spent batteries from Tesla electric vehicles (EVs) into stationary battery energy storage systems (BESS), also known as second-life energy storage systems. However, founder and CEO Oskari Jaakkola said that the fall in prices for new lithium iron phosphate (LFP) batteries has since changed that, he said .

“Due to the significantly improved cost competitiveness of first-life LFP cells, we are currently producing around 80-90% of the capacity and we expect this trend to continue,” Jaakkola said.

Elaborating on this, he said: “Currently, first-generation LFP cells are very attractive due to their longevity and price. However, we are agnostic in terms of battery chemistry and if other attractive technologies emerge, we will evaluate them.”

“When it comes to battery energy storage, second-life cells are a great fit. However, from a cost perspective, first-life LFP is currently more attractive. There are other aspects that support second-life cells, such as the ESG sector, which is why we want to keep second-life products in our offering and allow customers to make a choice.”

The high cost of new lithium-ion batteries is often cited as a driver of the second-life energy storage market.

Cactos Fleet is targeting €70 million in capital, half equity and half debt, and was established to separate the long-term lease and operation of BESS assets from Cactos’ technology business, which have different typical investor profiles.

Jaakkola explained the company’s business model and how it ties in with the decision to currently focus on first-life LFP battery cells.

“Our product is a smart energy storage system as a service – we provide a full range of services to our customers, who simply pay a monthly bill. We develop the technology (both hardware and software), we assemble the BESS, we install, commission, maintain, trade and finance the system. We also typically receive performance-based fees, so our customers have a vested interest in making our BESS the most reliable, profitable and cost-effective on the market.”

The company’s first BESS product is the Cactos One Cardo, while its product containing second-generation Tesla batteries is the Cactos One Classic. Its deployed BESS units are aggregated into a virtual power plant (VPP) using its proprietary software, Cactos Spine.

The company has 50 Cactos Ones (without specifying the split between Classic and Cardo), which could rise to more than 1,000 in the coming years, based on the latest funding. The investment period is expected to be 2.5 years, with a unit operating period of 10 years.

Its largest owned system is a 2.5MWh BESS installed at the Tuusula logistics center in Finland.

(Source: Cactos Fleet Global Energy Storage Network, New Energy Network Comprehensive)