A TCA Framework on Lithium-ion Electricity
Storage and the Influence of TCA on Decision
Making
Master of Science Business Administration Organizational & Management Control
Research Proposal Master Thesis Faculty of Economics and Business
Student: Riemer Beets Student Number: S2755270
Student E-Mail: riemerbeets.a@gmail.com Thesis Supervisor: dr. J.S. Gusc Company Mentor: Casper Scheltinga
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ABSTRACT
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TABLE OF CONTENTS
ABSTRACT………2
TABLE OF CONTENTS………3
INTRODUCION……….4
• Introducing the relevancy and importance of green initiatives………...…………4
• Introducing Full Cost Accounting as stimuli for green initiatives………...…………...5
• Literature gap………..6
• Research Question………...6
• Research Contribution……….6
LITERATURE REVIEW………...………6
• Sustainable development……….6
• True Cost Accounting (TCA)………...……..8
• Decision making………...………...….10
METHODOLOGY………11
• Case study………...………..12
• Interventionist research……….13
• Data collection and data analysis………..14
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I. INTRODUCTION
There is unanimous consent among scientists that global warming is caused by the increase of carbon dioxide (CO2) and other Greenhouse gases (GHG) emissions from natural sources and human activities. (e.g., Cox et al., 2000; Root et al., 2003; Hughes et al., 2017). To maintain the same temperature on earth, as much energy has to be remitted as is received from the sun. GHG’s restrict the remittance of energy and thus warm up the globe. In the past few decades, governmental bodies and international institutions are pushing towards more sustainable development regarding climate change. Governmental bodies have valid reasons to move away from fossil fuels. The reliance on fossil fuels coincides with being subject to unstable world politics and prices. Moreover, the fossil fuel reserves are depleting at a fast pace (EDGAR, 2016). Hence, the demand for alternative energy sources to create a greater sustainable environment is growing due to these policies and the greater awareness. Shareholders could perceive the environmental policies as a charge and not as added value. However, this is a biased view, because creating sustainable products will not only help the environment but will also add value to everyone’s future living conditions.
One way of developing towards sustainability is using renewable energy, which will probably cause a surge in the use of electrical appliances. Electric vehicles but also cell phones require the use of more rechargeable batteries (secondary batteries) (Hersley et al., 2012). Renewable energy sources need secondary batteries in order to increase the adaptability of the energy system by providing energy storage that enables the system to capture the highly variable electrical load. A greater energy storage capacity could also facilitate the electrical grid to less dependent on a baseline electricity production generated by fossil fuels, often coal plants, which emit the most GHG’s of any electricity plant. Moreover, the shift to electric vehicles (EV) will require a greater usage of electricity and batteries. In the Netherlands, the number of electronic vehicles is expected to increase significantly (Liang et al., 2017). However, batteries are still inefficient in comparison to other storage types and its production and disposal have a substantial impact on the environment. The most promising battery type is the secondary lithium-ion battery. Nevertheless, lithium is a scarce natural resource and the cobalt and nickel used for the cathode is scarce and usually mined in an unsafe setting.
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2010; Barg & Swanson, 2004). In 1993, the European Commission proposed the tool called Full Cost Accounting (FCA) that incorporates externalities of the three categories. (Hendriksen, Weimer & McKenzie, 2016; Bebbington et al., 2001; Lamberton, 2005; Burritt & Schaltegger, 2010). In recent years, energy corporations have become aware of their responsibilities and that not only are they responsible for the economic outcome of their production processes, but also for the environmental and social factors (Retolaza, Ruiz-Roqueñi & San-Jose, 2015). Large corporations have made changes to their product life cycle and added corporate social responsibility to their annual reports. Some companies have gone further by building on their current economic model by incorporating the externalities of the production processes.
Small enterprises usually do not have the funds to use TCA and the cost of products are generally based on cost accounting. This favours products with the lowest production costs. Small and medium enterprises (SME’s) are more likely to view additional environmental policy costs negatively, since it does not create as much brand value as for large enterprises. Implementation of TCA could give an incentive to put more funds into environment friendly electricity storage research and usage. Electricity storage manufacturers have improved the environmental footprint of batteries a lot during recent years but are still under a lot of pressure to improve secondary batteries. Not only because the manufacturing of batteries has to be clean, but also the duration and storage capacity of batteries has to be large enough to facilitate the transition from fossil energy to renewable energy. Thus, market forces and the government should be facilitating environmental awareness under battery producers and encouraging the adopt new eco-friendly technologies by incorporating TCA as a standardized framework.
A dozen of companies in the Netherlands have started taking initiatives to improve on electricity storage with secondary batteries. The concept of product initiatives is defined as the transition of corporate goals to the implementation or improvement of product performance (Brown & Eisenhardt, 1995). Product initiatives in a SME allows for greater flexibility. These type of companies are possibly more willing to adapt to a new method of accounting more easily and this could cause a more rapid implementation of the TCA model throughout the company.
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implementation regarding decision-making will lessen the information discrepancies and thus should result in more informed decisions (Kiker et al. 2009). TCA has the potential ability to improve the corporate decision-making process but no theory exist on the relationship between the tool TCA and the decision-making process in an environmental mindful industry.
Hence the research question of this paper is:
How does TCA affect the environmental and ethical decision making process in a battery recycling SME?
Sub questions are:
What are the true costs of battery energy storage facilities using either lithium-iron-phosphate batteries or nickel-manganese-cobalt batteries? and How have the environmental corporate decisions been incorporated in practice?
The research questions are addressed in exploratory interventionist research performed in a practical setting of an energy start-up company. Interpretive interventionist research is suited as this study aims to solve a practical problem and to build on academic theory, thereby bridging the gap between theory and practice (Jansen, 2018). Baldvinsdottir, Mitchell & Nørreklit (2010) advocate for more practice oriented research. They claim that the focus of research is about finding out about behaviour in companies rather than guiding companies to change their behaviour. Thus far practice orientated research has been ignored in many fields and also in the field of accounting. There is a literature gap regarding how accounting techniques can be used to affect management decision making. Consequently, this research will be conducted from a action research point of view and give insights into how TCA is implemented in an innovative SME and how it affects the decision making of the company. TCA is often used in practice and this paper will use TCA because of its practical orientation.
II. LITERATURE REVIEW
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operates in society and society in the environment. SD is about “meeting the needs of the present without compromising for the future.” (WCED, 1987). SD initiatives, e.g. re-usage of secondary lithium-ion batteries, not only could create value by reducing the cost of
environmental and social externalities, but also by obtaining a competitive advantage. In order to evaluate the data obtained from the sustainable development initiative of reusing LFP batteries on decision making, an assessment regarding the economic, environmental and societal practices are required.
According to Drury (2013), accounting is the language that provides information to stakeholders of the organization. Accounting as a dual function, it is both used as an internal tool to support decision-making and for external reporting (Burritt & Schaltegger, 2010). The purpose of FCA is to internalize external effects of the product and to take these into account during the corporate decision making process (Bebbington, Grey & Kirk, 2001). Currently, accounting does consider the environmental and social impacts of their production by adding Corporate Social Responsibility to the Annual Report. However, often not all facets are known regarding the lifecycle of their products.
Companies generate externalities through their day-to-day activities and these externalities could either be positively or negatively affecting the environment or society. TCA is useful a useful tool for corporate decision making because it monetizes both positive and negative externalities of all three parts of the sustainable development model. The traditional accounting model does not incorporate the environmental and societal aspect. (Maas, 2008). The purpose of TCA is to internalize external effects of the product and to take these into accounting during the corporate decision making process. Monetizing occurs to quantify the effects of the externalities which is useful in order to make comparisons. Evaluating options with non-numerical data is difficult due to not knowing the scope of the impact. Quantifying externalities by putting a monetary value on them allows businesses to easily assess options and also improve upon choices (Schaltegger & Burrit 2010). Furthermore, it also reduces the complexity for firms to implement TCA (Burritt & Schaltegger, 2010). Managers obtain more information when taking into account the benefits and cost of externalities by using the monetized values provided. Hence, corporations are using TCA is to obtain more information for accurate decision making (Barg & Swanson; 2004).
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TCA framework. The first step is to define a cost objective. Which can either be a product or a production process. The second step is to specify the externalities that are significant. The third step pertains the identification and measurement of external impact and the fourth step is the monetization of the externalities.
TCA FRAMEWORK
The aim of TCA is to monetize or quantify the effects of the externalities which is useful in order to make comparisons. Quantifying externalities by putting a monetary value on them allows businesses to easily assess options and also improve upon choices (Schaltegger & Burrit 2010). Furthermore, it also reduces the complexity for firms to implement TCA (Burritt & Schaltegger, 2010). Bebbington et al. (2001) describe a four-step model in order to create a TCA framework. The first step is to define a cost objective, which can either be a product or a production process. The second step is to specify the externalities that are significant. The third step pertains the identification and measurement of external impact and the fourth step is the monetization of the externalities. Exact monetizing of externalities is impossible because of incomplete knowledge and estimation can be made (Bebbington & Larrinaga , 2014).
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Social-LCA refers to impact that business conduct has on the stakeholders of the company (Dreyer et al., 2006). The companies responsibilities regarding people and the companies interactions with its stakeholders are part of social-LCA, it is the companies conduct that is under evaluation and not the impact from the physical flow from the production processes as is the case with environmental-LCA. To ensure that social-LCA remains relevant as corporate decision making tool, it must adapt to the actual context of the company. This is done by first looking at the obligatory set of categories and secondly at an optional set of impact categories (Hauschild, 2008). The first set consist of: discrimination, child labour, forced labour and freedom of association. These are based on the Universal Declaration of Human Rights. The second set is based more upon the setting of the company and consists of: physical working condition, working hours, minimum wage and benefits, training and education of employees and the development support towards local society (Hauschild, 2008).
Analysing the list of indicators with a representative of the case company to agree on the relevancy of each of the indicators is an important step and this reflection also allows the company to add or identify other potential relevant factors. The benefit of using LCA is that it can translate environmental effects into a monetary dimension. However, we have to stay aware of the limiting factors of using LCA as decision support tool. LCA is incapable of incorporating: uncertainty, irreversible decisions and future costs.
LCA can be split up in manufacturing, installation, maintenance, second-use and disposal of the energy storage system (Appendix 4, figure 4.0). Each of these stages will be accessed with the LCA model. The model will be based the composition of the energy storage unit, which consists of the battery pack, an inverter and a container. The battery pack contains the modules, the battery management system and a battery box and the battery cells are all made up of an electrolyte, anode, cathode, separator and casing (Appendix 4, figure 4.1).
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DECISION MAKING
TCA as a support tool could affect all four stages of the ethical decision making model. The four components of this model are; moral awareness, moral judgement, moral motivation and moral behaviour (Rest, 1986). Moral awareness concerns itself with the identification of moral issues surrounding the lifecycle of the product. Moral judgment can be defined as the degree of sophisticated ethical reasoning (Kohlberg, 1969). Moral motivation is the degree of commitment to take moral action. Hence valuing moral values over other values (Rest et al., 1999). Moral behaviour revolves around doing what is considered to be the right thing to do and is affected by cognitive moral development, organisational structures and ethical climate or culture. Many other researchers already build upon Rest’s model (figure 1). However, nobody assessed how information obtained from a TCA model could affect these moral decision making stages.
Figure 1: Ethical Decision Making Model (Rest, 1986).
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ethical decision making than individuals. Studies have shown that using several groups to make one decision on the project facilitates three benefits in comparison to making an individual decision. Cross-sectional teams reduce development costs, produce higher quality products and usually perform better financially after commercialization. If only one individual is making the decisions, usually he remains committed to the decisions even if he is making a loss. According to Whyte (1991), groups are more adept at making decisions because they have a greater knowledge base and do not feel personally responsible. However, Abdolmohammadi, Gabhart, and Reeves (1997) conducted a similar study and found that only male groups increased on their individual decision-making and a later study done by Baker and Hunt (2003) found no differences between males and females.
One of key reasons why ethical group decision-making is ambiguous is because many of the traditional cost-accounting systems could lead to incorrect investment decisions (Axelrod, Mcdaniels & Slovic, 1999). Pressures from the legal and regulatory environment cause many organizations adopt policies and programs to implement ethical behaviour within the organisation (Weaver, Treviño, & Cochran, 1999). Ethical group decision-making has to incorporate some degree of rationality. The degree of rationality may depend upon three conditions; defining a clear, coherent set of decision objectives, the knowledge available to analyse the decision and the time and attention the decision makers wish to devote to a specific problem (Burgstahler & Dichev, 1997). Environmental product decisions are complex and involve many different stakeholders with different priorities or objectives. Hence, behavioural decision on environmental research is hard to solve without the aid of support tools because these decisions tend to require knowledge from multiple aspects, combining natural, physical and social sciences (Axelrod, Mcdaniels & Slovic, 1999).
III. METHODOLOGY
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company is one of a few companies to provide energy storage by reusing secondary batteries in the Netherlands, which could be considered an opportunity for unusual research access (Yin, 2003).
CASE COMPANY
Time Shift Energy Storage (TSES) is a young start-up supplier of energy storage systems which mainly comprise of reused lithium-iron-phosphate (LFP) batteries. These reused batteries are obtained from EV’s which are given to TSES by Auto Recycling Nederland. However, TSES also uses new LFP and NMC batteries and is able to provide information regarding these modules. Those new batteries are obtained from either Germany and China. In table 1 the technical specifications of the batteries are given. LFP batteries are considered to have a low risks due to their lower energy density compared to other battery types. This lower density also allows the battery to limit its efficiency loss and thus is considered to be one of the better batteries for the environment compared to other batteries. The company has much potential and recently the Jan Terlouw Innovation Award at the second of October 2018.
Table 1 Composition of LiFePO4 and NMC batteries
Parameter LiFePO4 NMC Anode 24% 21% Cathode 27% 18% Electrolyte, Separator and Casing 12% 14% Battery box 14% 19% Module 27% 20% BMS 3% 1%
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INTERVENTIONIST RESEARCH
Interventionist research is most suitable for the research question as creating and analysing a TCA model requires collaboration between the systems, processes, employees and managers of the case company and the researcher (Sten, Jönnson and Kari Lukka, 2007). In order to collect empirical research materials, observations, archives and interviews are conducted or consulted. The researcher himself is deeply immersed in the subject at hand and hence interventionist research can be viewed as field experimentation. The researcher is placed in an experimental situation and acts on it in partnership with the company. The intervention that will happen is the creation a TCA model in order to understand how TCA affects corporate decision making. Retolaza et al. (2016) describes three conditions for interventionist research.
1. Firstly, the research project must involve a societal challenge with potential improvements. The societal challenge is the development, implementation and effects of a TCA model on an SME’s decision making. During my stay in the company, the owners and I will establish a list of the most important externalities (appendix 4, table 4.2) and craft a TCA model which would be used for future decision making between different energy storage systems. The information provided by this TCA model will improve their knowledge and hence their decision making.
2. Secondly, the project must entail a progressive loop of planning, action, feedback and reflection. Building the TCA model requires agreements between the researcher and the owner of the business. The planning and action consist of measuring and monetizing the agreed upon externalities in a comprehensive manner which suits the timeframe of the study. Feedback and reflection is also important during the study since assumptions or viewpoints can be changed in order to reflect a product better or to improve the TCA model by acknowledging other important aspects.
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DATA COLLECTION & DATA ANALYSIS
According to Eisenhardt (1989), the use of multiple data collection methods from different sources result in a stronger conclusions. The data required for this research will consist of both quantitative and qualitative data. Primary data will be collected by using qualitative instruments (i.e. semi-structured interviews and notes made during the collection process regarding intern meetings and observations) and this data will be supplemented by secondary data in the form of financial documentation of the company and environmental track records.
The semi-structured interviews will be targeted to the most relevant stakeholders of the company in order to get a more comprehensive understanding of the effect externalities have on them as well as their influence on business operations. According to the literature it is important to differentiate between group and individual investment decisions. Moreover, during the first day a semi-structured interview (Appendix 9) will be held with the management of TSES in order to get a greater insight into the perceived explanations regarding SD on their business operations.
Controllability, validity and reliability enables research products to be relevant and replicated (Aken et al., 2012). Controllability of the research progress will be established by the notes which are made during the data collection process and by adding the raw (consolidated) data in the Appendix. Validity will be obtained by using literature to identify interview questions and reliability is established by controlling biases of either the researcher, instruments or respondents (Aken et al., 2012).
After setting up the TCA model, the notes and interviews will be transcribed and inductive coding will take place in Atlas. The researcher will attempt to established relationship patterns to interpret the ‘how’ of the relationship between TCA and corporate decision making. The findings of this paper will be reflected against the other literature to obtain a greater validity.
IV. RESULTS LIFE CYCLE ANALYSIS
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to the total mass of the battery. Data on the energy and carbon of materials and manufacturing processes was obtained from many different information sources (e.g. textbooks, journals, LCA studies). If information was unavailable further research was conducted regarding similar components.
The LCA consists of a comparison between a 100% and a 80% State of Health (SoH) 250 kWh LFP battery and a 100% SoH 250 kWh NMC battery and review which one is performing better regarding each of the TCA aspects. Table 2 states the assumptions made for each of these systems. The second-use/new ratio is obtained from business cases of TSES and is used to estimate the gross capacity of the required batteries. New cells are operating at 100% of their fabric capacity, whereas secondary-use battery cells are operating at 80% of their nomimal capacity and this has to be accounted for. Moreover, the energy density and weight of the batteries are based on the findings of Majeau-Bettez, G., Hawkins, T. R., & Strømman, A. H. (2011). An assumption was made that 50 modules will fit in a container and each container needs one string and one vent. The lifespan of the batteries depends upon the intensity with which it is used. We assumed that the lifespan of the new batteries are roughly 8 years and reusing the battery at a lower intensity when it reaches 80% SoH could extend it another 8 years. The weight of the total amount of batteries for a nominal capacity of 250 kW is obtained by the formula:
Weight (battery kg) =nominal capacity (Wh) / energy density * second-use/new ratio (1)
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Monetization of CO2 emission based on source
According to Centre d'Analyse Stratégique (2008) CO2 emission had a cost of 32 euro per ton CO2 in 2008 and this cost would increase to 100 euro per ton CO2 in 2030. At the start of 2019, considering the increase is linear, the cost of CO2 emission per ton would be around 66 euro or 0,066 euro per kg-CO2. This amount will be applied for all environmental monetization purposes of the CO2 footprint analysis.
Table 2 Estimation of the weight of the material required to create a 250 kWh battery
NMC LFP LFP
State of Health (SoH) 100% 100% 80%
Nominal Capacity (kW) 250 250 250
Second-use/new ratio 1,00 1,00 1,3
Gross Capacity (kWh) 250 250 325
Energy Density (Wh/kg) 112 88 88
Required Batteries (kg) 2.232,1 2.840,9 3.693,2
Weight per Battery (kg) 150 110 110
Required modules 15 26 34
Required Containers/Strings/Vent/Inverter 1 1 1
Total Lifespan (years) 8 8 16
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1. Working Conditions Measurement
Two high value materials used in many batteries are graphite and cobalt. Most of the graphite is mined and processed in China. According to Dorner et al. (2012), working conditions are generally poor, and child and forced labour is abundant in the extraction of high value materials. These materials generally do not depend upon extensive infrastructure. Instead, many independent small-scale miners provide the raw material to the corporations without any oversight. According to an Amnesty report (2017), battery producing companies fail to address human working conditions in cobalt mines. A survey showed to what extend tech- , automobile - and battery giants identify, prevent and address human right abuses in their supply chain. For example, battery giant LG Chem has taken ‘moderate’ action whereas battery behemoth Shenzhen BAK has taken no action at all. This is concerning since field research (theguardian, 2018) shows that at least 255,000 locals are mining cobalt by hand, under which 35,000 children. Monetization of human life or their reduced lifespan due to bad working conditions is in my opinion impossible and nonetheless out of the scope of this study.
2. Value of Clean Electricity Generation Measurement
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Germany. The auctions reached an average price of 3.4 ct/kWh in October 2017 (OFATE, 2017). In our case the 250 kWh battery conducting 400 cycles per year will result in 3,400 euro for its annual production.
3. Energy Loss by usage Measurement
There are three main types heat losses, the first one comes from the batteries themselves. Batteries are in a constant flux of charge and discharge if they are connected to the grid. The main purpose of the battery is to keep the net stable and hence it never completes a full charge and discharge cycle. We assumed that the battery in theory would make 400 cycles per year. The second main type of heat loss is from the cables required to conduct electricity. The diameter of these cables were obtained from the website Vultflex dca (2016). The heat loss is estimated by using a report Ketenanalyse kabels CO2-prestatieladder. TSES and I came to the conclusion that it would be viable to calculate heat loss based on the surface area of the cables, since energy is given to the surrounding air if it takes place (Appendix 6). TSES estimates that the energy loss of an inverter is roughly 5%.
Table 3 Environmental costs Energy Loss
Item LiFePO4 100% kg CO2-eq LiFePO4 80% kg CO2-eq NMC 100% kg CO2-eq
Five Core YMvK
35mm 15,4 15,4 15,4
One Core YMvK
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4. Avoided Cable Cost Measurement
The Greenhuus project aims is to provide recreation houses which are completely autarkic, bio based and circular (Appendix 9). The roof of these chalets is covered with solar panels and these solar panels provide 120 kW energy during their peak. The location resorts to a three-phase 80 Ampere cable. At 230 volt, this net connection has a maximum capacity of 55 kW, which would not be enough for the solar panels to all generate energy at the same time. If the battery storage is not present than the company would have to get a greater net connection. The cable should have a capacity of 120 kW, which means that it has to be a three-phase 174A cable and would require a 160-630 kVA connection with transformer. Alliander charges 17,964 euro for the connection of such a cable with a maximum length of 25 meters. These costs are completely negated by installing a battery.
5. Flexibility Measurement
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6. Reliability Measurement
An analysis is made by the net operator, in this case TenneT, on how many disruptions take place in the Netherlands, which is then broken down by region. A comparison with respect to the performance of each grid operator is conducted. The length of the disruption, cause of the malfunction and the type of products that are related to the malfunctions are reported. This information can be used to better estimate true risks of the grid in the future. The reliability can be improved by placing a battery on the net, but the risks that a battery entails is still relatively unknown as it is not being applied on a large scale. The Netherlands counted 20 thousand blackouts in 2017. The chance of malfunction is multiplied by the time consumer(s) did not have access to electricity and is done after the incident happened. According to Baarsma and Hop (2009) one outage of two hours is 2,80 euro in costs for each household and 33,10 euro in cost for each SME firm. If one household consumes 1 kWh and a SME 3,5 kWh then the average benefit of utilizing a mobile battery is between 350 and 1200 euro per time it is used.
7. Ease of installation Measurement
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8. Ease of Use Measurement
The battery is automated by the BMS and thus does it not require any manual input once it is running. Prior to that the battery has to be set up, which can take up to two weeks. Setting up the battery requires a lot of time since you have to be confident that it is set to the right parameters and it will act accordingly. A BMS makes use of groupcurves which either act or don't act. Hence, the BMS makes the battery either work for 100% or not at all based on the input it is getting. The CEO of TSES told me they would usually ask 10,000 euro for setting up the battery whereas they would only be willing to spend 3,000 euro (Appendix 9). This is mainly due to having expertise with their own battery and thus can set up the battery more effectively for their own customer.
9. Ease of Maintenance Measurement
Batteries thus far almost required no maintenance whatsoever according to TSES. The CEO admitted that you would expect more maintenance issues than just one in 2,5 year especially since they work with reused batteries but this has not been the case (Appendix 9). However, he does not neglect that more maintenance duties could occur in the future. TSES would ask 6000 euro annually in order to perform maintenance and would be willing to pay 1000 to outsource it.
10. Electricity usage Measurement
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TSES would roughly have 5 projects per year. We assume that the kWh price in the Netherlands is roughly 30 cents.
Table 4 Environmental costs Electricity usage
Annual Electricity costs € 1.800
Projects per year 5
Project Electricity costs € 1.000
Annual Electricity costs € 6.800
kWh 22.667
CO2-eq 7480
Annual monetized € 493,68
11. Direct CO2 emission Measurement
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process emits CO2 directly during pyrometallurgy and transportation. According to Buchert (2011) these CO2 emission amount to 252 kg direct CO2 emission (Appendix 6).
Table 6 Direct CO2 emission
Direct CO2 emission NMC 100% LFP 100% LFP 80%
annual CO2-eq 348 408 274
kg CO2eq 2783 3264 4377
Monetized € 183,67 € 215,41 € 288,86 Annual monetized value € 22,96 € 26,93 € 36,11
12. CO2-eq emission
The indirect CO2 emission are based on the production, assembly and recycling of the battery. Table 7 represents the CO2-eq emission per main component. Considered as relevant are the mass of the battery cells, packs and modules, the sea container, inverter, cables and vent and the indirect emission during the recycling process (Appendix 6 and 7). After assessing the mass of each of these components, a separate table was created using the ICE database showing the Embodied CO2eq emissions and the embodied energy per metal. The kg CO2-eq for the production and assembly for the battery cells is obtained from Hao, H. et al. (2017). The container, inverter and cables are estimated to last for all 8 years throughout its second life whereas the battery material costs of the 80% battery have already been used for another purpose and thus last a total of 16 years.
Table 7 Indirect CO2 emission
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Total 57.527,40 61.811,14 74.314,14 Monetized € 3.796,81 € 4.079,54 € 4.904,73 Annual monetized value € 474,60 € 509,94 € 306,55
RESULTS
The three proposed battery systems all require the same amount of containers, inverters, vents and cables. The difference in these systems is the materials, amount of cells, the state of health and the lifespan of the cells. Figure 1 displays the differences of the three core aspects of TCA model for each of the battery systems. The economic aspect of the analysis is based on cost prevention or additional costs which were not included if you would not have bought the battery. This excludes the real maintenance costs because these costs are thus far
neglectable for TSES. The environmental aspect of our analysis is based on embodied CO2-eq and energy of each material used within a 250 kWh battery. The social external effects are based on reliability and flexibility and the perceived ease with which it can be installed, operated and maintained and are measured with interviews.
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The external economic effects are mainly driven by the annual avoided costs and energy savings. The avoided economic costs are the prevention of the instalment of a greater network cable in order to meet the demand of certain appliances. Generally, people can make the decision to either install a big battery, with way more capacity than is actually necessary or get a bigger connection to the net. Waiting on the local, regional or national network operator to install such a cable could take years and the missed opportunity of generating certain cash flows could be depicted as the avoided annual cable costs. The avoided costs are 2245 euro annually over a time span of 8 years and the same for each of the systems, because all systems have the same capacity.
The second biggest impact on the economic external effects are the energy savings obtained from saving renewable energy or loading the battery when the price is low and using or selling it when the price is higher during the day. This difference is annually estimated to be 1792 euro in the Netherlands. The value of energy saving is measured with the auction of green electricity in Germany, since both the marginal cost of the production of green
electricity as the marginal cost of the storage of electricity is roughly equal to zero, these green energy auctions give the most relevant price regarding the storage of green energy. The annual external environmental effects of CO2 emission have been measured over life-cycle of the battery systems and the results can be viewed in figures two and three.
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Figure 3: Annual Monetized Direct Environmental CO2-eq emission
In figure 2 the annual carbon footprint of LFP and NMC batteries is shown. The assumptions based to create the graph are the following: 100% SoH batteries are new batteries which are disposed of after their first use, whereas the 80% SoH LFP batteries required 30% more batteries in order to meet nominal capacity but depending on the use could extend their produce lifetime on average with another 8 years. This means that the total lifespan of 80% SoH is 16 years whereas those of 100% batteries is only 8 years.
The numbers show that the CO2-eq indirect emission of the production of lithium batteries is the highest for 100% LFP batteries with a total of 4,5k Co2-kg anually, secondly 100% NMC batteries with an annual carbon emission of 4,8k CO2-kg and thirdly the 80% LFP batteries with an annual emission of 3,1k CO2-eq annually.
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The annual CO2-emissions and benefits of recycling are depicted in Figure 4. In order to create a 250 kWh energy storage system 2.232 kg NMC batteries at 100% SoH are required, 2840 kg LFP batteries at 100% SoH or 3693 kg LFP batteries at 80% SoH are required. As shown in the picture NMC batteries are recyclable to a greater extent than LFP battery cells. This is mainly due to those battery cells containing lithium, nickel and cobalt that can be extracted and reused for other batteries or other products. All the batteries still have a positive kg CO2eq emission after the recycling process. This means that for the environment recycling is still a harmful process in our calculation since even though these materials will be reused again, this is the end of the lifecycle of our energy storage system.
Figure 4: Annual kg CO2-eq emission of the Indirect production (and assembly) & recycling of different battery types.
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TenneT (APN) and thus reliability is far less of an issue for most households and corporations. This is a factors that will change a lot between countries. The ease of installation and ease of use partially depend upon who build the energy storage system. In our cause the instalment is done by engineer that also created the energy storage system and the use and monitoring is completely automated by the BMS. Maintenance of a battery is very volatile and changes heavily based on the stage of the battery. These values are obtained from in-depth interviews and supplemented with following research paper of Baarsma and Hop (2009).
Figure 5: Annual social external effects
Results Decision-Making
During my case study it became clear that the project and investment decisions taken by the two owners of the company and are influenced by the employee and other stakeholders (Appendix 8). The group-level decision making in this company generally led to better conclusions regarding the scope and the feasibility of the projects. This is mainly due to the different backgrounds of the group. A clear example is the Greenhuus project cost reduction suggested and implemented by Wietse Scheltinga. This resulted into the company reducing possible or necessary costs and produce a higher quality product.
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customers are usually indifferent regarding the use of either LFP or NMC battery types because of a lack of knowledge regarding the true costs and differences between these lithium batteries. Wietse Scheltinga is often working on projects, which includes the disassembly, assembly and installation of battery units. Hence, he is often in contact with their customers personally and makes almost all of the production and installation decisions. Both Casper and Wietse are a lot in touch with the suppliers of all the parts required to create an energy storage systems. The employee Roy Lierop is doing most of the programming for the company. He displays the information from the BMS to allow customers to understand the status of their product at any time. The separation of tasks are not formal and occur due to interest and knowledge differences.
An important reason for why the company started conducting its business is the disposal of EV batteries, which could actually still be used in other appliances. The processes in order to recycle these batteries according to EU standards still emit significant GHG’s. Hence, the idea to prolong the lifespan of existing LFP batteries, batteries with a high safety standard, was born. Moreover, the owners and employee of the company are aware of the general life cycle of their product and the corresponding economic, environmental and societal externalities that could be present. However, the company is unable to create a precise life cycle since the product they use come from different brands of EV’s. This means usually different brands of batteries are used in their ESS’s with a whole different life cycle.
30
established. Many governmental institutions want to learn more about reused batteries and its implications, which could lead to more laws and regulations as well.
V. DISCUSSION
The developed TCA model describes in depth how the carbon footprint as well as the most important economic and social external effects to TSES are estimated and monetized. Surprisingly the difference between used and reused batteries is small. The results show us that the greatest impact is caused by the social external factors, secondly the economic external factors and finally the environmental impact. The social external factors are measured based on the perceived annual value given by the customers of the industrials ESS’s. Customers were mainly concerned with the voltage, capacity and the lifespan of the product they would acquire (Appendix 9). This resulted in the same value for each of these systems. The economic externality values are based on two items, the energy saving and avoided costs. These two items were for each of these systems also the same since both have the same capacity and are roughly equally valuable to the customers. This indifference between social factors can be explained due to a lack of knowledge regarding the differences between these two systems or customers may be indifferent about the batteries background and care more about the output and lifespan of the product. The economic factors are equal because the economic differences were estimated based on the capacity of the battery used. The capacity was chosen to estimate these differences because the factors were mainly relying on the capacity of the industrial battery. The similarities between these three energy storage systems is significant and that is why in appendix seven the three systems are compared based on a specific weight rather than a specific capacity. The greatest difference in the social factor is the working conditions of the NMC batteries compared to the LFP batteries, which remains unquantified.
31
whereas its lifespan doubles. Another interesting outcome is the significantly lower monetized values for the environment in comparison to the economic and societal aspects. An explanation for the low level of the monetized direct and indirect CO2-eq emission could be that the external environmental effects of a battery is a not significant in comparison to the economic and social external effects. Maybe the interviewees do not represent the overall market and the actual economic and social benefits are a lot lower. It could also mean that value per kg CO2-eq should be higher 6ct euro.
The aim of this paper was to research how the information obtained from the TCA model acts on the decision making processes within the case study. Initially, the concept of rational ethical group-level decision-making relies on the condition of having the knowledge available to analyse the decision. (Burgstahler & Dichev, 1997). In order to make ethical environmental decisions, TCA is a tool that provides more information and will add to the available knowledge base.
Group-level decision-making could be split up in four parts, moral awareness, moral judgement, moral motivation and moral behaviour (Rest, 1986). Two interviews with the owners of the company have been carried out in order to access each of these four aspects (Appendix 9). After encoding the interviews using Atlas, I found out that the moral awareness about the issues surrounding the lifecycle of the product were quite high. Both Casper and Wietse knew a lot about the moral and environmental issues during the extraction of resources and production of batteries. They both mentioned during these interviews that GHG emission during the creation, transport and disposal of batteries are significant. Moreover, the child labour during the extraction of cobalt and nickel in Africa is one of the key reasons to reuse of the LFP batteries that are disposed. According to CEO Casper Scheltinga: “LFP batteries are already produced, disposing them only because they reached a certain threshold (State of Health) is not necessary. Combining more of these battery cells in parallel will allow for the same capacity and that way less batteries have to be created. The production of less batteries is not only better for the environment, but also for the child labour and working conditions in Africa, because the demand for cobalt and nickel will be slightly lower.” These type of statements show me that the company does have moral awareness and moral reasoning regarding their product’s lifecycle.
32
adjust their perception of the product life cycle and cause changes in their ethical reasoning. Thus far the company has been thinking in a linear way, that reusing batteries is always better for the environmental as a whole, since the product has already been made and will not be recycled immediately. Notwithstanding the possible technological improvements on future battery generations. Still this paper also confirms many of the companies standpoint. Reused secondary batteries indeed have a lower annual CO2 footprint than new batteries. This is partially caused by the assumptions we took at the paper, which were based on past experiences of the case company.
Moral motivation or the commitment to actually uphold the moral judgement of the company not only depends on the relevant information regarding the differences between these ESS’s, but also on the stakeholders of the company (Weaver, Treviño, & Cochran, 1999). Moral motivation mainly depends on prioritizing moral values. These moral values will be established by the owners of the company. In our TSES model the social externalities are by far the greater positive externalities according to the customers of the company. This might mean that TSES as a small company will focus even more on the perceived value giving to battery systems by customers by trying to remain as flexible as possible and providing the customer with the best product in accordance to their needs. Hence, stakeholders of the company may have a huge say in the prioritizing of moral values when it comes to the production of ESS’s (Rest et al., 1999). Moral action is affected by the previous stages of the decision making process and by the courage and perseverance of the company. Moral actions are the actions you actually take and is not directly affected by the stakeholders nor the information provided by the TCA model.
33
VI. CONCLUSION
The purpose of this Master Thesis was to find an answer to the research question:
How does TCA affect the environmental and ethical decision making process in a battery recycling SME?
The answer to this research question is that in our case company the information provided by the TCA model is affecting the group-level decision making process on three out of four parts. Moral awareness and moral judgement are both affected directly. Not only allows the TCA model to become aware of certain external effects but also explains the monetization process of the externality. This allows the reader to make a better judgement about this external affect in comparison to others. Moreover, TCA influences the prioritization of the moral values displayed because of this comparison between the monetized external factors. However, prioritization does not only depend upon the information provided by the TCA model but also by the interests of the stakeholder and the companies value given to these stakeholders.
That the creation of an appropriate TCA model is highly dependent on the business processes of the company and the products and resources they use. However, once the TCA model has been created, the information obtained from the TCA model can be highly beneficial to strengthen accepted external factors due to its monetisation or to acknowledge new external factors and change the awareness and perception of ethical practices on the product’s lifecycle. The benefits of TCA for a the case company is that the SME is flexible and able to adapt quite easily. This means that the company can adjust their practices relatively fast based on the information provided by the research. The downside of TCA is that the TCA model depends upon the lifecycle of a specific product made by a specific company. This means that the TCA model is highly specific and generalisation may not be viable. Moreover, a SME usually does not have the resources to construct a broad TCA model for the complete life cycle of their product.
34
The findings of this paper could be of interest not only to the case company but also to the energy sector and decision making literature as a whole. For future decisions TSES has access to the TCA model in order to make a more informed environmental decision. TSES can use this information to inform their customers about their products and allow their customers to make more informed decisions themselves. The energy sector might benefit from the comparison of battery types including all relevant external effects to this case company. Many energy companies are concerned with being environmentally friendly and this paper shows which of the three batteries on display is best in that regard (the second-use battery). Lastly, group-level decision making in a SME setting has gained knowledge on how relations between information of the TCA model affects each level of the decision making process. Especially the finding on the effect stakeholders have on the decision making process is highly likely to be significant and more quantitative research could be conducted in this sector.
The first limitation regarding this study is, that it was conducted within six months. Assessing the true effects of a TCA model would require a longitudinal study. A longitudinal study is useful whilst large decisions in which the TCA model will be used will allow for a better understanding of the effects on the decision making process. The finding displayed in this research are based on interviews and observations during these six months, most as been acquired during October-December 2018.
The second limitation is that the external factors incorporated in the TCA model relied on the knowledge of the researcher and the owners of the case company. In this paper, the objective was to compare the energy storage systems with respect to the factors on the accepted shortlist. This means that certain significant external effects might not have been taken into account, which could alter the order of the batteries based on any of the sectors. However, the shortlist was based on the boundaries of a study which could be fulfilled within the limited timeframe and thus future research could expand upon this TCA model.
Lastly, this study was performed in one SME company in the Netherlands and thus these results cannot be generalized. Moreover, because the company is relatively small, seven interviews were conducted in total which could result in a biased view on the actual social external effects of the company.
ACKNOWLEDGEMENTS
35
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40 APPENDIX I: PLANNING
September
3-15 Literature Research and working on literature review chapters & adjustment methodology chapter
16 Deadline introduction, literature review and methodological section 24-30 Collecting Data at Time Shift Energy Storage
October
1-5 Collecting Data at Time Shift Energy Storage
9-11 Energiebeurs Brabanthallen
15-28 Collecting Data at Time Shift Energy Storage 28 Deadline Data Collection
November
1-15 Transcribe / Inductive coding and data analysis 16 Deadline coding and analysis
17-30 Writing results and discussion sections December
1-9 Writing results and discussion sections
10-15 Writing conclusion section and practical implications 16 Finishing first draft
17-30 Writing thesis completely
January
7 Deadline draft version
41
APPENDIX II: PLAN
This phase concerns itself with creating a TCA model for creating and maintaining electricity storage facilities.
Step 1: Define the cost object.
In our case the cost object will be both battery storage systems; one that uses sustainable LiFePO4 batteries and one that uses reused EV batteries to store electricity. In a first meeting with the CEO of the company, it became clear that the cost objective will be these two electricity storage systems as both parties are curious which system perform better if taking all costs into account. In order to create a TCA model, we have to discuss both electricity storage systems in more detail. From this conversation a TCA-model layout will be created which both parties can accept. Practically, this means that the TCA model will be related to each system’s requirements, economic data, greenhouse gas emission, social external effects and disposal costs as part of the life-cycle analysis.
Step 2: Define the scope
(sept 24) The second part consists of creating a list of potentially relevant factors affecting customers, the environment, the local community or other stakeholders. The relevant factors will be converted to a shortlist and the elements of this shortlist will be implemented in our model. The most common method of obtaining a long list of potentially relevant factors is by creating an environmental and social life-cycle assessment which includes factors affecting the procurement, production and installation, use and disposal of the product. Data is obtained from accounting information as well as interviews with the stakeholders.
Step 3 and 4: Measuring and monetization of the impact
(sept 25 - oct 5, 15-19 oct) The list of relevant indicators used to create the TCA model, will include effects that can be either positive and negative. Economic and environmental outputs can be measured and monetized usually relatively easily. Customers have different reasons to buy a system and hence the importance on social aspects given to each of the shortlist indicators may be different per customer. To trace the importance of the utilities and costs provided by these storage systems, interviews or questionnaires have to be conducted to quantify the relevance of these effects. Hence, a meeting should be arranged with the customers, accountant, employees and other relevant stakeholders of the company to obtain the relevant information.
Step 5: How TCA affects decision-making
42 APPENDIX III
43
APPENDIX IV
44 Table 4.2: Short list of relevant externalities
List of relevant indicators
Stakeholder Element Category Effect
Customer Avoided costs Economic -
Customer Depreciation Economic -
Customer Energy savings Economic +
Environment GHG emission from battery production Environmental - Environment GHG emission from container cattle to grave Environmental - Environment GHG emission from inverter cattle-to grave Environmental - Environment GHG emission from Vent cattle to grave Environmental - Environment GHG emission from transport Environmental - Environment GHG emission from recycling battery modules Environmental - Environment Air pollution by disposal Environmental -
Environment
Allow fossil fuel electricity sources to produce
more Environmental -
Environment Reduction GHG by reusing LFP battery Environmental + Environment Reduction air pollution by reusing Environmental +
Environment
Allow sustainable electricity sources to fully
operate Environmental +
Consumer Ease of use Social +
Consumer Ease of installation Social +
Consumer Ease of maintenance Social +
Local
community Flexibility Social +
Local
45 APPENDIX V: Economic Costs of Battery Systems (Items are removed because of
confidentiality)
Table 5.3.1: Costs of a second-use 250 kW LFP battery
Economisch model 80% LFP
Kosten Item Post Aantal
Prijs per
stuk Totaal Directe kosten (productiekosten)
