A logistics company running 100 delivery vehicles is deciding how to power them. Buy the batteries outright, and it owns an asset that depreciates, degrades, and eventually becomes a disposal problem. Use them under a Battery-as-a-Service (BaaS) arrangement instead, and it pays a recurring fee linked not just to access but to defined performance and service obligations, while the provider assumes responsibility for monitoring condition, maintenance, replacement, and end-of-life management.
Which is the better deal? The honest answer is: it depends on variables most articles about BaaS skip over. CIRCUBATT, a Horizon Europe project developing circular battery value chains, is testing exactly those variables, specifically for second-life batteries. If you’re new to the concept itself, our plain-language BaaS guide covers the basics. This article goes further: what determines whether BaaS is commercially better than ownership, for whom, and under what conditions.
What BaaS payment actually covers
BaaS is not one commercial arrangement, it’s several, and they carry different risk profiles:
- A fixed recurring fee for an agreed level of battery capacity, power, or availability, regardless of use.
- A per-use fee tied to distance, operating hours, cycles, or energy delivered.
- A fee linked to a guaranteed minimum state of health or uptime.
- A bundled subscription covering the battery, monitoring, maintenance, and replacement together.
- Battery swapping, exchanging a depleted battery for a charged one, typically through a subscription, usage-based payment, or fleet agreement rather than no contract at all.
A useful distinction: a conventional lease mainly finances access to an asset. BaaS normally adds a service or performance component on top, monitoring, maintenance, guaranteed availability, or a defined energy outcome, which is what separates it from simply renting equipment.
Why second-life batteries change the calculation
In this context, a second-life battery is one that no longer meets the performance requirements of its original application, most often an electric vehicle, but retains sufficient health to serve a less demanding use, such as stationary energy storage. That distinction matters commercially: second-life batteries carry uncertain remaining useful life, incomplete operating history, and variable condition between units, in a way new batteries don’t.
This is also where BaaS becomes particularly relevant, rather than incidental. A customer buying a second-life battery outright has to absorb all of that uncertainty alone. Under BaaS, the provider retains ownership, monitors performance continuously, and can replace or redeploy the battery when it no longer meets the contracted service level, which is precisely the kind of risk a customer is often least equipped to manage on their own.
Where it tends to work, and where it doesn’t
BaaS tends to suit operations with predictable, trackable battery use, where the customer would rather pay for an outcome than manage an asset. Fleet operations and stationary energy storage are the applications most frequently cited in existing commercial deployments and industry literature. [CIRCUBATT’s own pilot scenarios under WP4 will test at least three specific real-world applications by month 24 — the exact applications are to be confirmed once pilot sites are selected.]
It tends to work less well where:
- Battery use is irregular or unpredictable, making the risk difficult to estimate and price reliably.
- The customer has cheap access to capital and no operational reason to avoid ownership.
- The battery is highly customised, making it hard to redeploy to another customer later.
- There’s no functioning local market for repair, refurbishment, or second-life resale.
- Proprietary battery-management systems or restricted data access make switching providers difficult.
Customer economics vs. provider economics
These are two different business cases.
For the customer: BaaS mainly changes the timing of cost, spreading it over the contract instead of concentrating it upfront, and can shift operational responsibility and financial exposure for degradation and disposal to the provider. That risk doesn’t disappear, though, it’s normally priced into the service fee. Whether total cost ends up lower depends on the fee structure, contract length, and how those costs compare with financing a purchase outright.
For the provider: retaining ownership means financing the battery upfront and recovering that investment through fees plus residual value at contract end. Profitability depends on operating a commercially viable portfolio, which typically works through several concrete mechanisms: spreading monitoring-platform costs across many batteries, consolidating maintenance and reverse logistics, diversifying degradation and failure risk across units rather than carrying it on one asset, and redeploying batteries between applications as their condition changes. This is why scale matters more to providers than customers.
| Purchasing the battery | BaaS (second-life battery) | |
|---|---|---|
| Upfront cost | High | Lower |
| Degradation risk | Customer | Typically the provider, priced into the fee |
| End-of-life responsibility | Customer arranges disposal or resale | Provider recovers, refurbishes, or recycles |
| Residual value | Customer retains it | Provider retains it (unless shared contractually) |
| Operational control | Full | Depends on contract terms |
| Switching cost | None (you own it) | Can be significant, depending on data and system compatibility |
An illustrative comparison
To make this concrete, without implying real project figures: suppose purchasing a second-life battery system requires an upfront investment of €100,000, plus ongoing maintenance, monitoring, and end-of-life costs the customer arranges itself. A BaaS provider instead charges a monthly fee covering monitoring and replacement over a five-year contract. The relevant comparison isn’t the upfront figure against the monthly fee, it’s the full lifetime cost of both paths, including financing, downtime, maintenance, residual value, and risk. In broad terms:
BaaS value to the customer = avoided upfront financing + avoided maintenance and degradation exposure + availability value − service fees − switching and contractual costs
This isn’t a formula CIRCUBATT has validated with real numbers; it’s a framework for what belongs in the calculation, which any company evaluating BaaS should build with its own figures.
What has to be in the contract, and what happens if things go wrong
A workable BaaS agreement needs clear terms on: minimum guaranteed state of health, permitted operating conditions, liability for misuse versus normal wear, replacement timelines if performance drops, what happens to the battery and any residual value at contract end, and how service fees are indexed over time.
Two further questions matter specifically for second-life batteries. First, safety and certification: testing and qualification for the intended second-life use, liability for thermal events or system failure, insurance availability, and traceability of individual modules are not peripheral details, they can determine whether the model is viable at all. Second, provider continuity: what happens if the provider becomes insolvent, whether the customer retains access to the batteries and historical performance data, and whether another party can step in to maintain them. These are the kinds of questions an operator depending on third-party-owned batteries needs answered before signing, not after.
Data as a governance question
Every version of BaaS depends on knowing a battery’s real condition, which is what Data-as-a-Service (DaaS) is for. But data raises commercial questions of its own: who owns it, whether a customer can transfer it to another provider if they switch, and how condition assessments get verified independently rather than relying solely on the provider’s own assessment. Switching difficulty often has a specific technical cause here too, proprietary battery-management systems, non-standard data formats, or provider-specific hardware can lock a customer in well beyond what the contract itself states.
The regulatory backdrop
Depending on its specific role in the value chain, whether producer, distributor, or another economic operator, a BaaS provider may be subject to, or contractually affected by, requirements under the EU Batteries Regulation concerning traceability, battery information, due diligence, collection, and recycling. These obligations need to be reflected in the operating model and service price. [The exact obligations applicable to a given BaaS provider depend on their legal role under the Regulation and should be verified case by case before publication of specific claims.]
What CIRCUBATT is actually producing
The project’s business-model research is developing a public End-of-Life BaaS Business Model Handbook, informed by an online survey of 1,000 stakeholders and 10 focus groups involving 100 stakeholders, with a final version due at project month 26. WP4 will pilot BaaS and DaaS together in at least three real-world scenarios, with a Final Pilot Test Report and a Scale-Up Strategy Plan both confirmed for public release. Work on revenue models, pricing mechanisms, and market analysis is also underway, though those specific outputs are for internal project use rather than public release at this stage.
A quick checklist before you evaluate BaaS for your operation
- How predictable is our battery use, in cycles or hours per week?
- What level of availability, power, or state of health would we need guaranteed?
- Who currently absorbs the cost when a battery underperforms?
- Do we have reliable battery-health data today, or would we depend entirely on a provider’s reporting?
- What happens to the battery, and any residual value, at the end of the contract?
- How would total cost over the full contract compare with financing a purchase?
- What happens to our operations if the provider becomes insolvent or the contract ends early?
- How difficult would it be to switch providers, technically and contractually?
Interested in exploring what BaaS could mean for your business?
CIRCUBATT is particularly interested in hearing from manufacturers, recyclers, SMEs, fleet operators, and investors evaluating circular battery business models. Contact us to discuss partnership opportunities.